Erie Indemnity Company 2020 Annual Report

Member • Erie Insurance Group Home Offi ce • 100 Erie Insurance Place on Perry Square • Erie, Pennsylvania 16530 814.870.2000 • erieinsurance.com • An Equal Opportunity Employer

77268Cvr.indd268Cvr.indd 1 22/25/21/25/21 33:21:21 PMPM The words of ERIE’s co-founder H.O. Hirt to “never lose the human touch” took on a more powerful meaning in 2020. In the absence of handshakes and close conversations, we found diff erent ways to connect. We found creative ways to help. We found new ways to serve. The human touch was not lost in 2020; a more meaningful way to provide it was found.

On the cover: In 2020, we learned to work virtually—and serve virtually. Kentucky Branch liability team members designed a virtual ERIE Service Corps project, setting aside time to gather via Microsoft Teams® to create and write 114 letters to children to be distributed through the Lexington offi ce of Save the Children. Pictured from left on the top row are Mike Greenwell, Debbie Clem and Tracy Easton; second row, Whitney Tipton, Andrew Moore and Rayshawnna Shelby.

77268Cvr.indd268Cvr.indd 2 22/25/21/25/21 33:21:21 PMPM “It was so good to know any company is committed to doing the right thing. We want you to know how happy we are to be customers of a company with ethics. Thank you so much."

A Customer from West Virginia was one of nearly 2,000 who sent greeting cards, letters and notes to thank ERIE for the relief payments distributed to auto insurance Customers in May. Through the challenges of the past year, ERIE has been steadfast in our commitment to service and doing the right thing for our Customers, Agents, Employees and communities. And our nearly 6,000 Employees have stepped up in new ways to deliver on that—whether collaborating virtually from their homes or reporting to our offices to perform essential on-site work. Preparing a Customer mailing in the mechanical mailing facility at the Home Office are Mail Specialists Rochelle Wager, Bob Matlock and Dennis Pound.

2020 ANNUAL REPORT 3

7268Txt _C1.indd 3 2/26/21 12:50 PM To Our Shareholders

Each year starts in a similar way—with a renewed commitment to our goals and a sense of hope and excitement for what’s ahead.

In that way, 2020 was no diff erent.

It was a solid start to a year with plenty to celebrate. We would mark 95 years in business and 25 years on the NASDAQ. After three years of construction, our new seven-story offi ce building was nearly ready to open. If any year was to be a symbol of ERIE’s President & CEO Tim NeCastro stability and success, 2020 promised to be it.

We were unaware of the very diff erent shape that would take or just how much we would come to lean on our ﬁ rm foundation as the year progressed.

Over the course of a few days in mid-March, The year that started with so many high points our close-knit workforce was dispersed to had quickly turned into one with challenges avoid contact and exposure to the COVID-19 unlike any we’d ever experienced. It was surreal. virus. Employees who reported to one of our It was unsettling. I think it’s safe to say it shook 30 offi ce locations were now spread across us to our core—as individuals and as an nearly 6,000 individual home offi ces. The small organization. percentage of on-site essential Employees still But 2020 was also enlightening, even inspiring. reporting to our offi ces were faced with new And it showed us that, with our 95-year and unfamiliar health and safety restrictions commitment to service and doing the right aimed at reducing their risk of infection. thing as our foundation, when we’re shaken, As the situation unfolded further each day, our we just get stronger. Customer Care Operations team experienced a dramatic increase in calls from Customers Strength and Stability facing hardships caused by the pandemic. That strength was visible in the many examples Agents fi elded similar calls while operating of compassion and resilience throughout ERIE’s their own businesses under new restrictions. response to the pandemic. It’s also evidenced Our communities and the organizations in the remarkable levels of productivity that that serve them were struggling as well, as supported our fi nancial results for the year. the economic realities of lockdown were Despite the many challenges in the compounded by racial injustices and marketplace, ERIE remains fi nancially strong, as social unrest. refl ected in the highlights for both Indemnity and Exchange on page 10. These two entities

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77628Txt.indd628Txt.indd 4 22/25/21/25/21 33:52:52 PMPM have an important relationship and share a For Indemnity, operating income for the year common goal: ensuring the ﬁ nancial health ended at $338 million, down $19 million of the Exchange, the insurance operation we compared to 2019. This is due to an increase in manage, which—in turn—drives the success Employee bonuses and Agent commissions and of Indemnity. awards driven by the strong combined ratio. In 2020, the Exchange grew property and Revenue from investment operations declined casualty premium 1.7 percent over 2019, to $33 million, down $7 million compared to a driven by solid growth in our renewal business year ago. Indemnity had net income in 2020 of of 2.1 percent. a little over $293 million, a decrease of Our territories saw fewer catastrophic events $24 million compared to 2019. in 2020 compared to 2019, which is more In 2021, our focus will be on continuing to consistent with our long-term experience. This, outperform the industry, expanding our agency along with an industry-wide reduction in miles force, and further growing our Customer driven due to the pandemic, led to below- base. As always, we are committed to being normal losses and a combined ratio of 93.7 responsible stewards of your company. compared to 105 at the end of 2019. Policyholder surplus of the Exchange grew Productivity and Perseverance to $10.7 billion—up almost $1.3 billion for We came into 2020 poised to deliver on several the year, reﬂ ecting a disciplined approach key initiatives in support of our strategic focus to underwriting and a sharpened focus on areas: strengthening business platforms and investments in a year when surplus was also use of data; enhancing the ERIE experience; used to provide a policyholder dividend to our identifying and developing new sources of automobile customers. Over the past 10 years, revenue; and preparing the workforce of the the Exchange’s surplus has more than doubled. future.

“I’ve seen the ERIE spirit in action many times, but have never witnessed a group respond and deliver in such a short time.”

Andy Abramczyk, vice president and corporate technology offi cer, on the swift work to equip 95 percent of ERIE Employees to work remotely in a matter of days.

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77628Txt.indd628Txt.indd 5 22/25/21/25/21 33:52:52 PMPM Despite the many unexpected challenges faced to work smarter and faster, so they can focus on by our nearly 6,000 Employees and more than providing the human touch where and when it’s 13,000 licensed ERIE Agents, they not only needed most. met expectations, they exceeded them. Over Last year we launched and enhanced several the past year, I’ve been continually impressed products, providing both Agents and Customers with the resiliency of our organization. While with more options: we adapted to new challenges and demands ErieSecure Business® presented by the pandemic, we kept our • reimagined seven production, innovation, and of course, our legacy products into one single, customizable trademark service, at the forefront. commercial multi-peril product that Agents can quote, bind and issue in about Providing Customers with greater digital seven minutes. capabilities while maintaining ERIE’s distinctive ERIExpress Life, human touch was a critical objective as we • a new instant-issue term and entered 2020. Our new mobile app, launched whole life product, can be quoted, bound and in September, is helping us make important issued during the auto insurance quote and strides there. With just a couple taps on their application process, without the need for a mobile device, Customers can access their medical exam or physician statement. policy information and insurance ID cards, • ERIE Rate Lock®, which provides Customers make a payment, view the status of a claim or with an option to “lock in” their auto rate contact their Agent. During its development, until they’ve made a qualifying change, was the app was tested with both Agents and refreshed with more competitive pricing and Customers at every step of the process, rolled out in ten states. resulting in a highly user-friendly tool that is • YourTurn®, a product that monitors and quickly gaining popularity with Customers. records certain elements of the driving We also expanded our digital capabilities and experience, expanded to four additional states, created greater effi ciencies with two new rewarding safe drivers with fi nancial benefi ts in Claims tools. Preferred Method of Inspection eight states. uses artifi cial intelligence to determine the best The cross-functional teams that worked on method of inspection for vehicles, and Photo these product launches did so without missing Appraisal allows Customers to upload pictures a beat. And Agents have been quick to take of vehicle damage using a mobile device. Both advantage of these new off erings to boost capabilities allow our Employees and Agents their production.

“When we get to work on a quote now, we know exactly how to approach it, with no hesitation.”

Dana Dewberry, principal Agent, Protected Insurance Group, Clarksville, Tennessee, on the new ErieSecure Business® product.

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77628Txt.indd628Txt.indd 6 22/25/21/25/21 33:52:52 PMPM Agility and Anticipation Growth Partnership’s Erie Forward initiative. The advancements made during the past year The goal is to attract new businesses, help demonstrate our commitment to bolstering our existing ones grow, and spur startups through competitive position, creating new sources of an accelerator program while strengthening revenue, and meeting the changing needs of eff orts to develop our region’s workforce of our Customers. They also prove just how well the future. we work together and remain productive even ERIE’s dollars are specifi cally targeting projects in an adapted environment. aimed at both fi nancial return and social impact Face-to-face interaction has always been in our home community. Downtown Erie will and will always be ERIE’s sweet spot. It’s a truly be transformed by these eff orts and the diff erentiator for us as an insurer and as an entire region will feel the positive eff ects. employer. I look forward to the day we can be together in our offi ces—when we can shake Compassion and Action hands and see smiles that aren’t behind a mask As the pandemic forced us to be physically or computer screen. apart and fi nd new ways to connect and However, the past year has taught us much. provide service, it became clear we needed to We affi rmed not only that we can be nimble broaden our digital capabilities. At the same in today’s increasingly digital landscape, but time, the ongoing need for the human touch that we have to be. Growing and refi ning our also took on a greater clarity and importance. digital capabilities was a high priority going Looking back at ERIE’s response to the into 2020—but the importance of it grew challenges of 2020, I’m struck by how much of exponentially as the year went on. it was grounded in our longstanding principles As we look ahead to the next few years, we’ll of doing the right thing and maintaining be making even greater strides in the digital the human touch. And at the heart of those landscape—more swiftly and in ways that principles is compassion. It’s something that leverage the human touch model that sets us can’t be automated or digitized—and it’s apart. I’m very excited to see what the future what guided so many of our actions over this brings and have the utmost confi dence in the unprecedented year. teams that will get us there. Compassion prompted us to equip the majority I’m also excited about the continued of our Employees to work from home, to momentum around the revitalization of our keep them safe and to protect our on-site hometown, Erie, Pennsylvania. Opportunity essential workforce. Those are the dedicated zone investments initiated in 2019 are helping ERIE Employees whose roles require them to fund construction of a downtown urban to be in the offi ce. I’ve received countless market and food hall, market-rate housing, messages from members of the ERIE Family offi ce space for small business and retail and who appreciate the actions we’ve taken over other projects being developed by the Erie the past year to keep their well-being a priority. Downtown Development Corporation. Beyond that, the results of an Employee engagement survey conducted in September Additionally, last year we partnered with showed that 93 percent of our Employees Arctaris Impact Investors and the Erie consider ERIE to be a great place to work. Community Foundation to facilitate other local opportunity zone projects to attract new Compassion led us to assist Customers business to the area; so far, that includes a struggling to pay their bills because of job video game developer and a plastics recycling losses or illness by delaying payment dates, company. We’ve also invested $750,000 over adjusting installments, changing pay plans and fi ve years in the Erie Regional Chamber and waiving penalties and fees. It’s why we off ered $400 million in fi nancial relief to our Customers

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77628Txt.indd628Txt.indd 7 22/25/21/25/21 33:52:52 PMPM “Our loss was handled with professionalism, compassion, dedication and speed, despite the onset of the pandemic.”

A Customer from Virginia commenting on the high level of service they received from ERIE.

through rate reductions for auto policyholders our top priority over the past year. Doing and policyholder dividend payments. After the that successfully while meeting and, in many dividend checks were distributed, we received cases, exceeding our business objectives nearly 2,000 handwritten notes of appreciation is perhaps the most notable point of pride from Customers, affi rming that this was the right for me thus far in my tenure as President thing to do. and CEO. But more importantly, it’s a nod Compassion inspired us to provide a lead gift to the tenacity, adaptability, resiliency and of $100,000 to support the Erie Community humanity displayed by our thousands of ERIE Foundation’s COVID-19 Rapid Response Fund Employees and Agents. in Erie, Pennsylvania, and to make an additional When we had to come apart, we created new $2.5 million available to Agents and branch ways to come together. offi ces to support charitable work in their local When forced to slow down, we found ways to communities. Hundreds of social media posts be more effi cient. using #ErieAgentsGivingBack showed the we discovered impact that funding had. When faced with turmoil, opportunities for growth. Compassion is also why we continue to host And when confronted with the unknown, we listening sessions and conversations related to racial inequality. We also chose an Employee leaned on the foundation that’s guided us for to serve in a one-year, full-time appointment more than 95 years. Not surprisingly, it didn’t to the CEO Action for Racial Equity Fellowship let us down. Program. Gwendolyn White, a 35-year ERIE Thank you, Shareholders, for your continued Employee, is now part of a team of professionals support and trust. If the last year left us with from 100 companies nationwide working to one key lesson, it’s that when we let our address systemic racism and social injustice values lead the way, our true strength shows. through public policy. Ensuring the safety, well-being and fair treatment of our Customers, Employees, Agents and the communities we serve—while continuing to off er the protection and superior service Timothy G. NeCastro Customers know and expect from us—has been President and CEO

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77628Txt.indd628Txt.indd 8 22/25/21/25/21 33:52:52 PMPM “It’s important that we understand there are multiple ways to get things done and those things may be diff erent than anything we’ve experienced before. If we’re open to that, we can adapt mid-stride.”

Justin Mercier, senior district sales manager, Tennessee, was one of the thousands of ERIE Employees to experience signiﬁ cant changes to how and where they work because of the pandemic. Many who previously spent their day either on the road or in an offi ce building found themselves working at dining room tables or in spare bedrooms, often in the company of their children and pets. Product Analyst Stephanie Yeager shared this photo of her 3-year-old granddaughter Bryleigh. “Apparently she has been watching Mimi work and has it down pat!”

2020 ANNUAL REPORT 9

77628Txt.indd628Txt.indd 9 22/25/21/25/21 33:52:52 PMPM Financial Results

Indemnity Exchange** Life • Net income of $5.61 per • Direct written premium grew • Collected nearly $233 million diluted Class A Share, to $7.6 billion compared to in total life insurance, annuity compared to $6.06 in 2019 $7.5 billion in 2019 and Medicare Supplement • Net income of $293 million, • New direct written premium premium—a decrease of compared to $317 million of $852 million 3.4 percent from 2019. in 2019 *Includes a one-time special dividend of $2.00 • Reported combined ratio of per share

• $273 million in dividends 93.7 percent compared to **Results for the Exchange include those of its paid to Shareholders* 105 percent at the end of 2019 wholly-owned property/casualty subsidiaries • Regular quarterly cash • Policyholder surplus dividend grew 7.3 percent increased from $9.5 billion in payout per share over the to $10.7 billion prior dividend rate • 2.1 percent increase in total – From $0.965 to $1.035 on policies in force each Class A share • Strong policy retention at – From $144.75 to $155.25 89.9 percent on each Class B share

“Our communities are increasingly diverse, and we’re becoming more in tune with the challenges and opportunities that come along with that shift.”

Fred Johnson, vice president and branch manager, Canton, on the new Diversity Production Incentive Offer, a 60-month program that provides a forgivable loan for agencies to grow diversity in their agency force or Customer base.

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7268Txt_C2.indd 10 3/1/21 12:44 PM 2020 Highlights

5-10 minutes $1.2 million+ in 700+ Google is all it takes to quote, bind and contributions Chromebooks® issue the new ERIExpress Life to charitable causes were donated to schools and product launched in August. matched by ERIE. nonprofi ts to support virtual More than 2,400 policies were learning. The computers became placed in less than four months. 80 interns available as Employee equipment from 7 states and 30 was replaced to support ERIE’s Auto conversion rates universities participated work-from-home capabilities. increased nearly 25% in ERIE’s fi rst all-virtual in the ten states where ERIE Future Focus intern cohort. $2.5 million in Rate Lock® refreshed pricing An estimated 35 percent charitable funds has been implemented. of employers canceled were made available to ERIE their internships due to the agencies and offi ces to support Nearly 100% of pandemic. local causes during the pandemic. ERIE agencies Eighteen branch offi ces received have quoted an ErieSecure 36,000+ meetings $10,000; seven stand-alone Business® policy since the were hosted on Microsoft claims offi ces were given $5,000; streamlined commercial Teams® each month. Between and each of our more than 2,200 multi-peril product launched September and December agencies received $1,000 to give in the fall. alone, more than 70,000 calls back to their communities. were made, 10 million chat 75,000+ Customers messages sent and nearly 2,560 pounds of produce downloaded the new mobile 6,000 channels were in use. was donated to the Erie app in the fi rst three months City Mission through ERIE’s after its September launch. 27,000+ Community Garden Project, COVID-related calls reimagined in 2020 as 68 bucket gardens at Employee homes. 22,000+ drivers were answered by ERIE’s have registered for ERIE’s Customer Care Operations YourTurn® program. The team in March and April. 12 Employees telematics program that tracks Most of the calls were from were part of the inaugural and rewards safe driving was Customers asking for holds cohort for the Thomas B. Hagen introduced in four more states on their payments and billing Fellowship Program. The civic- in 2020 and is now off ered in adjustments. engagement development eight states total. program hopes to expand More than 95% across the ERIE footprint after a successful pilot in 60 underwriters of Employees Erie, Pennsylvania. cross-trained to handle both were equipped to work personal and commercial lines, remotely within a week in creating a deeper relationship March. That included the 18 virtual Annual between underwriter and Agent. distribution of more than Branch Meetings A total of 122 underwriters are 1,350 monitors and 275 were held, with nearly 4,500 now trained to handle both lines. Chromebooks across the attendees. 12-state geographic footprint.

