1. Stock
Information
Erie Indemnity Company
Class A Common Stock is listed on the
NASDAQ National Stock Market under the
symbol “ERIE.” Quotations are available via
major financial news sources.
Stock Transfer Information
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
(800) 937-5449
ER ERIE INDEMNITY COMPANY
1
1ST QUARTER REPORT
®
2004
ERIE INDEMNITY COMPANY
Member • Erie Insurance Group
www.erieinsurance.com
GF-540 5/04 © 2004 Erie Indemnity Company

2. To our period in 2003. This increase is partially due
to lower total impairment charges in the
Shareholders first three months of 2004 of $.1 million
compared to $7.3 million for the first three
Net income per share increased 8.1 percent
months of 2003.
to $.70 per share for the first quarter 2004
compared to $.65 per share for the same
Management
period in 2003. For the quarter ended
Operations
March 31, 2004, net income increased to
$49.6 million from $45.9 million for the
same period one year ago. Income from Management fee revenue increased 7.1
management operations for the first three percent to $221.9 million for the quarter
months of 2004 decreased 5.3 percent from ended March 31, 2004. The property and
2003. Contributing to this decrease was a casualty direct written premiums of the Erie
slower growth in management operations Insurance Group, upon which management
due to the lower management fee rate of fee revenue is calculated, grew 11.0 percent
23.5 percent in 2004 compared to 24.0 to $960.7 million in the first quarter of 2004
percent in 2003, despite an 11.0 percent from $865.2 million for the first quarter
increase in direct written premiums of the 2003. Increases in average premium per
Erie Insurance Group. Additionally, the policy, reflective of rate increases achieved
allowance for management fees returned on in various lines of business, and continuing
mid-term cancellations reduced management favorable policy retention rates were
fee revenue by $3.9 million in the first contributing factors in the growth of direct
quarter of 2004 compared to $.4 million written premiums. The slower premium
in the first quarter of 2003. The service fee growth in 2004 is due to the Company’s
revenue on voluntary assumed reinsurance focus on underwriting profitability through
also decreased as the Company exited from increased emphasis on controlling exposure
the business effective December 31, 2003. growth and improving underwriting risk
The improvement in insurance underwriting selection.
operations resulted as the benefits of rate
increases and other underwriting actions are The management fee rate was set at 23.5
being realized. Revenue from investment percent for 2004 and 24 percent for 2003.
operations increased 31.3 percent in the first This reduction in the management fee
three months of 2004 compared to the same rate caused a $4.8 million decrease in
2
1
▼
▼

3. The 2004 allowance was driven by higher
management fee revenue in the first quarter
cancellation rates which are reflecting an
of 2004 compared to the first quarter of
upward trend as a result of the underwriting
2003, or a reduction in net income after
profitability initiatives.
taxes of $.04 per share.
Service agreement revenue decreased to
Direct written premiums of the Erie
$5.6 million for the first quarter of 2004
Insurance Group grew 14.1 percent on
from $6.5 million for the same period in
a rolling 12-month basis. The average
2003. Included in service agreement revenue
premium per policy increased 8.9 percent
are service charges the Company collects
to $1,002 for the 12 months ended
from Policyholders for providing extended
March 31, 2004, from $920 for the same
payment plans on policies written by the
period in 2003. Also contributing to the
Erie Insurance Group. The service charge
annualized premium growth were policies
revenue for the first quarter of 2004 was
in force growing at an annualized rate of
$4.9 million, compared to a charge of $4.6
4.7 percent to 3,760,648 at March 31,
million for the first quarter of 2003.
2004, from 3,590,208 at March 31, 2003.
Policy retention was 89.8 percent and
Also included in service agreement revenue
91.2 percent for the 12 months ended
is service income received from the Exchange
March 31, 2004 and 2003, respectively, for
as compensation for the management
all lines of business combined. While still
and administration of voluntary assumed
favorable, the reinforcement of underwriting
reinsurance from non-affiliated insurers.
and reunderwriting standards to control
These fees decreased $1.2 million to $.7
exposure growth and improve risk selection
million in the first quarter of 2004 from
is contributing to the downward trend in the
$1.9 million in the first quarter of 2003 as
policy retention rate.
the Exchange exited the voluntary assumed
reinsurance business December 31, 2003.
Management fees are returned to the
The modest revenues recorded in 2004 are
Exchange when Policyholders cancel their
from several treaties that expire through June
coverage mid-term and unearned premiums
2004. The non-affiliated voluntary assumed
are refunded. The Company records an
reinsurance premium written in the first
estimated allowance for management fees
quarter of 2004 was $12.2 million compared
returned on mid-term cancellations. First
to $32.4 million in the same period in 2003.
quarter 2004 and 2003 revenues were
reduced $3.9 million and $.4 million,
respectively, in recording this allowance.
4
3
▼
▼