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77628Txt.indd628Txt.indd 1111 22/25/21/25/21 33:52:52 PMPM Awards & Recognitions

2nd in Customer Best-in-State America’s Best Customer Satisfaction Insurance Companies Service Companies (mid-sized insurers) Forbes (in eight states and all Homeowners Insurance, J.D. Power 2020 U.S. Insurance ﬁ ve categories) Newsweek Shopping Study 376 on Fortune 500 2020 Achievement in 2020 Top Pick, (up from 381 in 2019) Customer Excellence Renter’s Insurance Conﬁ rmit (in three categories) Best Comprehensive Coverage, Corporate Partner Money of the Year A+ (Superior) rating Penn State University A.M. Best

Workplace Honors

Great Place to America’s Best America’s Best-In-State Work® Certiﬁ ed Employers for Diversity Employers 2020 93% of Employees consider Forbes (Ranked 116 out of 500) Pennsylvania, Forbes ERIE a Great Place to Work. (An increase of 22 points Best Employers: Top 25 Employee since 2012) Excellence in Health Resource Group (ERG) & Well-Being ERIE’s Women’s Affi nity America's Best Platinum Award, Business Network, Association of ERGs Employers for Women Group on Health and Councils Forbes (Ranked 104 out of 300)

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77628Txt.indd628Txt.indd 1212 22/25/21/25/21 33:52:52 PMPM “They serve so that others may live. We see you. We you. We thank you. Thank you, Erie Insurance, for partnering with us to give back to those who give so much for our community.”

Advocate Insurance Group of Martinsburg, West Virginia, delivered meals to local fi refi ghters and fi rst responders after ERIE provided each agency an extra $1,000 to support their communities during the COVID-19 pandemic. The agency's social media post and photo of Outside Sales Agent Kaveh Sadat delivering the meals was one of thousands shared using #ErieAgentsGivingBack.

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77628Txt.indd628Txt.indd 1313 22/25/21/25/21 33:52:52 PMPM Organizational Structure

Erie Indemnity Company (Indemnity) is a These services are performed in accordance publicly held Pennsylvania business corporation with a subscriber’s agreement (a limited power that has been the managing attorney-in-fact of attorney) executed by each subscriber, who for the subscribers (Policyholders) at the Erie appoints Indemnity as their common attorney- Insurance Exchange (Exchange) since 1925. The in-fact to transact business on their behalf and Exchange is a subscriber-owned Pennsylvania- manage the aff airs at the Exchange. domiciled reciprocal insurer that writes The property and casualty and life insurance property and casualty insurance. operations are owned by the Exchange, and Indemnity’s primary function is to provide Indemnity functions as the management certain services to the Exchange relating to company. Indemnity, the Exchange, and its sales, underwriting and issuance of policies on subsidiaries and affi liates operate collectively as behalf of the Exchange. the “Erie Insurance Group.”

Erie Insurance Group Organizational Chart

Erie Indemnity Erie Insurance Exchange Company (A Reciprocal Exchange)

Erie Insurance Property Erie Insurance Flagship City Erie Family Life & Casualty Company Company Insurance Company Insurance Company

Erie Insurance Company of New York

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77628Txt.indd628Txt.indd 1414 22/25/21/25/21 33:52:52 PMPM Erie Indemnity Company Financial Highlights

(dollars in millions, except share data)

2018 2019 2020 FINANCIAL OPERATING DATA Management fee rate 25% 25% 25% Operating income $344 $357 $338 Investment income 26 40 33 Interest expense and Other (income), net (1) 1 3 Net income 288 317 293 Return on equity 31.5% 30.1% 25.3%

PER SHARE DATA Net income per Class A share—diluted $5.51 $6.06 $5.61 Dividends declared per Class A share 3.42 3.665 5.93* Dividends declared per Class B share 513.00 549.75 889.50**

FINANCIAL POSITION DATA Total assets $1,778 $2,016 $2,117 Total equity 974 1,133 1,188 Weighted average Class A common and 52,315,213 52,319,860 52,313,360 equivalent B shares outstanding—diluted

$5.93* *Includes a one-time special dividend of $2.00 per share **Includes a one-time special dividend of $300 per share

31.5% $3.665 30.1% $3.42 $6.06 25.3% $5.51 $5.61

2018 2019 2020 2018 2019 2020 2018 2019 2020

Return on equity Net Income Dividends declared per Class A share —Diluted per Class A Share

2020 ANNUAL REPORT 15

77628Txt.indd628Txt.indd 1515 22/25/21/25/21 33:52:52 PMPM Corporate Directory

Board of Directors J. Ralph Borneman, Jr., CIC, CPIA C. Scott Hartz, CPA President, Chief Executive Offi cer and Director, INRange Systems, Inc.; and Chairman of the Board, Body-Borneman Managing Director, INRange Investor Group, LLC Insurance & Financial Services, LLC Brian A. Hudson, Sr., CPA, CGMA, CTP Eugene C. Connell, FCAS, CFA, CPCU Retired Executive Director and Chief Executive Offi cer, Independent Investor and Advisor, Erie, PA Pennsylvania Housing Finance Agency

Salvatore Correnti, CFA, CCM, FLMI George R. Lucore, AAM, AIM, Retired Non-executive Vice Chair of the Board AIT, CIC, CPCU, LUTCF of Directors, Conning Holdings Corporation Managing Director, PAFLA Properties, LLC

LuAnn Datesh, Esq. Thomas W. Palmer, Esq. Vice President, General Counsel and Of counsel to the law ﬁ rm Marshall & Melhorn, LLC Corporate Secretary, Olympus Energy, LLC Martin P. Sheffi eld, CPCU(2) Jonathan Hirt Hagen, J.D. Owner, Sheffi eld Consulting, LLC Vice Chairman of the Board, Erie Indemnity Company; and Co-Trustee, H.O. Hirt Trusts Elizabeth Hirt Vorsheck Co-Trustee, H.O. Hirt Trusts Thomas B. Hagen Chairman of the Board, Erie Indemnity Company; and Chairman, Custom Group Industries

Erie Indemnity Company 2020 Standing Committees of the Board

Charitable Exchange Compensation Nominating & Name Audit Risk Executive Investment Strategy Giving Relationship & Development Governance J. Ralph Borneman, Jr. x x x Chair Eugene C. Connell x Chair x x Salvatore Correnti x Chair LuAnn Datesh x x Jonathan Hirt Hagen x x x x Chair x Thomas B. Hagen(1) Chair C. Scott Hartz xx Brian A. Hudson, Sr. Chair x x George R. Lucore x x x x Thomas W. Palmer x Chair x Martin P. Sheffi eld(2) xxx Elizabeth Hirt Vorsheck Chair x x x x x

(1) As the non-executive Chairman of the Board of Directors, Thomas B. Hagen serves, ex offi cio, as a non-voting member of the Audit Committee, and a voting member of all other committees, except for the Risk Committee. Mr. Hagen has deferred his ex offi cio membership on the Risk Committee to the Vice Chairman of the Board.

(2) Martin P. Sheffi eld resigned from the Board of Directors eff ective December 31, 2020.

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77628Txt.indd628Txt.indd 1616 22/25/21/25/21 33:52:52 PMPM Executive Leadership Timothy G. NeCastro, CPA, CIC Robert C. Ingram III President and Chief Executive Officer Executive Vice President and Chief Information Officer

Lorianne Feltz, CPCU Douglas E. Smith, CPCU, FCAS, MAAA Executive Vice President, Claims and Customer Service Executive Vice President, Sales and Products

Gregory J. Gutting, CPA, CPCU Dionne Wallace Oakley Executive Vice President and Chief Financial Officer Executive Vice President, Human Resources and Strategy

Senior Leadership Brian W. Bolash, Esq. Ruben F. Fechner III Senior Vice President, Secretary and General Counsel Senior Vice President, Personal Products

Jeffrey W. Brinling, CPCU C. Michael Fletcher, CIC Senior Vice President, Corporate Services Senior Vice President, Sales and Marketing

Patrick J. Burns, CPCU, AIC, AIS Ronald S. Habursky, CFA Senior Vice President, ERIE Experience Senior Vice President and Chief Investment Officer

Marc Cipriani, CIC Keith E. Kennedy Senior Vice President, Underwriting Senior Vice President, Next Level Innovation

Louis F. Colaizzo, CIC Robert W. McNutt, CTP Senior Vice President, Erie Family Life Insurance Company Vice President and Corporate Treasurer

Cody W. Cook, FCAS, CPCU Julie M. Pelkowski, CPA Senior Vice President, Claims Senior Vice President and Controller

Sean Dugan, CPCU, CIC, ARe, AU Sheryl A. Rucker, Esq. Senior Vice President, Human Resources Senior Vice President, Strategic & Integrated Services

Bradley C. Eastwood, FCAS, MAAA David S. Russo, CPCU, CIC, ARe Senior Vice President, Actuarial, and Chief Actuary Senior Vice President, Customer Service

David Edgerton Sarah J. Shine, CPCU, FCAS Senior Vice President, Information Technology Senior Vice President, Commercial Products

A talented ERIE team collaborated on the production of the 2020 Annual Report: Isaac Smith, design; Jennifer Duda, content; Bruce Bennett and Edward Bernik, photography; Scott Beilharz and Robert Scalise, Treasury; Chandra Burns and Rebecca Buona, Law; Jessica Oldham, Finance; Kathy Felong, Strategic Communications; Dennis Morell, Penny Allen, and Dorian Otero-Flanagan, Creative Services.

2020 ANNUAL REPORT 17

7268Txt_C3.indd 17 3/2/21 2:14 PM F.W. Hirt Quality Agency Award Winners 2016-2020

The F.W. Hirt Quality Agency Award is the highest honor bestowed on an ERIE agency. It recognizes long-term proﬁ tability and growth, thorough and responsible underwriting practices, and continuing commitment to education.

Allentown Branch Harrisburg Branch Richmond Branch 2019 Warren Weiss Insurance 2020 The Hess Agency 2019 CMR Insurance Agency, LLC 2018 Cellucci Foran Insurance 2019 Klebon Insurance Group 2016 Foundation Insurance Group 2016 Earley-Poli Agency 2018 Covenant Insurance Group Roanoke Branch 2017 CrossKeys Insurance Group Canton Branch 2020 Willard Insurance Agency 2020 Walsh Insurance Group 2016 James B. Murdoch 2019 Wilkins Insurance Agency, Inc. Insurance Group 2018 Troy Miller Agency 2018 Walter & Walter Insurance Agency 2017 Vince Hrobat Agency Indiana Branch 2017 Wampler’s Insurance Agency 2018 Patton Insurance 2016 The Agent Insurance Services 2017 VanVleet Insurance Agency Silver Spring Branch 2020 Bayside Insurance Associates Charlotte Branch 2016 Johnson Insurance Agency 2020 Mark McDuffi e Insurance Agency 2019 Schauber-Van Schaik Insurance 2018 Trey Siner Insurance Group New York Branch 2016 Joseph W. McCartin Agency 2020 Tanner Insurance Agency Columbus Branch 2019 The Kinney Agency, Inc. Tennessee Branch 2020 O’Nail-Hartman Insurance Agency 2020 Jones Insurance Service 2017 A.T. Matthews & Dier 2018 Dolbow Insurance 2019 Hugh Cate Insurance Agency 2017 Welty Financial Services Pittsburgh Branch 2017 Bailey Insurance Service 2020 Bruner Insurance Agency 2016 Burrey Insurance Agency 2019 Kattan-Ferretti Insurance West Virginia Branch 2020 Assure America Corporation Erie Branch 2017 Brian Ruscello Agency 2020 Williams Agency 2019 L&L Auvil Insurance Agency LLC 2016 The Kerr Agency 2019 Hoak Insurance Services 2018 United Security Agency 2018 Rossbacher Insurance Service Raleigh Branch 2017 Mercer Insurance Associates 2019 Riddick Insurance Group, Inc. 2017 St. Marys Insurance Agency 2016 Morris Insurance Services 2016 Schultze Insurance Agency 2016 Great Lakes Insurance Services Group Wisconsin Branch 2019 Bartelt Insurance Services, LLC

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77628Txt.indd628Txt.indd 1818 22/25/21/25/21 33:52:52 PMPM Erie Indemnity Company Corporate Information

Corporate Headquarters/Home Offi ce Annual Meeting of Shareholders 100 Erie Insurance Place Our virtual Annual Meeting of Shareholders will Erie, PA 16530 be held on April 20, 2021, at 9:30 a.m., EDT. 814.870.2000 Independent Registered Stock Listing Public Accounting Firm Erie Indemnity Company’s Class A nonvoting Ernst & Young, LLP common stock is listed on The NASDAQ Stock 950 Main Avenue Market®, Inc., under the symbol “ERIE.” Suite 1800 Cleveland, OH 44113 Stock Transfer Information Broadridge Corporate Issuer Solutions, Inc. Online Information P.O. Box 1342 Erie Indemnity’s information statement Brentwood, NY 11717 and annual report are available online at 877.830.4936 www.erieproxy.com. Additional ﬁ nancial and shareholder information, press releases, and general news about the Company may be accessed at www.erieinsurance.com.

Field Offi ces

West Northeast Southeast Region Region Region Peoria, IL Rochester, NY Hagerstown, MD Fort Wayne, IN Allentown, PA Silver Spring, MD Indianapolis, IN Erie, PA Charlotte, NC Lexington, KY Harrisburg, PA Raleigh, NC Canton, OH Johnstown, PA Richmond, VA Columbus, OH Murrysville, PA Roanoke, VA Knoxville, TN Philadelphia, PA Waynesboro, VA Nashville, TN Pittsburgh, PA Parkersburg, WV Waukesha, WI

Active States Home Offi ce, Erie Field Offi ce Field Offi ces

2020 ANNUAL REPORT 19

77628Txt.indd628Txt.indd 1919 22/25/21/25/21 33:52:52 PMPM Erie Indemnity Company

Excerpts From Form 10-K

77628Txt.indd628Txt.indd 2020 22/25/21/25/21 33:52:52 PMPM ERIE INDEMNITY COMPANY EXCERPTS FROMFORM10-K This Annual Report includes theCompanysAuditedFinancialStatements andexcerptsfromthe Companysfull Form 10-K report as filedwiththe Securities andExchange Commission (SEC)onFebruary25, 2021. Thecomplete Form 10-K canbefoundonthe SECWeb site at www.sec.gov.

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-24000 ERIE INDEMNITY COMPANY (Exact name of registrant as specified in its charter)

Pennsylvania 25-0466020 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 100 Erie Insurance Place, Erie, Pennsylvania 16530 (Address of principal executive offices) (Zip Code)

814 870-2000 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Class Acommon stock, stated value $0.0292 per share ERIE NASDAQ Stock Market, LLC (Title of each class) (Trading Symbol) (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, anon-accelerated filer,smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "acceleratedfiler," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed areport on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of theExchange Act). Yes ☐ No ☒ Aggregate market value of voting and non-voting common stock held by non-affiliates as of the last business day of the registrant's most recently completed second fiscal quarter: $4.8 billion of Class Anon-voting common stock as of June 30, 2020. There is no active market for the Class B voting common stock. The Class Bcommon stock is closely held by few shareholders. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 46,189,068 shares of Class Acommon stock and 2,542 shares of Class Bcommon stock outstanding on February 19, 2021. DOCUMENTS INCORPORATED BY REFERENCE Portions of Part III of this Form 10-K (Items 10, 11, 12, 13, and 14) are incorporated by reference to theinformation statement on Schedule 14C to be filed with the Securitiesand Exchange Commission no later than 120 days after December 31, 2020. INDEX

PART ITEMNUMBER AND CAPTION PAGE

IItem 1. Business 3 Item1A. Risk Factors 6 Item1B. UnresolvedStaff Comments 14 Item2.Properties 15 Item3.Legal Proceedings 16 Item4.Mine SafetyDisclosures 18

II Item5.Market for Registrant's Common Equity, RelatedStockholderMattersand IssuerPurchases of Equity Securities 19 Item6.Selected Financial Data 20 Item7.Management'sDiscussion and Analysis of Financial Condition and ResultsofOperations 20 Item7A. Quantitative and QualitativeDisclosures About Market Risk 42 Item8.Financial Statements and Supplementary Data 45 Item9.ChangesInand Disagreements With Accountants on Accounting andFinancial Disclosure 83 Item9A. Controlsand Procedures 83 Item9B. OtherInformation 83

III Item10. Directors, Executive Officers and CorporateGovernance 85 Item11. Executive Compensation 86 Item12. Security Ownership of CertainBeneficialOwners and Management andRelated Stockholder Matters 86 Item13. CertainRelationships and RelatedTransactions, and Director Independence 86 Item14. Principal Accountant Fees and Services 86

IV Item15. Exhibitsand FinancialStatement Schedules 87 Item16. Form 10-K Summary 87

Signatures 92

2 PARTI

ITEM 1. BUSINESS

General ErieIndemnity Company ("Indemnity","we", "us", "our")isapubliclyheldPennsylvania business corporation that has since itsincorporation in 1925 served as the attorney-in-fact for the subscribers (policyholders) at theErie Insurance Exchange ("Exchange"). The Exchange,whichalsocommenced businessin1925, is aPennsylvania-domiciledreciprocal insurer that writesproperty andcasualtyinsurance. TheExchange haswholly owned property andcasualtysubsidiariesincluding: Erie Insurance Company, Erie Insurance Company of NewYork, Erie Insurance Property &Casualty Company and Flagship City Insurance Company, andawhollyowned life insurance company, Erie FamilyLifeInsuranceCompany ("EFL").

Our primary function as attorney-in-factistoperform policyissuanceand renewal services on behalf of thesubscribers at the Exchange.Wealsoact as attorney-in-fact on behalf of theExchange with respecttoall claims handling and investment management services, as well as the serviceprovider for allclaimshandling, life insurance, andinvestment management services for itsinsurance subsidiaries, collectivelyreferred to as "administrative services". Acting as attorney-in-fact in these two capacitiesisdone in accordancewithasubscriber's agreement (a limitedpower of attorney) executed individually by each subscriber(policyholder), which appoints us as theircommon attorney-in-facttotransact certain business on theirbehalf. Pursuant to the subscriber’s agreement for acting as attorney-in-factinthese twocapacities, we earn amanagement fee calculatedasapercentage, not to exceed 25%, of thedirectand affiliated assumed premiums written by theExchange. The management feerateisset at leastannuallybyour Board of Directors. The process of setting themanagement fee rateincludes the evaluation of current year operating results comparedtobothprior year andindustry estimated results for both Indemnity and theExchange, andconsideration of several factors for both entities including: theirrelative financial strengthand capital position; projectedrevenue, expense andearnings for the subsequent year; future capitalneeds; as well as competitive position.

Services The policy issuance and renewal services we provide to theExchange arerelated to thesales, underwriting andissuance of policies. The salesrelatedservices we provide include agent compensation and certainsalesand advertising support services. Agent compensation includesscheduled commissions to agents based upon premiums written as well as additional commissions and bonusestoagents, which areearnedbyachieving targetedmeasures.Agent compensation comprised approximately 66% of our 2020 policyissuance and renewal expenses. Theunderwriting services we provide include underwriting andpolicy processing and comprised approximately 10% of our 2020 policyissuance and renewal expenses. The remaining servicesweprovide include customer service and administrative support. We also provide information technology services thatsupport allthe functions listed above that comprised approximately11% of our 2020 policy issuance and renewal expenses. Includedinthese expenses are allocations of costs for departmentsthat support these policy issuance and renewal functions.

By virtue of itslegal structure as areciprocal insurer, theExchange doesnot have any employeesorofficers. Therefore, it enters intocontractualrelationships by andthrough an attorney-in-fact.Indemnityserves as the attorney-in-fact on behalfof the Exchange with respect to itsadministrative services. The Exchange's insurance subsidiariesalsoutilize Indemnityfor these services in accordancewiththe serviceagreements between each of the subsidiariesand Indemnity. Claimshandling services include costs incurred in theclaimsprocess, including the adjustment,investigation, defense, recording andpayment functions. Life insurance management servicesinclude costs incurredinthe management and processing of life insurancebusiness. Investment management servicesare relatedtoinvestmenttrading activity, accounting and allother functions attributable to the investment of funds. Includedinthese expenses are allocations of costs for departments thatsupport these administrative functions. The amountsincurred for theseservicesare reimbursed to Indemnity at cost in accordance withthe subscriber's agreement and the serviceagreements. State insurance regulations require thatintercompany service agreementsand any materialamendments be approvedinadvancebythe state insurance department.

Erie Insurance Exchange As our primary purpose is to manage the affairs at the Exchange for the benefit of the subscribers (policyholders) through the policy issuance and renewal services and administrative services, the Exchangeisour sole customer. Our earnings arelargely generatedfrom management fees based on thedirect and affiliatedassumed premiumswritten by the Exchange.Wehave no direct competition in providing these services to theExchange.

The Exchange generatesrevenue by insuring preferredand standard risks, withpersonal linescomprising 71% of the 2020 direct andaffiliatedassumed written premiums andcommerciallinescomprising the remaining 29%. The principalpersonal lines products areprivate passenger automobileand homeowners. Theprincipalcommerciallinesproductsare commercial multi-peril, commercialautomobileand workers compensation. Historically, due to policyrenewal and salespatterns, the

3 Exchange'sdirect and affiliatedassumedwritten premiums aregreater in the second andthird quarters thaninthe first and fourth quarters of the calendaryear.

The Exchange is representedbyindependent agenciesthatserve as itssole distribution channel. In addition to their principal role as salespersons, theindependent agents playasignificant role as underwriting andserviceproviders and areanintegralpart of the Exchange's success.

Our results of operations are tied to thegrowth andfinancial condition of the Exchange.Ifany eventsoccurredthatimpaired the Exchange's abilitytogrow or sustainits financialcondition, including but not limitedtoreduced financialstrength ratings, disruption in theindependent agency relationships, significant catastrophe losses, or products not meetingcustomer demands, the Exchange couldfind it more difficult to retain itsexisting business and attract new business. Adecline in thebusiness of the Exchange almost certainly would have as aconsequence adecline in thetotalpremiums paidand acorrespondingly adverse effect on the amount of themanagement feeswereceive. We also have an exposure to aconcentration of creditriskrelatedto the unsecuredreceivables due from the Exchange for itsmanagement fee and cost reimbursements. See Part II, Item8. "FinancialStatements and Supplementary Data -Note 16, Concentrations of CreditRisk, of Notes to Financial Statements" contained within this report.See theriskfactors relatedtoour dependency on thegrowth andfinancial condition of the Exchange in Item 1A. "Risk Factors" containedwithinthisreport.

Competition Our primary function as attorney-in-factistoperform policy issuance and renewal services on behalf of thesubscribers at the Exchange.Wealsoact as attorney-in-fact on behalf of theExchange, as well as the serviceprovider for itsinsurance subsidiaries, with respect to alladministrative services. There arealimitednumberofcompanies thatprovide servicesunder a reciprocal insuranceexchange structure.Wedonot directlycompeteagainst othersuch companies, givenweare appointedby the subscribers at theExchange to provide these services.

The direct and affiliatedassumed premiums written by theExchange drive our management fee which is our primary source of revenue. Theproperty andcasualtyinsuranceindustry is highlycompetitive.Property andcasualtyinsurers generally compete on the basis of customer service,price, consumer recognition, coveragesoffered, claims handling, financial stability and geographic coverage.Vigorous competition, particularly in the personal lines automobile and homeowners lines of business, is providedbylarge, well-capitalizednationalcompanies, some of whichhave broad distribution networks of employed or captive agents, by smallerregional insurers,and by large companies who marketand sell personal lines products directlytoconsumers. Innovations by competitors or other marketparticipantsmay also increase the level of competition in theindustry. In addition, because the insurance products of the Exchange are marketedexclusively through independent insuranceagents,the Exchange faces competition withinits appointed agenciesbasedupon ease of doing business, product,price,and service relationships.

Marketcompetition bears directlyonthe pricecharged forinsurance products and services subjecttoregulatory limitations. Industry capital levelscan alsosignificantlyaffect prices charged for coverage. Growthisdrivenbyacompany's ability to provide insurance services and competitive prices while maintaining targetprofit margins. Growth is aproduct of acompany's abilitytoretain existing customers and to attract new customers, as wellasmovement in the average premium per policy.

The Exchange's business model is designed to provide the advantages of localizedmarketing and claims servicing withthe economiesofscale andlow costofoperations from centralizedsupport services. The Exchange also carefullyselects the independent agenciesthat represent it andseeks to be the lead insurer with itsagents in ordertoenhancethe agency relationship andthe likelihood of receiving the most desirable underwriting opportunities from itsagents.

The Exchange’s strategic focus as areciprocal insureristoemployadisciplinedunderwriting philosophy and to leverage its strong surplus position to generatehigher risk adjusted investmentreturns.The goalisto produceacceptablereturns,onalong- term basis, through careful riskselection,rational pricing and superior investment returns.This focus allows theExchange to accomplish itsmission of providing as nearperfect protection, as nearperfect serviceasishumanly possible at thelowest possible costs.

See the risk factors relatedtoour dependencyonthe growthand financial condition of the Exchange in Item 1A. "RiskFactors" containedwithinthis report forfurtherdiscussion on competition in the insuranceindustry.

4 HumanCapital Management Our success is largelydependent upon our ability to attract,retain, and develop diverse talent while maintaining our service- based culture. We strive to createavalue proposition for our employeesthrough trustand collaboration whileproviding competitive compensation, benefits, and other reward programs. Our low turnover andhigh tenure are reflective of our culture and themutualcommitment that exists betweenemployees and thecompany.

Our human capitalmanagement strategy, including initiatives to shape our workforceand workplace, is designed to ensure we are well positioned for thefuture. Areasoffocus include talent acquisition, performance management, succession planning, learning and development, anddiversity andinclusion. Ourinvestments in human capitalinclude programs aimedatpreparing our employees for internaladvancement.Wehold ashared responsibilityviewofretirement planning whereby the company providestools and resources thatemployeesare expectedtouse to achieve theirretirement goals. We set ourselves apart by offering both a401(k) planand anoncontributory defined benefitpension plan.

We use the following humancapital metrics as part of managing our business: Years endedDecember31, 2020 2019 2018 Workforcesize Full-time (1) 5,849 5,772 5,544 Part-time314154 Temporary (2) 34 32 41 Turnover (3) 5.3 %5.6 %6.0 % Average tenure (4) 12.5 12.3 12.5

(1) Includes 50% of employees who provide claims and life insurance management services exclusively for the Exchange and its subsidiaries. The Exchange and its subsidiaries reimburse us monthly for the cost of these services. (2) Temporary employees are hired for short-term work and paid directly by us. (3) The percentage of employees who left voluntarily or involuntarily, including retirements. Calculated using the number of employees who exited, divided by the average headcount of the period. (4) The average number of years employees have been employed with the organization. Total number of years divided by average headcount of full-time and part-time employees for the period.

As we recognizethe importanceofemployee engagement on the outcomesweachieve as an organization, we also work with independent external partners to administerconfidentialsurveys to collectfeedback on theemployee experience.Wehave partneredwith theGreatPlace to Work® ("GPTW")Institute since 2012 but didnot apply for Top100 Companiesranking until2020 (outcomeyet unknown). Eighty-sevenpercent of employees participatedinthe 2020 survey, whichisastrong indicator of engagement. We receivedthe highest possible honors outside of ranking for our prior threesurveys:GreatPlace to Work-Certified™ in 2020 and2017, and Great-ratedin2014. Our overall GPTWscore has trended upwards over thelast three surveys andisfavorable comparedtothe benchmark of thecompaniesranked on theGreatPlace to Work® Top100 CompaniesList.

5 Government Regulation Most stateshaveenactedlegislation that regulates insurance holding company systems, definedastwo or more affiliated persons, one or more of which is an insurer. Indemnityand theExchange, andits wholly owned subsidiaries, meet the definition of an insuranceholding company system.

Each insurance company in the holding company systemisrequiredtoregister with the insurancesupervisory authority of its state of domicile and furnish information regarding theoperations of companieswithinthe holding company system thatmay materiallyaffect the operations, management, or financialcondition of theinsurers withinthe system.Pursuant to these laws, the respective insurance departmentsmay examine us and theExchange andits wholly owned subsidiaries at any time,and may require disclosure and/or prior approvalofcertaintransactions with the insurers and us, as an insurance holding company.

All transactions withinaholding company system affecting themember insurers of theholding company system must be fair and reasonableand any chargesorfees for services performed must be reasonable. Approval by the applicableinsurance commissioner is requiredprior to the consummation of transactions affecting the members withinaholding company system.

Website Access Our annual reportsonForm 10-K, quarterly reports on Form 10-Q, current reportsonForm 8-K, and any amendments to those reportsare available free of charge on our websiteatwww.erieinsurance.com as soon as reasonablypracticable after such materialisfiledelectronicallywith theSecuritiesand Exchange Commission. Additionally, copies of our annualreport on Form 10-K areavailable free of charge, upon written request, by contacting Investor Relations, ErieIndemnity Company, 100 ErieInsurancePlace,Erie, PA 16530, or calling(800) 458-0811.

ITEM 1A.RISK FACTORS

Our businessinvolves various risks and uncertainties, including, but not limitedtothose discussedinthis section. Therisks and uncertaintiesdescribedinthe risk factors below,orany additionalriskoutside of those discussedbelow, could have amaterial adverse effect on our business, financialcondition, operating results,cashflows, or liquidityifthey were to develop intoactual events. Thisinformation should be consideredcarefully together withthe otherinformation containedinthis report and in otherreportsand materials we fileperiodicallywith theSecuritiesand Exchange Commission.

Our risks have been dividedintothe following categories:

Risks related to Erie Insurance Exchange –risks relatedtoour dependence on our relationship with the Exchange associated with management fees, premium growth, andfinancial condition, as the Exchange is our solecustomerand principal source of revenue

Operating risks –risks stemming from eventsorcircumstancesthat directly or indirectly affectour operations, including our operations as attorney-in-factfor theExchange

Market, Capital, and Liquidity risks –risks that mayimpactthe valuesorresults or our investment portfolio, ability to meet financial obligations or covenants, or obtaincapital as necessary

Although we have organized risks generallyaccording to these categories in thediscussion below, risks mayhaveimpactsin more thanone category andare includedwhere theimpact is mostsignificant.

Risks related to Erie Insurance Exchange

If themanagement feerate paid by the Exchange is reduced or if there is asignificant decrease in theamount of directand affiliated assumedpremiums writtenbythe Exchange, revenuesand profitabilitycould be materially adversely affected.

We are dependent upon management fees paidbythe Exchange,whichrepresent our principal source of revenue.Pursuant to the subscriber's agreement withthe subscribers at theExchange, we may retain up to 25% of alldirectand affiliated assumed premiumswritten by theExchange. Therefore, management fee revenue from the Exchange is calculatedbymultiplying the management feeratebythe direct and affiliatedassumedpremiumswritten by theExchange. Accordingly, any reduction in direct and affiliatedassumedpremiumswritten by theExchange and/or themanagement fee ratewould have anegative effect on our revenues andnet income.

6 Themanagementfee rate is determinedbyour Board of Directors andmay not exceed 25% of thedirectand affiliated assumed premiumswritten by theExchange. TheBoard of Directorssetsthe management fee rateeachDecember for the following year. At theirdiscretion, theratecan be changedatany time.The process of setting the management feerateincludesthe evaluation of current year operating resultscomparedtobothprior year andindustry estimatedresultsfor both Indemnityand the Exchange,and consideration of severalfactors for both entitiesincluding: theirrelative financial strengthand capital position; projectedrevenue, expense andearnings for the subsequent year; future capitalneeds; as well as competitive position. The evaluation of these factors couldresult in areduction to themanagement fee rateand our revenues and profitabilitycould be materially adverselyaffected.

Serving as the attorney-in-fact in thereciprocal insuranceexchange structure results in theExchange being our solecustomer. We haveaninterest in thegrowth of the Exchange as our earnings are largelygeneratedfrom management fees based on the directand affiliatedassumedpremiums written by the Exchange.Ifthe Exchange'sability to grow or renew policies were adversely impacted, thepremium revenue of the Exchange would be adversely affectedwhichwould reduceour management feerevenue.The circumstancesorevents that might impair theExchange'sability to grow include,but are not limitedto, the items discussedbelow.