4. The cost of management operations Also contributing to the increase was a 5.6
increased 10.9 percent for the first quarter percent increase in staffing levels as well as
of 2004 to $171.2 million from $154.4 pay rate increases.
million for the same period in 2003.
Income from the Company’s management
Commission costs totaled $122.9 million
operations was $56.2 million and $59.4
for the first quarter of 2004, a 10.8 percent
million for the three months ended
increase over the $110.9 million for the first
March 31, 2004 and 2003, respectively.
quarter of 2003. Commission costs include
The gross margins from management
scheduled commissions, contingency awards,
operations were 24.7 percent and 27.8
accelerated commissions and promotional
percent in the first quarters of 2004 and
incentives earned by independent Agents.
2003, respectively. If the management fee
Scheduled commissions, including Agent
rate, which is currently 23.5 percent, had
contingency awards, increased 11.7 percent
remained consistent with the 2003 rates of
to $116.6 million for the quarter ended
24 percent, gross margin for the first quarter
March 31, 2004. Charges incurred for
2004 would have been 26.3 percent.
accelerated commissions above normal
scheduled rate commissions decreased $.7
million to $1.9 million for the quarter ended
Insurance Underwriting
March 31, 2004.
Operations
Other operating costs, excluding
Insurance underwriting operations of the
commissions, increased 11.2 percent in
Company’s property and casualty insurance
the first quarter of 2004 to $48.3 million
subsidiaries, Erie Insurance Company and
from $43.5 million recorded in the same
Erie Insurance Company of New York,
period of 2003. Personnel costs, including
which together assume a 5.5 percent share
salaries, employee benefits and payroll taxes,
of the underwriting results of the Erie
increased 17.6 percent to $29.8 million
Insurance Group under an intercompany
for the three months ended March 31,
reinsurance pooling agreement, reported
2004, compared to $25.3 million for the
underwriting losses of $1.5 million and $5.7
same period in 2003. The increase was
million for the first quarters of 2004 and
the result of total employee benefit costs
2003, respectively.
increasing 29.3 percent related to increases
in health and retirement plan benefit costs.
6
5
▼
▼

5. The Company’s property and casualty in the first quarter of 2004 compared to $1.2
insurance subsidiaries’ share of the Erie million in the first quarter of 2003. There
Insurance Group’s direct business generated were no recoveries during the first quarter
a $.2 million net underwriting income for of 2004 under this agreement. Recoveries
the first quarter of 2004 compared to a net during the first quarter of 2003 amounted to
underwriting loss of $7.0 million in the $2.0 million. No cash payments have been
first quarter of 2003. In the first quarter made between companies in 2004 or 2003
of 2004, the Property and Casualty Group for recoveries under this agreement since
experienced improved frequency trends, loss related losses are reserved but not yet paid.
catastrophes and improvement in average
Included in the Company’s policy
premium per policy. The improvement in
acquisition and other underwriting expenses
2004 underwriting results on direct business
are the property and casualty insurance
reflects the impact of the underwriting
subsidiaries’ share of eCommerce initiative
profitability initiatives implemented in 2003.
expenses covered under a technology cost
The 2003 underwriting losses resulted
sharing agreement totaling $.4 million and
primarily from rapid increases in claims
$.8 million for the quarters ended March 31,
severity and increased catastrophe losses.
2004 and 2003, respectively.
The Company’s property and casualty
insurance subsidiaries’ unaffiliated assumed
Investment
reinsurance business generated net
Operations
underwriting income of $.1 million and
$.9 million in the first quarters of 2004 and
Net revenue from investment operations
2003, respectively.
for the first quarter of 2004 increased to
$19.4 million from $14.8 million in the
Underwriting results are net of premiums
first quarter of 2003. The increase in net
paid and recoveries recorded under the
revenue from investment operations in
aggregate excess of loss agreement with
2004 is primarily due to net realized gains
the Exchange. The premium paid to the
of $2.9 million in the first quarter of 2004,
Exchange for the agreement totaled $1.7
compared to net realized gains of $.6 million
million during the quarter ended March 31,
in the first quarter of 2003, as well as
2004, and $1.2 million during the quarter
income generated from limited partnership
ended March 31, 2003. The portion of this
investments.
premium recorded as earned was $.8 million
8
7
▼
▼