Unfavorablechangesinmacroeconomic conditions, including declining consumerconfidence, inflation, high unemployment, and thethreatofrecession, among others, may lead the Exchange's customers to modify coverage,not renew policies, or even cancelpolicies, which could adverselyaffect the premium revenue of theExchange, andconsequentlyour management fee.

The Exchange faces significant competition from other regionaland nationalinsurance companies. The propertyand casualty insuranceindustry is highlycompetitive on the basis of product,priceand service. If theExchange's competitors offer property and casualty products with more coverage or offerlower rates, and the Exchange is unabletoimplement productimprovements quickly enough to keep pace,its abilitytogrow and renew itsbusiness maybeadversely impacted. In addition, due to the Exchange's premium concentration in theautomobileand homeowners insurance markets, it maybemore sensitive to trends thatcould affectauto andhome insurancecoverages and ratesover time,for examplechanging vehicleusage,usage-based methods of determining premiums, ownership and driving patterns suchasride sharing, advancementsinvehicleorhome technology or safetyfeaturessuch as accident and loss prevention technologies, the development of autonomous vehicles, or residential occupancypatterns, among other factors. Innovations by competitors or othermarket participants mayincrease the level of competition in the industry. Ifwefailtorespond to thoseinnovations on atimely basis,our competitive position and resultsmay be materiallyadversely affected.

The Exchange marketsand sellsits insurance products through independent,non-exclusive insuranceagencies. Theseagencies are not obligated to sellonly the Exchange's insurance products, and generally alsosellproductsofthe Exchange's competitors. If agencies do not maintain their current levels of marketing efforts, bind theExchange to unacceptable risks, placebusiness with competinginsurers,orthe Exchange is unsuccessful in attracting or retaining agenciesinits distribution system as well as maintaining itsrelationships with those agencies, the Exchange's ability to grow and renew itsbusiness maybeadversely impacted. Additionally, consumerpreferencesmay causethe insurance industry as awholetomigratetoadelivery system otherthan independent agencies.

The Exchange maintains abrand recognizedfor customer service.The perceived performance,actions, conduct and behaviors of employees, independent insurance agency representatives, and third-partyservicepartners may result in reputationalharmto theExchange's brand. Specific incidents which maycauseharminclude but are not limited to disputes, long customer wait times, errors in processing aclaim, failure to protectsensitivecustomer data,and negative or inaccuratesocial media or traditionalmediacommunications. Likewise, an inability to match or exceed theservice providedbycompetitors, which is increasingly relying on digitaldeliveryand enhanceddistributiontechnology, mayimpede the Exchange's abilitytomaintain and/or grow its customer base. If third-party service providers fail to perform as anticipated, theExchange mayexperience operational difficulties, increased costs and reputational damage.Ifanextremecatastrophicevent were to occur in aheavily concentrated geographicarea of subscribers/policyholders, an extraordinarilyhighnumber of claims couldhave the potential to strainclaims processing and affectthe Exchange's ability to satisfy its customers. Any reputational harm to the Exchange could have the potential to impairits ability to grow and renewits business.

We haveaninterest in the financial condition of the Exchange based on serving as the attorney-in-fact in the reciprocal insuranceexchange structure and the Exchange being our sole customer. If the Exchange weretofail to maintainacceptable financial strengthratings,its competitive position in the insurance industry would be adverselyaffected. Ifaratingdowngrade ledtocustomers not renewing or canceling policies, or impacted theExchange's ability to attractnew customers, the premium revenue of the Exchange would be adverselyaffected whichwould reduce ourmanagement feerevenue.The circumstances or events thatmight impair theExchange'sfinancial condition include,but arenot limitedto, theitems discussedbelow.

7 Financial strength ratings are an important factor in establishing thecompetitive position of insurance companies suchasthe Exchange.Higher ratings generallyindicate greaterfinancial stabilityand astronger abilitytomeetongoing obligations to policyholders. The Exchange's A.M. Best rating is currentlyA+("Superior"). Rating agenciesperiodicallyreview insurers' ratings and change their rating criteria;therefore, theExchange's current rating maynot be maintainedinthe future. A significant downgrade in this or otherratings couldreducethe competitive position of theExchange, making it more difficultto attract profitablebusiness in the highlycompetitive propertyand casualty insurance market and potentiallyresult in reduced salesofits productsand lower premium revenue.

The performanceofthe Exchange's investment portfolio is subjecttoavariety of investment risks. TheExchange's investment portfolio is comprised principallyoffixedincome securities, equity securitiesand limitedpartnerships.The fixedincome portfolio is subjecttoanumber of risks including, but not limitedto, interest raterisk, investment credit risk, sector/ concentration risk and liquidity risk. The Exchange's common stock andpreferred equitysecurities have exposure to pricerisk, the risk of potential loss in estimatedfairvalue resulting from an adverse change in prices. Limitedpartnerships are significantlylessliquidand generallyinvolve higher degreesofprice risk thanpubliclytraded securities. Limited partnerships, like publicly tradedsecurities, have exposure to market volatility; but unlike fixedincome securities, cash flows andreturn expectations are less predictable.Ifany investmentsinthe Exchange's investment portfolio were to suffer asubstantial decrease in value,the Exchange's financialposition could be materiallyadversely affectedthrough increased unrealized losses or impairments. Asignificant decrease in the Exchange's portfoliocouldalsoput it,orits subsidiaries, at risk of failing to satisfy regulatory or rating agency minimum capital requirements.

Property andcasualtyinsurers are subjecttoextensive regulatory supervision in the states in whichtheydobusiness. This regulatory oversight includes, by way of example, mattersrelating to licensing, examination, ratesetting, market conduct, policy forms, limitations on the nature andamount of certaininvestments, claims practices, mandatedparticipation in involuntary marketsand guaranty funds, reserve adequacy, insurer solvency, restrictions on underwriting standards, accounting standards, and transactions between affiliates. Such regulation andsupervision areprimarilyfor the benefit and protection of policyholders. Changesinapplicableinsurance laws, tax statutes, regulations, or changes in theway regulators administer those laws, taxstatutes, or regulations could adverselyimpactthe Exchange's business, cash flows, results of operations, financial condition, or operating environment and increase itsexposure to loss or put it at acompetitive disadvantage, which couldresultinreducedsalesofits products and lower premium revenue.

Property andcasualtyinsurers face asignificant risk of litigation and regulatory investigations and actionsinthe ordinary course of operating their businesses including the riskofclass action lawsuits andclaims regarding the infringement of the intellectualproperty of others. Plaintiffs in class action and otherlawsuitsagainstthe Exchange mayseeklarge or indeterminate amountsofdamages, including punitive and treble damages, which mayremain unknownfor substantialperiods of time. TheExchange is alsosubject to various regulatory inquiries, suchasinformation requests, subpoenas, andbooks and record examinations from state and federalregulators and authorities.

Asinsuranceindustrypracticesand legal,judicial,socialand otherenvironmentalconditions change,unexpectedand unintendedissuesrelatedtoclaims and coverage mayemerge. In someinstances, these emerging issuesmay not become apparent for sometimeafter theExchange has issued the affected insurancepolicies. As aresult, the fullextent of liability under the Exchange'sinsurancepoliciesmay not be known for many years after the policies are issued. These issues may adversely affectthe Exchange's businessbyeither extending coverage beyond itsunderwriting intent or by increasing the numberorsizeofclaims.

TheExchange's insurance operations areexposed to claims arising out of catastrophes. Commonnaturalcatastrophicevents include hurricanes, earthquakes, tornadoes, hail storms,and severe winterweather. The frequency andseverityofthese catastrophes is inherently unpredictable. Changing climateconditions have addedtothe unpredictability, frequency and severityofnaturaldisasters andhave created additionaluncertainty as to futuretrends and exposures. Asingle catastrophic occurrenceoraggregation of multiple smalleroccurrenceswithin its geographical region of the Exchange or itsassumed property reinsuranceportfoliocouldadversely affectthe financial condition of the Exchange. Man-made disasters suchas terrorist attacks and riotscould also cause losses from insurance claimsrelatedtothe property andcasualty insurance operations, which could adversely affectits financial condition.

If the impacts of theCOVID-19 pandemic impair the Exchange’s ability to grow or its financial condition, it could have a material adverse effectonour business, financial condition, results of operations, or cash flows.

On March 11, 2020, the WorldHealthOrganization declared the outbreak of COVID-19 aglobal pandemic. Thesignificant economic disruption and uncertaintyresulting from the COVID-19 pandemicthatbegan in 2020 continues to evolve andthe pandemic’s ultimate impactand duration remain highlyuncertainatthis time.Iffuture wavesofthe virus occur or effective 8 medical treatments are not administered, future restrictions, including businessclosuresand stayathome orders,and a prolongedrecession remainapossibility. The resulting effects, including adecline in consumeractivity, lower demand for certain services, high unemployment,payrolldeclines, and reduced personalincomemay cause customers to modify coverages, not renew or cancelpolicies, which mayhaveanegative impact on the Exchange’s written premiums, and therefore our management fees. Accordingly, theextent andduration of theeffects on future customer demand and buying practicesremains uncertain. Aspecific action taken by theExchange bothinresponse to changesinexposure as lessdriving occurs and to provide financial relieftothe policyholders has resultedinacertain reduction to the Exchange’s written premiums. In 2020, the Exchange and itssubsidiariesannouncedanestimated $200 millioninpersonal andcommercial autoratereductions effective beginning July 1, 2020 at thetimeofnew policyissuance or policy renewal.Estimatedremaining rate reductions related to thisevent of $110 million in premiumsand acorresponding decrease of $28 millioninmanagement fee revenue will impactboththe Exchanges’ written premium andour management feerevenue in 2021. Longer term,there could be sustained changes in driving patterns if working remotelybecomesmore common and accepted, potentiallyhaving anegative impacton premium revenues. Further declinesineconomicconditions, potential regulatory actions, or competitive pressure couldalso impactthe Exchange’s rates and writtenpremium,and therefore our management fees.

The Exchange is representedbyindependent agenciesthat serve as its sole distribution channel. Theeconomic impactofthe pandemiconindependent agents’ business operations or systemscapabilitiescould make it difficultfor independent agents to write new business andretainexisting business and/or constrainthe ability to recruit new agents, thereby impeding premium growth. While independent agentshave been able to work remotely or safely in their offices, future wavesofthe virus could adversely impact their operations and theirability to write new business andprovide servicetoexisting policyholders. More broadly, independent agentsmay face challengessustaining theirown business operations and financialconditions thatcould result in thesaleorclosure of theirbusinesses, thereby reducing theagencyforce of the Exchange.Further, theCOVID-19 pandemiccould be an accelerant to shifting consumerbehaviors toward increased digital interactions.

The unknown risks relatedtothe COVID-19 pandemic maycause additional uncertaintyinthe process of estimating loss and loss adjustment expense reserves. For example,the behavior of claimantsand policyholders maychange in unexpected ways, the disruption to thecourt system mayimpactthe timing andamounts of claims settlements, and theactions taken by governmental bodies, both legislative andregulatory, in reaction to COVID-19 and their relatedimpacts are hard to predict. As aresult, theExchange's estimated levelofloss and loss adjustment expense reservesmay change.

The Exchange’s financialcondition could be impactedbydefaultsordelays in collecting premiums from customers due to economichardships. Regulatory actions including temporary suspension of policy cancellations for the nonpayment of premiumsand relaxing due datesfor premium paymentscouldalsohave anegative impact to theExchange.Ifthere were legislative action to retroactively mandate coverage irrespective of terms, exclusions or otherconditions includedinbusiness interruption policies thatwould otherwise preclude coverage,this could have amaterialimpactonthe financial condition, results of operations and cash flows of the Exchange.

The Exchange and itssubsidiaries have beennamed as defendants in anumberofpandemic-relatedlawsuitsand, therefore,are subject to therisks anduncertaintiesofsuch litigation. There is alsoarisk that theExchange could sufferreputationalharmif anyactions taken arenot viewedassufficient responsestothe pandemicbycustomers or consumer organizations.

Whilethe Exchange’s investment portfolio was negatively impacted by the significant disruption to financialmarkets in the firstquarterof2020 as aresultoftheCOVID-19 pandemic,market conditions substantiallyrecoveredthrough the remainderof theyear. The value of the Exchange’s investedassets could be adversely impacted and there is potentialfor further impairments on itsinvestment portfolio as long as marketconditions remain volatile in response to thedevelopments of this pandemicand the relatedeconomicimpacts.

The duration and extent of the impactonthe Exchange’s business, strategy, financialcondition, resultsofoperations and cash flows cannot be estimatedwith ahighdegree of certaintyatthis time giventhe ongoing developments of this pandemic and the relatedimpacts on the economy and financialmarkets.

Operating risks

If thecosts of providing services to theExchange arenot controlled, our profitability couldbemateriallyadversely affected.

Pursuant to the subscriber's agreement, we perform policyissuanceand renewal services for the subscribers at theExchange and we serve as the attorney-in-fact on behalf of theExchange with respecttoits administrative services. The most significant costs we incur in providing policy issuance and renewal services are commissions, employee costs, andtechnology costs.

9 Commissions to independent agents areour largest expense. Commissions include scheduledcommissions to agentsbased upon premiumswritten as well as additional commissions and bonuses to agents, which areearnedbyachieving certain targeted measures. Changestocommission rates or bonus programs mayresult in increased future costs and lower profitability. Our second largest expense is employeecosts, including salaries, healthcare,pension, andotherbenefit costs.Regulatory developments, provider relationships, anddemographicand economicfactors that are beyond our control indicate that employeehealthcare costs couldcontinue to increase whichcouldreduceour profitability. The defined benefitpension planwe offer to our employees is affected by variable factors suchasthe interest rateused to discount pension liabilities, asset performanceand changes in retirement patterns, which arebeyond our control andany relatedfuture costs increases would reduceour profitability.

Technological development is necessary to facilitate ease of doing business for employees, agentsand customers. Insurance company technologicaldevelopments are focused on simplifying andimproving thecustomerexperience,increasing efficiencies, redesigning productsand addressing otherpotentially disruptive changes in theinsurance industry. As we continue to develop technology initiativesinorder to remaincompetitive,our profitability could be negativelyimpactedasweinvest in system development.

If we are unabletoattract, develop, and retain talentedexecutives, key managers, and employees our financial conditions and results of operations couldbeadversely affected.

Our success is largely dependent upon our abilitytoattractand retaintalentedexecutivesand otherkey management.Talentis defined as people with theright skills, knowledge,abilities, character, and motivation. Theloss of the servicesand leadership of certain keyofficers and thefailure to attract and develop talentednew executivesand managers could prevent us from successfully communicating, implementing, andexecuting business strategies.

Our success also depends on our abilitytoattract, develop, and retain atalentedemployeebase. The inabilitytostaff all functions of our business with employeespossessing the appropriatetalent,failure to recognize and respond to changing trends and other circumstancesthat affect our employees, or failure to instillappropriate culturalexpectations and behavioralnorms withinour employees couldhave an adverse effectonour business performance.Staffing appropriatelytalentedemployees for the handling of claims and servicing of customers, rendering of disciplined underwriting, and effective sales and marketing are criticaltothe core functions of our business. In addition, talented employeesinthe actuarial, finance, human resources,law, and information technology areas are also essential to support our core functions.

If we are unabletoensure system availability or effectively manage technology initiatives,wemay experienceadverse financial consequencesand/or may be unabletocompeteeffectively.

Our business is highly dependent upon the effectiveness of our technology and information systemswhich support key functions of our core businessoperations including processing applications and premiumpayments,providing customer support, performing actuarialand financial analysis,and maintainingkey data.Additionally, the Exchange relies heavilyon technology systemsfor processing claims. In order to support our business processesand strategicinitiatives in acost and resourceefficient manner, we mustmaintain the effectiveness of existing technology systemsand continue to both develop new, and enhanceexisting, technology systems. As we invest in thedevelopment of oursystems,costsand completion times could exceedoriginal estimates, and/or theproject maynot deliverthe anticipatedbenefit or perform as expected. If we do not effectively andefficientlymanage and upgrade our technology systems, our abilitytoserve our customers and implement our strategic initiatives could be adversely impacted.

Additionally, we depend on alarge amount of datatoprice policies appropriately, trackexposures, perform financial analysis, report to regulatory bodies, and ultimately make business decisions. Shouldthis data be inaccurate or insufficient,risk exposure maybeunderestimatedand/or poor business decisions maybemade. Thismay in turnlead to adverse operational or financialperformance and adverse customer or investor confidence.

If we experience difficulties with technology,data and network security, including as aresult of cyber attacks, third-party relationships or cloud-based relationships,our ability to conduct our businesscould be adverselyimpacted.