6. Net investment income totaled $14.7 Our first quarter results reflected continued
million and $14.3 million for the quarters progress toward improving underwriting
ended March 31, 2004 and 2003, profitability. The statutory combined ratio of
respectively. the Property and Casualty Group improved
significantly to 100.2 in the first quarter of
The Company realized net gains on 2004, compared to 113.2 in the first quarter
investments of $2.9 million in the first of 2003. While new business production
quarter of 2004 compared to $.6 million has declined as a result of the focus on
for the same period in 2003. There were no underwriting and rate actions, we remain
impairment charges on investments in the competitive in our markets. We are confident
first quarter of 2004. The first quarter 2003 that our balanced approach to underwriting
net realized gains included $6.0 million in profitability and quality growth will positively
impairment charges for write-downs of fixed position the Company for the future.
maturity, nonredeemable preferred stock and
common stock investments in the energy
and financial services sectors.
Jeffrey A. Ludrof
Equity in earnings of limited partnerships
President and Chief Executive Officer
was $.4 million for the quarter ended
March 31, 2004, compared to losses of $1.3
million for the same period one year ago. “Safe Harbor” Statement Under the Private
Private equity and fixed income limited Securities Litigation Reform Act of 1995: Certain
forward-looking statements contained herein involve
partnerships realized earnings of $.1 million risks and uncertainties. These statements include
for the three months ended March 31, certain discussions relating to management fee
revenue, cost of management operations, underwriting,
2004, compared to losses of $1.7 million in
premium and investment income volume, business
2003. In the first quarter of 2004, there were strategies, profitability and business relationships and
impairment charges related to private equity the Company’s other business activities during 2004
and beyond. In some cases, you can identify forward-
limited partnerships of $.1 million compared looking statements by terms such as “may,” “will,”
to impairment charges of $1.3 million in “should,” “could,” “would,” “expect,” “plan,” “intend,”
“anticipate,” “believe,” “estimate,” “project,” “predict,”
the first quarter of 2003. Real estate limited
“potential” and similar expressions. These forward-
partnerships reflected earnings of $.3 million looking statements reflect the Company’s current views
for the three months ended March 31, 2004, about future events, are based on assumptions and are
subject to known and unknown risks and uncertainties
compared to earnings of $.4 million for the that may cause results to differ materially from those
same period in 2003. anticipated in those statements. Many of the factors
that will determine future events or achievements are
beyond our ability to control or predict.
10
9
▼
▼

7. Consolidated statements of operations—
segment basis
(Amounts in thousands, except per share data)
Three months ended March 31
(unaudited)
2004 2003
Management operations
Management fee revenue $ 221,867 $ 207,246
Service agreement revenue 5,598 6,484
Total revenue from management operations $ 227,465 $ 213,730
Cost of management operations 171,239 154,373
Income from management operations $ 56,226 $ 59,357
Insurance underwriting operations
Premiums earned $ 50,649 $ 45,182
Losses and loss adjustment expenses incurred $ 38,037 $ 37,500
Policy acquisition and other underwriting expenses 14,103 13,352
Total losses and expenses $ 52,140 $ 50,852
Underwriting loss $ ( 1,491) $ ( 5,670)
Investment operations
Net investment income $ 14,686 $ 14,319
Net realized gain on investments 2,853 593
Equity in earnings (losses) of limited partnerships 418 ( 1,326)
Equity in earnings of Erie Family Life
Insurance Company 1,414 1,169
Net revenue from investment operations $ 19,371 $ 14,755
Income before income taxes $ 74,106 $ 68,442
Provision for income taxes 24,534 22,542
Net income $ 49,572 $ 45,900
Net income per share—basic and diluted $ 0.70 $ 0.65
Weighted average shares outstanding 70,947 70,997
Dividends declared
Class A non-voting common $ 0.215 $ 0.190
Class B common $ 32.25 $ 28.50
NOTES: (1) The Consolidated Statements of Operations and Exchange Commission on Form 10-Q. Shareholders may
Comprehensive Income have been prepared from accounts obtain a copy of the Form 10-Q report without charge by
without audit. (2) Net income for the period ended March 31, writing to the Chief Financial Officer, Erie Indemnity Company,
2004, is not necessarily indicative of the results that may 100 Erie Insurance Place, Erie, Pennsylvania, 16530 or by
be expected for the year ending December 31, 2004. (3) The visiting the Company’s website at www.erieinsurance.com.
Company submits a quarterly report to the Securities and
12
11
▼
▼

8. Consolidated statements of
comprehensive income
(Dollars in thousands)
Three months ended March 31
(unaudited)
2004 2003
Net income $ 49,572 $ 45,900
Unrealized holding gains arising during period,
net of reclassification adjustment for gains
included in net income, net of tax 13,058 9,755
Comprehensive income $ 62,630 $ 55,655
Consolidated statements
of financial position
(Amounts in thousands, except per share data)
December 31
March 31
2004 2003
Assets (unaudited)
Investments
Fixed maturities $ 927,537 $ 879,361
Equity securities
Preferred stock 151,413 148,952
Common stock 40,853 40,451
Other invested assets 119,034 116,400
Total investments $ 1,238,837 $ 1,185,164
Cash and cash equivalents $ 80,891 $ 87,192
Equity in Erie Family Life Insurance Company 60,287 56,072
Premiums receivable from Policyholders 267,596 266,957
Receivables from affiliates 1,018,348 984,146
Other assets 185,767 175,076
Total assets $ 2,851,726 $ 2,754,607
Liabilities and shareholders’ equity
Liabilities
Unpaid losses and loss adjustment expenses $ 867,702 $ 845,536
Unearned premiums 453,659 449,606
Other liabilities 323,750 295,295
Total liabilities $ 1,645,111 $ 1,590,437
Total shareholders’ equity 1,206,615 1,164,170
Total liabilities and shareholders’ equity $ 2,851,726 $ 2,754,607
Book value per share $ 17.03 $ 16.40
Shares outstanding 70,858 70,997
14
13
▼
▼