Inthe normalcourse of business, we collect,use, store and whereappropriate,disclosedata concerning individuals and businesses. We also conductbusiness using third-party vendors who may provide software, data storage, cloud-based computing and other technology services. We have on occasion experienced, and willcontinue to experience, cyberthreats to our data and systems. Cyberthreatscan createsignificant risks suchasdestruction of systemsordata,denial or interruption of service, disruption of transaction execution, loss or exposure of customer data, theftorexposure of our intellectualproperty,

10 theftoffunds or disruption of otherimportant business functions. Thebusiness we conductwithour third-party vendors may expose us to increased risk relatedtodatasecurity, servicedisruptions or effectiveness of our control system.

In addition, we are subject to numerous federal and statedataprivacy laws relating to theprivacyofthe nonpublicpersonal information of our customers, employees and others. The improper access,disclosure, or misuse or mishandling of information sent to or received from acustomer, employee or third partycouldresult in legalliability, regulatory action and reputational damage.Third partiesonwhom we relyfor certain business processing functions arealso subject to these risks, and their failure to adhere to these laws and regulations could negatively impact us.

We employ acompany-wide cybersecurity programoftechnical,administrative,physicaland disclosure controls intendedto reducethe risk of cyber threats and protectour information, as well as to communicatepotentialmaterial threatsand incidents. Our cybersecurityphilosophy and approach aligntothe NationalInstituteofStandards and Technology Cybersecurity Framework and itscore elements to identify, protect, detect,respond and recoverfrom thevarious forms of cyberthreats. Our practicesinclude, but are not limitedto, cybersecurity protocolsand controls, system monitoring and detection, communication of incidents to appropriate management, vendor risk management, andongoing privacyand cybersecuritytraining for employees and contractors concerning cyber risk. We periodicallyassess the effectiveness of our cybersecurityeffortsincluding independent validation andverification andsecurity assessmentsconducted by independent third parties. The number, complexityand sophistication of cyberthreatscontinue to increase over time.The controlswehave implemented, and continue to develop, maynot be sufficient to prevent events like unauthorizedphysicalorelectronic access, denialofservice,cyber attacks, or othersecurity breaches to our computer systemsorthose of third partieswithwhom we do business. In some cases, such events maynot be immediately detected and/or theimpact of such events immediately determined.

Our Board of Directors oversees our activitieswithrespect to managing cyber risk through itsRisk Committee. Management periodically reports on our cybersecurity risk management program including our risk evaluation and theresults of independent third-partysecurity assessments, and our effortstomitigatecyber relatedrisks.

To date,weare not aware of anymaterialcybersecuritybreach withrespecttoour systemsordata.Any cyber incident or other security breachcouldcause disruption in our business operations and mayresult in othernegative consequences including significant remediation costs,loss of revenue,additional regulatory scrutiny, fines, litigation, monetary damagesand reputationalharm. Whilewemaintain cyber liability insurancetomitigatethe financialriskaround cyberincidents, such insurancemay not coverall costs associated with theconsequences of information or systemsbeing compromised. As aresult, in the event of amaterial cybersecurity breach, our business, cashflows,financial condition or results of operations could be materially,adversely affected.

If events occurred causing interruption of our operations, facilities, systems or business functions, it couldhave amaterial adverse effect on our operations and financial results.

We have an established business continuity plantoensure the continuation of core businessoperations in theevent thatnormal businessoperations couldnot be performed due to acatastrophic or otherevent. While we continue to testand assess our businesscontinuityplan to validateitmeets the needs of our core business operations and addressesmultiplebusiness interruption events, there is no assurance thatcore business operations couldbeperformedupon the occurrenceofsuch an event. Employee absence, physical premises damage,systems failures or outages couldcompromise our ability to perform our businessfunctions in atimely manner, whichcouldharm our ability to conductbusiness and hurt ourrelationships with our businesspartners and customers. Our business continuityisalso dependent on third-party personnel, infrastructure and systems on which we rely. Our operations and thoseofour third-party vendors may becomevulnerable to damage or disruption due to circumstances beyond our or theircontrol, such as from catastrophic events, poweranomaliesoroutages, naturaldisasters, network failures, and cyber attacks.Disruption of our operations for any reason couldresult in amaterialadverse effect on our business, cashflows,financialcondition, or results of operations.

We are subject to applicableinsurancelaws, taxstatutes,and regulations,aswellasclaimsand legal proceedings, which,if determined unfavorably,could have amaterial adverse effect on our business, results of operations, or financial condition.

We faceasignificant risk of litigation and regulatory investigations and actions in theordinary course of operating our businesses including the riskofclass actionlawsuits. We are,havebeen,ormay become subjecttoclass actions andindividual suits alleging breach of fiduciary or otherduties, including our obligations to indemnify directors andofficers in connection with certain legalmatters. We arealsosubjecttolitigation arising out of our general businessactivities suchascontractualand employment relationships andclaims regarding theinfringement of the intellectual property of others. Plaintiffs in classaction and otherlawsuitsagainstusmay seek large or indeterminateamounts of damages, including punitive and treble damages, whichmay remain unknownfor substantial periods of time.Weare alsosubject to various regulatory inquiries, such as 11 informationrequests,subpoenas,and books and record examinations from state and federalregulators and authorities.In addition, changes in theway regulators administerapplicablelaws, taxstatutes, or regulations could adverselyimpactour business, cashflows,resultsofoperations, or financial condition.

The effect of theCOVID-19 pandemic on our operations, the business operations of our customers and/or independent agents, or our third-partyvendor operations, could haveamaterial adverse effect on our business, financial condition, results of operations, or cash flows.

If the COVID-19 pandemic resultsinconditions thatconstrainthe Exchange’s abilitytogrow itswritten premiums, our management feerevenue couldbenegatively impacted. Certainexpenses withinour cost of operations couldincrease as a result of the pandemic, including but not limitedtoagent compensation, technology costs,and potentiallyhealthcare costs, among others. Our agent incentive bonuses include aprofitability component. If claims frequencyand loss expenses continue to decline,the profitability component of our agent incentive bonuses will continue to improve,increasing our agent compensation costs. Technology costs maycontinue to increase as aresult of supporting remote work capabilitiesfor our employees. If asignificant numberofour employees and/or their dependents were to become infected, there is apotentialfor increased healthcare costs for treatmentsonCOVID-19 as well as the potential for increased use of third-partyservices to maintainservice. Also, future pension costs could increase as aresult of alower discount rateorinvestment returns relatedto the adverse market conditions caused by theCOVID-19 pandemic.

Our business continuityplans were implemented upon theoutbreakofthispandemic,including transitioning thevastmajority of our employees and third-party contractors to remote work capabilities. We have hadnosignificant interruption to our core businessprocesses or systemstodate. We have processesinplace with our critical third-partyvendors to understand impacts on their business and their business continuityplans. We have hadnosignificant interruption to anythird-partyvendor relationships,businessprocesses or systemstodate. No significant challenges have beenidentifiedinour, or our third-party vendor’s ongoing business continuityplans, however if future challengesweretoarise, thiscould result in an adverse effect on our business, financialcondition, results of operations or cashflows. Also, while we have not experienced anydelays in internalinitiatives to date,future challengescould arise that impactthe timing andexecution of certain initiatives. Having shiftedtoremoteworking arrangements, we also face aheightenedrisk of cybersecurity attacksordata securityincidents. While cyberthreatshave remainedataconstant level,new cybersecurity tactics,techniques, and practicescontinue to evolve. Additionally, weare more dependent on internet and telecommunications access and capabilities. If we experience difficulties with technology, dataand network security, telecommunications access, outsourcing relationships or cloud-based technology, our abilitytoconduct our businesscould be negativelyimpacted.

Indemnity’s workforceislargely concentratedinErie,Pennsylvania. If asignificant outbreakaffectsthe labor force in this area, or if asignificant operatingfunction had ahighlevelofinfections at onetime, it could impact thepolicyacquisition, underwriting, claimsand/or support services providedtothe policyholders of the Exchange and/or our independent agents.

Withthe increasing numberofCOVID-19 relateddisputes, there is arisk that Indemnity could becomesubjecttopandemic relatedlitigation. It is alsopossible thatchanges in economic conditions and steps takenbyfederal, state and localgovernments in response to COVID-19 couldrequire an increase in taxes at thefederal, stateand local levels, whichwould adversely impact our results of operations.

WhileIndemnity’s investment portfolio was negatively impacted by the significant disruption to financial marketsinthe first quarterof2020 as aresultoftheCOVID-19 pandemic, market conditions substantiallyrecoveredthrough the remainder of the year. The value of our investedassetscould be adversely impactedand there is potential forfurtherimpairments in our investment portfolioaslong as marketconditions remain volatile in response to thedevelopments of this pandemicand the relatedeconomicimpacts.

The duration and extentofthe impactonour business, strategy, financialcondition, results of operations and cash flows cannot be estimatedwith ahighdegree of certaintyatthis timegiven theongoing developments of thispandemicand the related impacts on the economy and financialmarkets.

Market, Capital, andLiquidity risks

The performance of our investment portfolioissubject to avariety of investment risks, which may in turn haveamaterial adverse effect on our resultsofoperations or financial condition.

At December31, 2020, our investment portfolio consistedofapproximately 84% fixed maturitysecurities, with theremaining 16% investedinequitysecurities and other investments. 12 Generaleconomic conditions and otherfactors beyond our control canadverselyaffect the value of our investmentsand the realization of net investment income,orresult in realized investment losses.Inaddition, downward economictrends also may have an adverseeffectonour investment resultsbynegatively impacting thebusiness conditions and impairing credit for the issuers of securities heldinour respective investment portfolios. This couldreducefairvaluesofinvestmentsand generate significant unrealized lossesorimpairment charges which mayadverselyaffect our financial results.

The performanceofthe fixed incomeportfolioissubjecttoanumber of risks including, but not limitedto:

•Interest rate risk -the risk of adverse changes in thevalue of fixedincome securities as aresult of increases in market interest rates.

•Investment credit risk -the risk thatthe value of certain investmentsmay decrease due to thedeterioration in financial condition of, or the liquidity available to, one or more issuers of those securities or, in thecase of structured securities, due to thedeterioration of the loans or other assets thatunderliethe securities, which, in each case, also includes the risk of permanent loss.

•Sector/Concentrationrisk -the risk thatthe portfoliomay be tooheavilyconcentrated in the securities of one or more issuers, sectors, or industries. Eventsordevelopments thathaveanegative impact on any particular industry, group of relatedindustries, or geographic region mayhave agreater adverse effectonour investment portfolio to the extent thatthe portfolioisconcentrated within those issuers, sectors, or industries.

•Liquidityrisk -the risk thatwewillnot be able to convert investment securitiesinto cash on favorable terms and on atimelybasis,orthatwewillnot be able to sellthem at all, when desired. Disruptions in the financial markets or alackofbuyers for the specific securities thatweare trying to sell,couldprevent us from liquidating securities or cause areduction in prices to levels thatare not acceptable to us.

•Reinvestment risk -the possibilitythatthe cash flowsproduced by an investment willhavetobereinvested at a reduced rate of return. Approximately 38% of our fixed maturityportfolio is expectedtomature overthe next threeyears.

Our equitysecurities have exposure to pricerisk. Equitymarkets, sectors, industries, and individualsecuritiesmay also be subjecttosome of thesamerisks that affect our fixedincome portfolio, as discussed above.

All of our fixed incomeand equity securitiesare subject to marketvolatility. To theextent that future market volatility negativelyimpacts our investments, our financial condition will be negatively impacted. We reviewthe fixedincome portfolio on acontinuous basistoevaluate positions that are in an unrealizedlossposition to determine whether impairments are aresult of creditloss or other factors. Inherent in management's evaluation of asecurity are assumptions and estimatesabout the operations of the issuerand itsfuture earnings potential.The primary factors consideredinour review of investment valuation include the extent to whichfair value is less thancost,historical operatingperformanceand financialcondition of theissuer, short- andlong-term prospects of the issuerand itsindustry, specificevents thatoccurredaffecting the issuer, including rating downgrades,and, depending on thetype of security, our intent to sellorourabilityand intent to retainthe investment for a period of time sufficient to allow for arecovery in value. As the process for determining impairments is highlysubjective, changes in our assessments mayhaveamaterialeffect on our operating results andfinancialcondition. SeealsoPartII, Item 7A. "Quantitative andQualitative Disclosures about Market Risk".

In July 2017, the UnitedKingdom’s FinancialConduct Authority("FCA"), which regulatesthe London Interbank OfferedRate (“LIBOR”), announcedthat it intends to phase out LIBOR by the end of 2021. After thisdate,the FCA will no longerrequire banks to makeLIBOR submissions. Following discussions with theFCA and other official sector bodies, theIntercontinental Exchange Benchmark Administration announced in November2020 thatitisconsidering the publication of certain USD LIBORsettings through June 30, 2023. Approximately 23% of our investment portfolioincludes securities with LIBOR exposure where the statedfinalmaturity dateextends beyond June 30, 2023. For securitieswithout adequate fallback provisions already in place, there areongoing efforts to establish an alternative reference rate. Thetransition of our investments to an alternative reference rate mayresultinadverse changes to thevalue and return on thoseinvestments. Due to uncertainty surrounding alternative rates,weare unabletopredictthe overall impactofthis change at this time.

Deteriorating capital and credit market conditions or afailure to accurately estimate capital needs may significantlyaffect our abilitytomeet liquidity needs and access capital.

13 Sufficient liquidity andcapital levelsare requiredtopay operating expenses, income taxes,and to provide the necessary resourcestofund future growthopportunities,satisfycertainfinancial covenants, pay dividends on common stock, and repurchase common stock. Management estimatesthe appropriatelevelofcapitalnecessarybased upon current and projected results, which includes evaluating potential risks. Failure to accurately estimateour capitalneeds mayhave amaterial adverse effect on our financial condition untiladditionalsourcesofcapitalcan be obtained. Further, adeteriorating financialcondition maycreateanegative perception of us by third parties, including investors, andfinancial institutions, which could impact our ability to access additionalcapitalinthe debt or equity markets.

Our primary sources of liquidity aremanagement fee revenue andcashflows generatedfrom our investment portfolio. In the event our current sources do not satisfy our liquidity needs, we have the ability to access our $100 million bank revolving line of credit,from whichthere were no borrowings as of December31, 2020, or liquidate assets in our investment portfolio. Volatilityinthe financialmarkets couldlimit our abilitytosellcertainofour fixedincome securities or cause suchinvestments to sellatdeepdiscounts.

In the event these traditional sources of liquidity arenot available, we mayhavetoseek additionalfinancing. Our access to funds will depend upon anumber of factors including current market conditions, the availabilityofcredit,market liquidity, and the timing of obtaining credit ratings. In deteriorating marketconditions, there canbenoassurance thatwewillobtain additional financing, or, if available,thatthe cost of financing will not substantiallyincrease and affectour overallprofitability.

ITEM 1B.UNRESOLVEDSTAFFCOMMENTS

None.

14 ITEM 2. PROPERTIES

Indemnityand theExchange share acorporatehomeoffice complexinErie,Pennsylvania,which comprisesapproximately 996,000 squarefeet. Our squarefootage increased as the construction of the new officebuilding wascompleted in the fourth quarter of 2020. Additionally, we lease twooffice buildings andone warehouse facilityfrom third parties. We are charged rent for the related square footage we occupy.

Indemnityand theExchange also operate25field offices in 12 states to perform primarily claims-relatedactivities. The Exchange owns seven fieldoffices, Indemnityowns property, aportion of which houses one fieldoffice, andleases the remaining fieldoffices from third parties. Commitments for propertiesleased from other parties expire periodicallythrough 2027. We expect thatmost leases will be renewed or replacedupon expiration. Rental costs of shared facilities are allocated based upon usage or square footage occupied.

Due to theuncertainty of theCOVID-19 pandemic,approximately 90% of our workforce has beenworking remote since March 2020. We expect to return to our offices whenconditions are feasibleand safe.

15 ITEM 3. LEGAL PROCEEDINGS

State CourtLawsuit Against ErieIndemnity Company ErieIndemnity Company ("Indemnity")was namedasadefendant in acomplaint filedonAugust 1, 2012 by alleged subscribers of the Erie Insurance Exchange (the "Exchange")inthe Court of Common Pleas Civil Division of FayetteCounty, Pennsylvania captioned Erie Insurance Exchange,anunincorporatedassociation,byJoseph S. Sullivan andAnita Sullivan, PatriciaR.Beltz,and Jenna L. DeBord, trustees ad litemv.ErieIndemnity Co.(the "Sullivan"lawsuit).

As subsequently amended, thecomplaint allegesthat, beginning on September 1, 1997, Indemnity retained"Service Charges"(installment fees) and "Added ServiceCharges" (latefeesand policyreinstatement charges)onpolicies written by Exchange and itsinsurancesubsidiaries, which allegedly shouldhave beenpaidtoExchange, in the amount of approximately $308 million. In addition to their claimfor monetary reliefonbehalf of Exchange, Plaintiffs seek an accounting of allso-called intercompany transactions between Indemnity andExchange from 1996 to date. Plaintiffs allege that Indemnitybreachedits contractual, fiduciary, andequitable duties by retaining Service Chargesand AddedServiceChargesthat should have been retained by Exchange. Plaintiffs bring these same claims under threeseparatederivative-type theories. First, Plaintiffs purport to bring suit as members of Exchange on behalf of Exchange. Second, Plaintiffs purport to bring suit as trusteesadlitem on behalf of Exchange. Third, Plaintiffs purport to bring suit on behalf of Exchange pursuant to Rule 1506 of the Pennsylvania RulesofCivilProcedure, whichallows shareholders to bring suit derivativelyonbehalf of acorporation or similarentity.

Indemnityfiled amotion in the statecourt in November2012 seeking dismissalofthe lawsuit. On December19, 2013, the court granted Indemnity’s motion in part,holding thatthe Pennsylvania Insurance Holding Company Act "providesthe [PennsylvaniaInsurance] Department with specialcompetence to address thesubject matter of plaintiff’s claims" and referring "all issues" in the Sullivan lawsuittothe Pennsylvania Insurance Department (the "Department")for "its viewsand any determination." The court stayedall further proceedings andreserveddecision on allother grounds for dismissalraised by Indemnity. Plaintiffs sought reconsideration of thecourt’s order, andonJanuary 13, 2014, the court enteredarevised order affirming itsprior order andclarifying that the Department "shalldecideany and allissues within itsjurisdiction." On January 30, 2014, Plaintiffs asked thecourt to certify itsorder to permitanimmediate appeal to theSuperior Court of Pennsylvania and to stayany proceedings in theDepartment pending completion of any appeal. On February 18, 2014, thecourt issued an order denying Plaintiffs’ motion. On March 20, 2014, Plaintiffs filed apetition for reviewwiththe Superior Court, whichwas denied by the Superior Court on May 5, 2014.

The Sullivan matter was assignedtoanAdministrative Judge within theDepartment for determination. The partiesagreedthat an evidentiary hearing wasnot required, entered into astipulatedrecord, and submitted briefing to theDepartment.Oral argument washeldbefore theAdministrative Judge on January 6, 2015. On April 29, 2015, theDepartment issuedadeclaratory opinion and order: (1) finding that the transactions between Exchange andIndemnityinwhichIndemnityretained or received revenue from installment and other service charges from Exchange subscribers complied with applicableinsurance laws and regulations andthatIndemnity properly retainedcharges paidbyExchange policyholders for certain installment premium payment plans, dishonored payments, policycancellations, andpolicy reinstatements; and (2) returning jurisdiction overthe matter to the Fayette County Court of Common Pleas.

On May 26, 2015, Plaintiffs appealedthe Department’s decision to thePennsylvania Commonwealth Court. Oral argument was heldbefore the Commonwealth Court en banc on December9,2015. On January 27, 2016, theCommonwealth Court issued an opinion vacating theDepartment’s ruling anddirecting theDepartment to return thecase to the Court of Common Pleas, essentially holding that the primary jurisdiction referral of the trial court was improperatthistimebecause the allegations of the complaint do not implicatethe specialcompetency of theDepartment.

On February 26, 2016, Indemnity filedapetitionfor allowanceofappealtothe PennsylvaniaSupremeCourt seeking further review of the Commonwealth Court opinion. On March 14, 2016, Plaintiffs filed an answeropposing Indemnity’s petition for allowanceofappeal; and, on March28, 2016, Indemnitysought permission to file areply brief in furthersupport of itspetition for allowanceofappeal. On August 10, 2016, the PennsylvaniaSupremeCourt deniedIndemnity’s petition for allowanceof appeal;and the Sullivan lawsuitreturnedtothe Court of Common Pleas of Fayette County.

On September12, 2016, Plaintiffs filed amotion to staythe Sullivan lawsuitpending theoutcomeofthe Federal CourtLawsuit theyfiled against Indemnityand former andcurrent Directors of IndemnityonJuly 8, 2016. (Seebelow.) Indemnityfiled an opposition to Plaintiff’s motion to stayonSeptember 19, 2016; and filedamendedpreliminary objections seeking dismissalof the Sullivan lawsuitonSeptember20, 2016. The motion to stayand theamended preliminary objections remain pending. On June 27, 2018, Plaintiffs filed amotion for astatus conference in theSullivan lawsuit.

16 On July 30, 2018, the Court held astatus conference and thereafter lifted thestayofproceedings. On September28, 2018, Indemnityfiled aMotion to Enforce the FederalJudgment in theBeltz II lawsuit, seeking dismissal of the Sullivan lawsuitwith prejudice. On October26, 2018, Plaintiffs filed an opposition to thatMotion; and Indemnity filedareply in furthersupport on November5,2018. Oral argument washeldonIndemnity’s Motion on November20, 2018 and on July30, 2019.

On December2,2020, the Court entered an order in the Sullivan lawsuitgranting Indemnity’s requestfor relief anddismissing Plaintiff’s Second Amended Complaint with prejudice.

Federal Court LawsuitAgainst ErieIndemnity Company and Directors On February 6, 2013, alawsuit was filed in the United States District Court for theWestern DistrictofPennsylvania,captioned ErieInsuranceExchange, an unincorporated association, by members PatriciaR.Beltz,Joseph S. Sullivan andAnita Sullivan, and Patricia R. Beltz, on behalf of herself andothers similarly situatev.Richard L. Stover; J. Ralph Borneman, Jr.; Terrence W. Cavanaugh; JonathanHirt Hagen; SusanHirt Hagen; ThomasB.Hagen; C. Scott Hartz;Claude C. Lilly, III; Lucian L. Morrison; Thomas W. Palmer;Martin P. Sheffield; Elizabeth H. Vorsheck; and Robert C. Wilburn (the "Beltz" lawsuit), by alleged policyholders of Exchange who are also the plaintiffs in the Sullivan lawsuit. Theindividualsnamed as defendantsin the Beltz lawsuitwere the then-current Directors of Indemnity.

As subsequently amended, theBeltz lawsuitasserts many of thesameallegations and claims for monetary reliefasinthe Sullivan lawsuit. Plaintiffs purport to sue on behalf of allpolicyholders of Exchange,or, alternatively, on behalfofExchange itself. Indemnity filedamotion to intervene as aParty Defendant in theBeltz lawsuitinJuly 2013, andthe Directors filed a motion to dismiss the lawsuitinAugust 2013. On February 10, 2014, thecourt entered an order granting Indemnity’s motion to intervene andpermitting Indemnitytojoin theDirectors’ motion to dismiss;granting in part theDirectors’ motion to dismiss; referring themattertothe Department to decide any andall issues withinits jurisdiction; denying allotherreliefsought in the Directors’ motion as moot;and dismissing thecase without prejudice.Toavoid duplicative proceedings and expeditethe Department’s review, the Parties stipulatedthatonlythe Sullivan action would proceed before theDepartment and anyfinaland non-appealabledeterminations made by the Department in the Sullivan action willbeappliedtothe Beltz action.

On March 7, 2014, Plaintiffs filed anotice of appeal to theUnited States Court of Appealsfor the Third Circuit.Indemnityfiled amotion to dismiss the appealonMarch 26, 2014. On November17, 2014, the Third Circuit deferred ruling on Indemnity’s motion to dismiss the appeal and instructedthe partiestoaddress thatmotion, as well as the meritsofPlaintiffs’ appeal, in the parties’ briefing. Briefing wascompletedonApril 2, 2015. In light of the Department’s April29, 2015 decision in Sullivan,the Parties thenjointlyrequestedthatthe Beltz appeal be voluntarilydismissed as moot on June 5, 2015. The Third Circuit did not rule on the Parties’ request for dismissaland insteadheldoral argument as scheduled on June8,2015. On July 16, 2015, the Third Circuit issued an opinion and judgment dismissing the appeal.The Third Circuit found thatitlacked appellate jurisdiction over theappeal, because the DistrictCourt’s February 10, 2014 orderreferring themattertothe Department was not afinal, appealableorder.

On July 8, 2016, the Beltz plaintiffs filed anew action labeled as a"Verified DerivativeAnd Class Action Complaint" in the UnitedStatesDistrictCourt for theWestern DistrictofPennsylvania.The action is captioned Patricia R. Beltz, Joseph S. Sullivan, andAnita Sullivan, individually andonbehalf of allothers similarly situated, andderivatively on behalfofNominal Defendant Erie Insurance Exchange v. ErieIndemnity Company; Kaj Ahlmann; John T. Baily; SamuelP.Black, III; J. Ralph Borneman, Jr.; Terrence W. Cavanaugh; Wilson C. Cooney; LuAnn Datesh; PatriciaA.Goldman; Jonathan Hirt Hagen; Thomas B. Hagen; C. Scott Hartz;Samuel P. Katz;Gwendolyn King; Claude C. Lilly, III; Martin J. Lippert;George R. Lucore; Jeffrey A. Ludrof; Edmund J. Mehl; Henry N. Nassau; ThomasW.Palmer; MartinP.Sheffield; Seth E. Schofield; Richard L. Stover; Jan R. Van Gorder; ElizabethA.HirtVorsheck; Harry H. Weil;and Robert C. Wilburn (the "BeltzII"lawsuit). The individualdefendants areall present or formerDirectors of Indemnity(the "Directors").

The allegations of theBeltz II lawsuitarise from thesamefundamental, underlying claims as the Sullivan and prior Beltz litigation, i.e., that Indemnityimproperlyretained ServiceChargesand Added ServiceCharges. The BeltzIIlawsuitallegesthat the retention of theService Charges and Added Service Charges was improper because, for among otherreasons, that retention constituted abreach of theSubscriber’s Agreement and an ImpliedCovenant of Good Faithand FairDealingbyIndemnity, breachesoffiduciary dutybyIndemnityand theother defendants, conversion by Indemnity, andunjust enrichment by defendantsJonathanHirt Hagen, Thomas B. Hagen, and ElizabethA.HirtVorsheck, at theexpense of Exchange. TheBeltz II lawsuitrequests, among other things, that ajudgment be enteredagainst the Defendants certifying the action as aclass action pursuant to Rule23ofthe Federal Rules of Civil Procedure;declaring Plaintiffs as representatives of the Class and Plaintiffs’ counsel as counsel for the Class; declaring theconduct alleged as unlawful, including, but not limitedto, Defendants’ retention of the ServiceChargesand AddedServiceCharges; enjoining Defendants from continuing to retainthe ServiceChargesand Added ServiceCharges; and awarding compensatory andpunitive damagesand interest.

17 On September23, 2016, Indemnityfiled amotion to dismiss the BeltzIIlawsuit. On September30, 2016, the Directors filed their ownmotions to dismiss the BeltzIIlawsuit. On July 17, 2017, theCourt grantedIndemnity’s and the Directors’motions to dismiss the BeltzIIlawsuit, dismissing the case in itsentirety. The Court ruledthat"the Subscriber’s Agreement does not govern theseparateand additional charges at issue in the Complaint"and, therefore,dismissedthe breach of contract claim against Indemnity for failure to stateaclaim. TheCourt also ruledthatthe remaining claims, including the claims for breach of fiduciary duty against Indemnityand theDirectors, are barred by theapplicable statutesoflimitation or fail to state legally cognizable claims. On August 14, 2017, Plaintiffs filedanoticeofappealtothe UnitedStates Court of Appeals for the Third Circuit.

On May 10, 2018, the UnitedStates Court of Appeals for the Third Circuit affirmedthe DistrictCourt’s dismissalofthe Beltz II lawsuit. On May24, 2018, Plaintiffs filedapetitionseeking rehearing of their appealbefore theThird Circuit.The Third Circuit denied that petition on June 14, 2018.

For additionalinformation on contingencies, seePart II, Item8."FinancialStatements and Supplementary Data -Note 17, Commitment andContingencies, of Notes to Financial Statements".

ITEM 4. MINE SAFETYDISCLOSURES

Not applicable.

18 PARTII

ITEM 5. MARKET FORREGISTRANT'SCOMMONEQUITY,RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASESOFEQUITYSECURITIES

Common StockMarket Prices and Dividends Our Class A, non-voting common stocktrades on The NASDAQ StockMarketSM LLCunderthe symbol "ERIE".No establishedtrading marketexistsfor the ClassBvoting common stock. Broadridge CorporateIssuer Solutions, Inc.servesas our transferagent andregistrar. As of February 19, 2021, there were approximately561 shareholders of record for the ClassA non-voting common stock and9shareholders of record for the ClassBvoting common stock.

Historically, we have declared andpaidcashdividends on aquarterly basis at the discretion of theBoard of Directors. The payment and amount of future dividends on the common stock will be determinedbythe Board of Directors and will depend upon, among otherthings, our operating results, financialcondition, cash requirements, and general businessconditions at the time such payment is considered.

Stock Performance The following graph depicts the cumulative totalshareholder return, assuming reinvestment of dividends, for the periods indicatedfor our Class Acommon stock compared to the Standard &Poor's 500 Stock Indexand theStandard &Poor's Supercomposite Insurance Industry Group Index. The Standard &Poor's Supercomposite Insurance Industry Group Indexis made up of 57 constituent members represented by property andcasualtyinsurers,insurancebrokers, and life insurers,and is a capitalization weightedindex.

300 275

250 225

200 Erie Indemnity Company Class Acommonstock

Dollars 175 Standard &Poor's500 Stock Index Standard &Poor'sSupercomposite Insurance Industry Group Index 150 125

100 75 2015 2016 2017 2018 2019 2020

2015 2016 2017 2018 2019 2020 Erie Indemnity Company Class Acommon stock $100 (1) $120 $134 $151 $191 $291 Standard &Poor's 500 Stock Index 100 (1) 112 136 130 171 203 Standard &Poor's Supercomposite Insurance Industry Group Index 100 (1) 119 138 124 160 157

(1) Assumes $100 invested at the close of trading, including reinvestment of dividends, on the last trading day preceding the first day of the fifth preceding fiscal year, in our Class Acommon stock, the Standard &Poor's 500 Stock Index, and the Standard &Poor's Supercomposite Insurance Industry Group Index.

19 IssuerPurchasesofEquity Securities We maypurchase shares,from time-to-time,inthe openmarket,through trading plans entered into with one or more brokerage firmspursuant to Rule10b5-1 underthe SecuritiesExchange Actof1934, or through privately negotiated transactions. The purchase of shares is dependent upon prevailing market conditions and alternateuses of capital,and at timesand in amanner thatisdeemed appropriate.

Our Board of Directorsauthorizedastockrepurchase programeffective January 1, 1999, allowing therepurchase of our outstanding ClassAnonvoting common stock. Various approvalsfor continuation of this program have since beenauthorized, with themost recent occurring in 2011 for $150 million, whichwas authorizedwith no time limitation. There were no repurchases of our Class Acommon stock underthisprogram during the quarter ending December 31, 2020. We had approximately $17.8 millionofrepurchase authority remaining under this program,based upon trade date, at both December31, 2020 and February 19, 2021.

See Item 8. "FinancialStatements and Supplementary Data –Note 13, CapitalStock, of Notes to Financial Statements" contained within this report for discussion of additional shares purchased outside of thisprogram.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

The following discussion of financial condition and resultsofoperations highlights significant factors influencing Erie IndemnityCompany ("Indemnity", "we", "us", "our"). Thisdiscussion should be readinconjunction with theaudited financial statements andrelated notes and allotheritems containedwithin this Annual Report on Form 10-K as these containimportant information helpful in evaluating our financialcondition andresultsofoperations.

INDEX

Page Number Cautionary Statement Regarding Forward-Looking Information 20 Recent Accounting Standards 21 Operating Overview 22 Critical Accounting Estimates 25 Results of Operations 29 Financial Condition 36 Investments 36 Shareholders' Equity 37 Home Office Expansion 37 Liquidity and Capital Resources 38 Transactions/Agreements with Related Parties 41

CAUTIONARY STATEMENTREGARDING FORWARD-LOOKINGINFORMATION

"Safe Harbor" Statementunderthe Private Securities Litigation ReformAct of 1995: Statements containedherein that are not historicalfactare forward-looking statements and, as such, are subjecttorisks and uncertaintiesthatcould causeactual events andresultstodiffer, perhaps materially, from those discussedherein. Forward- looking statementsrelate to future trends,events or resultsand include,without limitation, statementsand assumptions on which such statements are based that are related to our plans, strategies, objectives, expectations, intentions, and adequacyof resources. Examplesofforward-looking statementsare discussions relating to premium andinvestment income, expenses, operating results, and compliancewithcontractualand regulatory requirements. Forward-looking statementsare not guarantees of future performanceand involve risks and uncertaintiesthat are difficulttopredict.Therefore,actualoutcomes and results maydiffermateriallyfrom what is expressedorforecastedinsuch forward-looking statements. Among the risks and

20 uncertainties, in addition to those setforthinour filings with theSecurities and Exchange Commission, thatcould causeactual resultsand future events to differ from those set forthorcontemplatedinthe forward-looking statements include the following:

•dependenceupon our relationship with theErie Insurance Exchange ("Exchange")and themanagement fee under the agreement with thesubscribers at theExchange; •dependenceupon our relationship with theExchange andthe growth of the Exchange,including: ◦ general businessand economicconditions; ◦ factors affecting insurance industry competition; ◦ dependenceupon theindependent agency system;and ◦ ability to maintainour reputation for customerservice; •dependenceupon our relationship with theExchange andthe financial condition of the Exchange,including: ◦ the Exchange's abilitytomaintain acceptablefinancialstrength ratings; ◦ factors affecting thequality andliquidity of theExchange's investment portfolio; ◦ changes in government regulation of the insuranceindustry; ◦ litigation andregulatory actions; ◦ emerging claims and coverage issues in the industry; and ◦ severe weather conditions or othercatastrophic losses, including terrorism; •potential impacts of the COVID-19 pandemic on the growth and financialcondition of theExchange; •costs of providing policyissuance and renewal services to theExchange underthe subscriber's agreement; •abilitytoattractand retaintalentedmanagement andemployees; •abilitytoensure system availability andeffectively manage technology initiatives; •difficulties with technology or data security breaches, including cyberattacks; •abilitytomaintain uninterruptedbusinessoperations; •outcome of pending and potentiallitigation; •potential impacts of the COVID-19 pandemic on our operations, the business operations of our customers and/or independent agents, or our third-party vendor operations; •factors affecting thequalityand liquidityofour investment portfolio; and •our ability to meet liquidity needs and access capital.

Aforward-looking statement speaks only as of the date on which it is made and reflectsour analysis onlyasofthatdate. We undertake no obligation to publiclyupdateorrevise anyforward-looking statement,whetherasaresult of newinformation, future events, changes in assumptions, or otherwise.

RECENT ACCOUNTING STANDARDS

See Item 8. "FinancialStatements and Supplementary Data -Note 2, Significant Accounting Policies, of Notes to Financial Statements" containedwithinthisreport for adiscussion of recently adoptedaccounting standards and theimpact on our financial statements.

21 OPERATING OVERVIEW

Overview We areaPennsylvania business corporation that since1925 hasbeenthe managing attorney-in-factfor thesubscribers (policyholders)atthe Exchange,areciprocalinsurerthatwrites propertyand casualty insurance.Our primary function as attorney-in-fact is to perform policyissuance and renewal services on behalf of thesubscribers at theExchange. We also actas attorney-in-fact on behalf of theExchange, as well as the serviceprovider for itsinsurancesubsidiaries, with respect to all administrative services.

The Exchange is areciprocalinsurance exchange,which is an unincorporated association of individuals, partnerships and corporations that agreetoinsure one another. Each applicant for insurancetothe Exchange signs asubscriber's agreement, which contains an appointment of Indemnity as theirattorney-in-fact to transactthe business of the Exchange on theirbehalf.

Pursuant to the subscriber’s agreement for acting as attorney-in-factinthese twocapacities, we earn amanagement fee. Management feerevenue is based upon alldirect and affiliatedassumed premiums written by theExchange andthe management feerate, which is not to exceed 25%. Our Board of Directors establishes the management feerateatleast annually, generally in Decemberfor the following year. The process of setting themanagement fee rateincludes the evaluation of current year operating results comparedtobothprior year andindustry estimated results for both Indemnity andthe Exchange,and consideration of severalfactors for both entitiesincluding: their relative financialstrength andcapital position; projected revenue,expense and earnings for the subsequent year; future capitalneeds; as well as competitive position. The management feeratewas setat25% for 2020, 2019 and2018. Our Board of Directors set the2021 management fee rateagain at 25%, itsmaximum level.

Our earnings are primarilydrivenbythe management feerevenue generated for theservicesweprovide to theExchange. The policy issuance and renewal services we provide to theExchange arerelated to thesales, underwriting andissuance of policies. The salesrelatedservices we provide include agent compensation and certainsalesand advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written as well as additional commissions and bonuses to agents, which areearnedbyachieving targetedmeasures.Agent compensation comprised approximately66% of our 2020 policy issuance and renewal expenses. Theunderwriting services we provide include underwriting andpolicy processing and comprised approximately 10% of our 2020 policyissuance and renewal expenses. Theremaining services we provide include customer service and administrative support. We also provide information technology servicesthat support all the functions listed above that comprised approximately11% of our 2020 policy issuance and renewal expenses. Includedin these expenses areallocations of costsfor departments thatsupport these policyissuance and renewal functions.

By virtue of itslegal structure as areciprocal insurer, theExchange doesnot have any employeesorofficers. Therefore, it enters intocontractualrelationships by andthrough an attorney-in-fact.Indemnityserves as the attorney-in-fact on behalf of the Exchange with respect to itsadministrative services. The Exchange's insurance subsidiariesalso utilize Indemnityfor these services in accordancewiththe serviceagreements between each of the subsidiaries and Indemnity. Claimshandling services include costs incurred in theclaimsprocess, including the adjustment,investigation, defense, recording andpayment functions. Life insurance management servicesinclude costs incurredinthe management and processing of life insurancebusiness. Investment management servicesare relatedtoinvestmenttrading activity, accounting and allother functions attributable to the investment of funds. Includedinthese expenses are allocations of costs for departments thatsupport these administrative functions. The amountsincurred for theseservicesare reimbursed to Indemnity at cost in accordance withthe subscriber's agreement and the serviceagreements. State insurance regulations require thatintercompany service agreementsand any materialamendments be approvedinadvancebythe state insurance department.

Our results of operations are tied to thegrowth and financial condition of the Exchange as theExchange is our sole customer, and our earnings arelargelygeneratedfrom management feesbasedonthe direct and affiliatedassumed premiums written by theExchange. The Exchange generates revenue by insuring preferredand standard risks, withpersonal lines comprising 71% of the 2020 direct and affiliated assumed writtenpremiumsand commercial lines comprising theremaining29%. The principal personallines products are private passenger automobileand homeowners. Theprincipalcommerciallinesproductsare commercialmulti-peril, commercial automobileand workers compensation.

We generate investment incomefrom our fixed maturity and equitysecurity portfolios.Our portfolioismanaged with the objective of maximizing after-taxreturns on arisk-adjustedbasis. We actively evaluate the portfolios for securities in an unrealizedlossposition and record impairment write-downs on investments in instanceswhere we have the intent to sellorit's morelikelythan not that we would be requiredtosellthe security. Impairments resulting from acreditloss are recognizedin earnings with acorresponding allowanceonthe balancesheet.

22 Coronavirus ("COVID-19") Pandemic On March 11, 2020, theoutbreakofthe coronavirus ("COVID-19") wasdeclared aglobal pandemic. Thesignificant volatility in thefinancialmarkets, economic disruption anduncertaintyresulting from the COVID-19 pandemic thatbegan in the first quarter of 2020 continues to evolve and thepandemic’s ultimate impactand duration remain highly uncertainatthistime.

The impactthe COVID-19 pandemic has on the premiumswritten by theExchange, our sole customer, affects our management fee revenue. Whilethe Exchange experienced declinesinnew businesspremiums in thefirst halfof2020 due to business disruptions and recessionary conditions, new businesspremiums grew 10.8% in thesecond halfof2020 comparedtothe same period in 2019, primarilydrivenbygrowth in thepersonal auto andhomeowners linesofbusiness.The uncertainty of the ongoing impactsofthe COVID-19 pandemic will likelycontinue in 2021 andmay continue untilsuch time as the spreadofthe virus is contained. In response to reduceddriving conditions resulting from theCOVID-19 pandemic,the Exchange implemented$200 million in personal and commercialauto rate reductions, which became effective in thethird quarterof 2020, resulting in adecrease of approximately$90 million in the Exchange written premiums and acorresponding decrease of approximately $22 millioninour management fee revenue in 2020. The remainder of theratereductions will impactthe Exchange’s written premiums and our corresponding management fee revenue in 2021. There mayalso be other marketand/or regulatory pressuresthat couldimpactthe Exchange’s operations. In 2020, withinour cost of operations, we incurred increased agent incentive costs as lowerclaim frequencyresulted in improved agent profitability. We also incurred additionaltechnology costs in support of remoteworking conditions for our employees. These expenses, among others, couldcontinue to persist as the full extent and duration of the pandemic’s impacts remainuncertain. Whilethe financialmarketvolatilitycreated by the COVID-19 pandemic had anegative impact on our investment portfoliointhe first quarter of 2020, markets substantially recoveredthrough theremainderofthe year, resulting in overall realizedand unrealized gains in 2020. We could experience future lossesand/or impairmentstothe portfolio given thepandemic’s impact on market conditions. We have provided additional disclosure of these impactedareas throughout our Management’s Discussion and Analysis that follows. Abroader discussion of the potential future impacts has also been disclosed in the FinancialCondition, Liquidityand CapitalResources, and Part I, Item1A. "Risk Factors" relatedtoCOVID-19 containedwithinthisreport.

We have adedicated internal committee comprised of management from various finance disciplines reviewing our risk positions and emerging trends on an ongoing basis as circumstancesare evolving. The committee is reviewing risk scenarios and performing stresstests, including the review of cash flow trends, liquidity requirements and other forms of risk quantification. Thisprovides toolsfor management,aswellasour Risk Committeeofthe Board of Directors, to assess risks and prioritizekey issues.

While we were not required to close our physicallocations under the statemandatedclosure of nonessential services, out of concern for the healthand safety of our employees, over 90% of our workforcehas been working remotesinceMarch 2020. We have had no significant interruption to our core businessprocesses or systemstodate. We have hadnosignificant changes to our financialclose or reporting processesorrelatedinternalcontrols, nor do we anticipate any significant future challengesat this time. We have adedicatedteamdeveloping areturn to the officeplanthat will be implemented when it becomesfeasible and safe.

23 Financial Overview Years endedDecember 31, (dollars in thousands, except per share data) 2020 %Change 2019 %Change 2018

Operating income$338,157 (5.4) %$357,339 3.8 %$344,343 Total investment income 32,867 (17.8) 39,967 54.9 25,796 Interestexpense,net 731 (14.7) 856 (65.2) 2,460 Other(expense) income (1,778) NM 255 (93.0) 3,641 Incomebefore incometaxes368,515 (7.1) 396,705 6.8 371,320 Incometax expense 75,211 (5.8) 79,884 (3.9) 83,096 Net income $293,304 (7.4) %$316,821 9.9 %$288,224 Net income per share -diluted $5.61 (7.4) %$ 6.06 9.9 %$ 5.51

NM =not meaningful

Operating incomedecreased in 2020 comparedto2019 as growthinoperating expenses outpacedthe growthinoperating revenues. Management feerevenue is based upon the management feeratewecharge andthe direct and affiliatedassumed premiumswritten by theExchange. Themanagement fee ratewas 25% for 2020, 2019, and 2018. Thedirectand affiliated assumed premiums written by theExchange increased 1.7% to $7.6 billion in 2020 and5.2% to $7.5 billion in 2019.

Costofoperations for policyissuance and renewal services increased 3.3% to $1.6 billion in 2020 primarily due to higher commissions driven by directand affiliated assumed writtenpremium growth, higheragent incentive compensation drivenby lower automobileclaimsfrequencyexperiencedbythe Exchange,and higher personnel costs. Cost of operations for policy issuance and renewal services increased 5.5% to $1.5 billion in 2019 drivenprimarily by higher commissions and higher investments in information technology, partiallyoffset by lower agent andemployeeincentive costs relatedtoless profitable growth on the propertyand casualty insurance businessofthe Exchange.

Management feerevenue for administrative services increased 4.0% to $59.5 millionin2020 compared to 6.7% to $57.2 million in 2019. The administrative services reimbursement revenue andcorresponding costofoperations increased both total operating revenue andtotal operating expenses to $609.4 million in 2020 and $582.0 millionin2019, but had no netimpact on operating income.

Total investment incomedecreased $7.1 millionin2020 primarilydrivenbyhigherimpairments and lower net investment income reflecting lower interest ratesdue to marketvolatilitycaused by the COVID-19 pandemic.Total investment income increased $14.2 million in 2019 primarily driven by netrealizedinvestment gains and highernet investment income.

Incometax expense was$75.2 million in 2020 comparedto$79.9 millionin2019. Income taxexpense wasreducedin2019 by $4.0 million as aresult of settling an uncertaintax position, which decreased our effective taxrateby1.0%.

General Conditions and Trends Affecting Our Business Economicconditions Unfavorablechangesineconomic conditions, including declining consumerconfidence, inflation, high unemployment, andthe threat of recession, among others,may lead theExchange’s customers to modify coverage, not renewpolicies, or even cancel policies, which could adverselyaffect the premium revenue of theExchange, andconsequentlyour management fee. The extent to whicheconomicconditions couldimpactthe Exchange’s operations and our management feewas exacerbated with the COVID-19 pandemic.The extent and duration of the impacts to economic conditions remain uncertainasthe pandemic continuestoevolve. See FinancialCondition, Liquidityand CapitalResources, and Part I, Item 1A. "Risk Factors" contained withinthisreport for adiscussion of the potential impacts of the COVID-19 pandemic on our operations.

Financialmarketvolatility Our portfoliooffixedmaturity andequity security investmentsissubject to marketvolatilityespecially in periods of instability in theworldwide financial markets. Over time,net investment income couldalsobeimpactedbyvolatility andbythe general level of interest rates, which impact reinvestedcashflow from the portfolio andbusinessoperations. Depending upon market conditions, which areunpredictable and remain uncertain, considerablefluctuation could exist in the fairvalue of our investment portfolioand reportedtotal investment income, whichcouldhave an adverse impact on our financial condition, resultsofoperations, and cash flows. Significant volatilityhas beenseen in the globalfinancialmarkets since the outbreak of the COVID-19 pandemic.The extent of the impactonour investedassets cannot be estimatedwith ahigh degree of certaintyat thistimegiven theongoing developmentsofthis pandemicand the related impactsonthe financialmarkets. 24 CRITICAL ACCOUNTING ESTIMATES

The financial statements include amountsbasedupon estimatesand assumptions that have asignificant effect on reported amounts of assets and liabilitiesatthe date of the financial statements and thereportedamounts of revenues and expenses during thereporting period and relateddisclosures. We consider an accounting estimatetobecritical if 1) it requires assumptions to be made thatwere uncertain at thetimethe estimatewas made, and2)different estimatesthat couldhave been used, or changes in theestimatethat are likelytooccur from period-to-period, could have amaterialimpact on our Statements of Operations or FinancialPosition.

The following presentsadiscussion of those accounting policies surrounding estimatesthat we believe arethe most criticalto our reported amountsand require themost subjective andcomplexjudgment.Ifactualeventsdiffer significantly from the underlying assumptions, there couldbematerial adjustments to prior estimatesthat couldpotentially adverselyaffect our results of operations, financialcondition, andcashflows. Theestimates and theestimating methods used are reviewed continually, and any adjustmentsconsiderednecessary are reflectedincurrent earnings.

Investment Valuation Available-for-salesecurities We make estimatesconcerning thevaluation of allinvestments. Valuation techniquesare used to derive thefairvalue of the available-for-salesecuritieswehold. Fair value is theprice thatwould be received to sell an asset in an orderly transaction between willing market participants at the measurement date.

Fair value measurementsare based upon observableand unobservableinputs. Observableinputs reflectmarketdataobtained from independent sources,while unobservableinputs reflectour view of market assumptions in the absenceofobservable market information. We utilizevaluation techniques thatmaximize the use of observableinputs and minimize the use of unobservableinputs.

For purposes of determining whether themarketisactive or inactive,the classification of afinancial instrument is based upon the following definitions:

•Anactivemarketisone in whichtransactions for the assets being valued occur withsufficient frequency andvolume to provide reliablepricing information.

•Aninactive (illiquid) marketisone in whichthere arefew and infrequent transactions, where thepricesare not current, pricequotations vary substantially, and/or there is littleinformation publiclyavailablefor theassetbeing valued.

We continuallyassess whetherornot an active marketexists for allofour investmentsand as of each reporting datere-evaluate the classification in the fairvalue hierarchy. All assets carriedatfairvalue areclassifiedand disclosed in one of thefollowing threecategories:

•Level 1–Quoted prices(unadjusted) in active marketsfor identical assets or liabilities thatthe reporting entitycan access at themeasurement date.

•Level 2–Inputs otherthanquotedprices includedwithinLevel 1thatare observable for the assetorliability, either directly or indirectly.

•Level 3–Unobservableinputs for the assetorliability.

Level 1reflects market dataobtained from independent sources, such as prices obtainedfrom an exchange or anationally recognized pricing servicefor identical instrumentsinactivemarkets and primarilyincludespreferredstock.

Level 2includesthose financial instrumentsthat are valued using industry-standard models thatconsider various inputs, such as the interest rateand credit spread for theunderlying financial instruments. All significant inputsare observable,orderived from observable information in the marketplace,orare supported by observable levelsatwhichtransactions are executed in the marketplace.Financialinstruments in this category primarily include corporatebonds, structured securitiesand preferredstock.

Level 3securities are valued based upon unobservableinputs, reflecting our estimatesofvalue based upon assumptions used by market participants. Securities are also assigned to Level 3incases where non-binding brokerquotesare significant to the valuation andthere is alackoftransparency as to whetherthese quotesare based upon information that is observable in the marketplace.Fair value estimatesfor securities valued using unobservable inputsrequire significant judgment due to the 25 illiquid nature of the market for these securities and represent the bestestimate of the fairvalue that wouldoccur in an orderly transaction betweenwilling marketparticipantsatthe measurement date under current market conditions. Fair value for these securities is generally valuedusing an estimateoffairvalue based upon indicative market prices thatinclude significant unobservableinputs not based upon, nor corroboratedby, market information, including theutilization of discountedcashflow analyses which have been risk-adjustedtotake intoaccount illiquidity andothermarket factors. Thiscategory primarily consists of structured securitiesand corporate bonds.

As of eachreporting period, financialinstruments recorded at fair value are classifiedbased upon thelowest level of input that is significant to the fairvalue measurement. Thepresence of at least one unobservableinput that has significant impact to the fairvalue measurement would result in classification as aLevel 3instrument.Our assessment of the significance of aparticular input to thefairvalue measurement requires judgment,and considers factors specific to theasset, such as the relative impact on the fairvalue as aresult of including aparticular input andmarket conditions. We didnot make any other significant judgmentsexcept as describedabove.

Estimatesoffair valuesfor our investment portfolio areobtained primarilyfrom anationallyrecognized pricing service. Our Level 1securities are valued using an exchange traded price providedbythe pricing service.Pricing servicevaluations for Level 2securities include multiple verifiable,observableinputs including benchmark yields, reported trades, broker/dealer quotes, issuerspreads,two-sided markets, benchmark securities, bids,offers, and reference data. Pricing service valuations for Level 3securities are based upon proprietary modelsand are used whenobservableinputs are not available or in illiquid markets.

Although virtuallyall of our pricesare obtained from third partysources,wealsoperform internal pricing reviews, including evaluating the methodology and inputs usedtoensure thatwedetermine theproperclassification levelofthe financial instrument and reviewing securities with price changes thatvarysignificantlyfrom current market conditions or independent pricesources. Price variances are investigatedand corroborated by marketdataand transaction volumes. We have reviewed the pricing methodologies of our pricing service as well as otherobservableinputs and believe thatthe pricesadequately considermarket activityindetermining fair value.

In limitedcircumstances we adjust the pricereceivedfrom thepricing servicewhen, in our judgment,abetterreflection of fair value is available based upon corroborating information and our knowledge andmonitoring of market conditions such as a disparity in priceofcomparablesecuritiesand/or non-binding brokerquotes. In other circumstances, certainsecuritiesare internallypriced because prices are not provided by thepricing service.

Whenaprice from thepricing serviceisnot available, valuesare determined by obtaining broker/dealer quotesand/or market comparables. When available,weobtain multiple quotes for the same security. The ultimate value for these securities is determinedbased upon our best estimate of fairvalue using corroborating marketinformation. As of December31, 2020, nearly allofour available-for-sale and equitysecurities were pricedusing athird partypricing service.

Impairments Available-for-salesecuritiesinanunrealizedloss position areevaluated to determine whetherthe impairment is aresult of credit loss or otherfactors. If we have the intent to sell or it's more likely than not thatwewould be required to sell the security before recovery of theamortized cost basis, the entire impairment is recognizedinearnings. Securities thathaveexperienced a decline in fairvalue that we do not intend to sell, andthatwewillnot be requiredtosellbefore recovery, are evaluatedto determine if thedecline in fair value is credit related. Impairment resulting from acredit loss is recognizedinearnings with a corresponding allowanceonthe balance sheet.Future recoveriesofcreditloss result in an adjustment to theallowance and earnings in theperiod thecreditconditions improve. Factors considered in the evaluation of credit loss include theextent to which fair value is less than cost and fundamentalfactors specific to theissuersuch as financial condition, changes in credit ratings, nearand long-term business prospectsand otherfactors, as well as the likelihood of recovery of the amortizedcost of the security. If thequalitative reviewindicates credit impairment, theallowance for credit loss is measured as the amount that the security’s amortizedcost exceeds the present value of cash flowsexpectedtobecollected andislimited to theamount that fairvalue is below amortizedcost.

26 Retirement Benefit Plans for Employees Our pension plans consist of anoncontributory definedbenefit pension plancovering substantially allemployees and an unfunded supplementalemployee retirement plan ("SERP") for certainmembers of executive andsenior management. Although we arethe sponsor of these postretirement plans and record the funded statusofthese plans, the Exchange andits subsidiariesreimburse us for approximately59% of the annualbenefitexpense of these plans, which includes pension benefits for employees performing administrative servicesand the Exchange's allocatedshare of costs for employeesindepartmentsthat support the administrative functions.

Our pension obligation is developed from actuarialestimates. Severalstatistical and other factors, which attempttoanticipate future events, are used in calculating theexpense andliability relatedtothe plans. Keyfactors include assumptions about the discount rates and expectedrates of return on planassets. We review these assumptions annually andmodify themconsidering historicalexperience, current market conditions, including changesininvestment returns and interest rates, and expected future trends.

Accumulatedand projectedbenefit obligations are expressedasthe present value of future cash payments. We discount those cash payments based upon ayield curve developed from corporate bond yield information with maturitiesthat correspond to the payment of benefits. Lowerdiscount rates increase present values and subsequent yearpension expense, whilehigher discount rates decrease present values and subsequent yearpension expense. Theconstruction of theyield curve is based upon yields of corporate bonds ratedAAorequivalent quality. Targetyieldsare developed from bonds at various maturity points and acurve is fittedtothose targets. Spot rates (zero coupon bond yields) are developed from the yield curve andused to discount benefit payment amounts associatedwith each future year. The present value of plan benefits is calculatedbyapplying thespot/ discount rates to projectedbenefit cash flows. Asingle discount rateisthen developed to produce the same present value. The cash flows from the yield curve were matched against our projected benefitpayments in thepension plan, which have a duration of about 19 years. Thisyieldcurve supported theselection of a2.96% discount ratefor the projected benefit obligation at December 31, 2020 andfor the 2021 pension expense. Thesamemethodology was used to develop the 3.59% and 4.47% discount ratesused to determine the projected benefit obligation for 2019 and2018, respectively, andthe pension expense for 2020 and 2019, respectively. A25basispoint decrease in thediscount rate assumption, with other assumptions held constant, would increase pension cost in thefollowing yearby$6.8 million, of whichour share would be approximately $2.8 million, andwould increasethe pension benefit obligation by $61.6 million.

Unrecognized actuarial gains andlossesarisefrom several factors,including experience and assumption changes in the obligations and from thedifference between expectedreturns and actualreturns on planassets. These unrecognized gains and losses are recorded in thepension plan obligation and accumulated other comprehensive income (loss). These amountsare systematicallyrecognized to netperiodic pension expense in future periods,with gains decreasing and losses increasing future pension expense. If actuarialnet gains or losses exceed 5% of the greater of theprojectedbenefitobligation and the market- relatedvalue of planassets, theexcessisrecognized through thenet periodic pension expense equallyover theestimated serviceperiodofthe employee group, whichiscurrently14years.

Theexpectedlong-termrateofreturn forthe pension plan represents the average rate of return to be earned on plan assetsover the period the benefits includedinthe benefit obligation are to be paid. To determine theexpectedlong-term rateofreturn assumption, we utilizedmodelsbased upon rigorous historical analysisand forward-looking views of thefinancialmarkets basedupon key factors such as historical returns for the assetclass'applicable indices, the correlations of the assetclasses under various market conditions andconsensus views on future real economicgrowthand inflation. The expected future return for each asset class is then combined by considering correlations betweenasset classes and the volatilities of each assetclassto produce areasonable range of assetreturnresults withinwhich ourexpected long-term rate of returnassumption falls. The expectedlong-term rate of return is lesssusceptible to annualrevisions, as there aretypicallynosignificant changesinthe asset mix. Based on the current assetallocation and areviewofthe keyfactors andexpectations of future assetperformance,we reduced the expectedreturnonassetassumption from 6.00% to 5.50% for 2021. Achange of 25 basis points in theexpected long-term rateofreturnassumption, with other assumptions held constant, would have an estimated$2.3 million impactonnet pension benefit cost in thefollowing year, of which ourshare wouldbeapproximately $0.9 million.

We use afour-yearaveraging method to determine the market-relatedvalue of planassets, which is used to determine the expectedreturn component of pension expense. Underthis methodology, assetgainsorlosses thatresult from returns that differfrom our long-term rateofreturnassumption are recognized in themarket-related valueofassets on alevel basisover a four-yearperiod. Themarket-relatedasset experience during 2020 thatrelatedtothe actual investment returnbeing different from thatassumedduring the prior yearwas again of $146.3 million. Recognition of thisgainwill be deferred andrecognized over afour-yearperiod, consistent with themarket-relatedassetvaluemethodology. Once factoredintothe market-related assetvalue, these experience gains and losses will be amortizedover aperiod of 14 years, which is the remaining service period of the employee group. 27 Estimates of fairvalues of the pension plan assets areobtained primarilyfrom thetrustee and custodianofour pension plan. Our Level1category includes amoney marketmutualfund andaseparateaccount for which the fairvalue is determined using an exchange tradedpriceprovided by thetrusteeand custodian. Our Level 2category includescommingled pools. Estimates of fairvalues for securities heldbyour commingledpools areobtained primarilyfrom thetrustee and custodian. Trusteeand custodian valuation methodologiesfor Level2securities include multipleverifiable, observable inputsincluding benchmark yields, reported trades, broker/dealer quotes, issuers spreads,two-sided markets, benchmark securities, bids,offers,and referencedata. There werenoLevel 3investments in 2020 or 2019.

We expect our net pension benefitcosts to increase from $45.1 millionin2020 to $56.6 million in 2021 primarily driven by the decrease in thediscount rate.Our share of thenet pension benefit costs after reimbursements was$18.5 million in 2020. We expect our share of thenet pension benefit costs to be approximately $23.2 millionin2021.

The actuarialassumptions we used in determining our pension obligation maydiffer materially from actualresults due to changing marketand economicconditions, higherorlower withdrawal rates, or longerorshorter life spans of participants. While we believe that the assumptions used are appropriate, differencesinactualexperienceorchangesinassumptions may materiallyaffect our financial position, resultsofoperations, or cash flows. SeeItem8."FinancialStatements and Supplementary Data-Note 10, Postretirement Benefits, of Notes to Financial Statements" containedwithinthisreport for additional details on the pension plans.

28 RESULTS OF OPERATIONS

Management fee revenue We have two performance obligations in the subscriber’s agreement, providing policyissuanceand renewalservicesand acting as attorney-in-fact for the Exchange,aswellasthe serviceprovider for itsinsurance subsidiaries, with respect to all administrative services. We earn management feesfor acting as the attorney-in-fact for the subscribers at theExchange in these two capacities. Our revenuesare allocatedbetween thetwo performance obligations.

Management feerate The management feeiscalculated by multiplying alldirect and affiliatedassumedpremiumswritten by theExchange by the management feerate, which is determined by our Board of Directorsatleast annually. Themanagement fee ratewas setat 25%, the maximum rate,for 2020, 2019 and 2018. Changesinthe management fee ratecan affectour revenue and netincome significantly. Thetransaction pricefor management fee revenue andadministrative servicereimbursement revenue is allocated based on the estimatedstandalone selling pricesdeveloped using industry information andotheravailableinformation for similarservices. We updatethe transaction priceallocation annuallybased upon themost recent information available or more frequentlyifthere have beensignificant changesinany components considered in the transaction price.In2020, we reviewed thetransaction priceallocation quarterlytoconsider themost current economic conditions relatedtothe COVID-19 pandemic. Thereviews resultedinnomaterial change to the allocation.

The following table presentsthe allocation and disaggregation of revenue for our twoperformance obligations: Years endedDecember31, (dollars in thousands) 2020 %Change 2019 %Change 2018

Policyissuanceand renewal services Directand affiliated assumed premiums written by the Exchange $7,613,519 1.7 %$7,486,030 5.2 %$7,112,846 Management feerate24.2 %24.2 %24.2 % Management feerevenue 1,842,472 1.7 1,811,619 5.2 1,721,309 Change in allowance for management feereturned on cancelled policies (1) (678) 41.7 (1,162) 33.3 (1,742) Management feerevenue -policy issuance and renewal services, net $1,841,794 1.7 %$1,810,457 5.3 %$1,719,567

Administrative services Directand affiliated assumed premiums written by the Exchange $7,613,519 1.7 %$7,486,030 5.2 %$7,112,846 Management feerate0.8 %0.8 %0.8 % Management feerevenue 60,908 1.7 59,888 5.2 56,903 Change in contract liability (2) (1,376) 47.8 (2,633) 17.9 (3,209) Change in allowance for management feereturned on cancelled policies (1) (69) (34.6) (51) 17.0 (62) Management feerevenue -administrative services, net 59,463 4.0 57,204 6.7 53,632 Administrative services reimbursement revenue 609,435 4.7 582,010 0.3 580,336 Total revenue from administrative services $668,898 4.6 %$639,214 0.8 %$633,968

(1) Management fees are returned to the Exchange when policies are cancelled mid-term and unearned premiums are refunded. We record an estimated allowance formanagement fees returned on mid-term policy cancellations. This estimated allowance has been allocated between the two performance obligations consistent with the revenue allocation proportion. The potential for agreater number of mid-term cancellations as aresult of the COVID-19 pandemic was taken into consideration in the determination of this allowance in 2020. (2) Management fee revenue -administrative services is recognized over time as the services are performed. See Item 8. "Financial Statements - Note 3, Revenue, of Notes to Financial Statements" contained within this report.

29 Direct and affiliated assumedpremiumswrittenbythe Exchange Directand affiliated assumed premiums include premiums written directly by theExchange andpremiumsassumed from its whollyownedpropertyand casualty subsidiaries. Direct and affiliatedassumedpremiumswritten by theExchange increased 1.7% to $7.6 billion in 2020, from $7.5 billion in 2019, drivenbyanincrease in policies in force. Year-over-year policiesin force for alllinesofbusinessincreased 2.1% in 2020 as the result of continuing strong policyholder retention, comparedto 1.8% in 2019. Theyear-over-yearaverage premium per policyfor alllinesofbusiness decreased 0.4% at December 31, 2020, comparedtoanincrease of 3.2% at December31, 2019. The year-over-year average premium perpolicy at December 31, 2020 was impacted by theratereductions for personal andcommercial autopolicies as aresult of theCOVID-19 pandemic.

Premiums generated from new business decreased 1.2% to $852 million in 2020. While new business policieswritten increased 5.0 %in2020, year-over-yearaverage premium per policyonnew business decreased 5.9% at December 31, 2020, drivenbythe personal and commercialauto rate reductions which took effect in thethird quarterof2020. Premiums generated from newbusiness decreased 2.6% to $863 million in 2019. While year-over-year average premium perpolicy on new businessincreased 5.1% at December 31, 2019, newbusiness policieswritten decreased 7.4% in 2019.

Premiums generated from renewal business increased 2.1% to $6.8 billion in 2020, compared to 6.4%, or $6.6 billion, in 2019. Underlying the trend in renewal businesspremiums were increases in average premium perpolicy andsteady policy retention ratios. The renewal business year-over-yearaverage premium per policyincreased 0.4% at December31, 2020, comparedto 2.9% at December31, 2019.

The Exchange implements ratechangesinorder to meet loss cost expectations. As theExchange writes policies with annual terms only, rate actions take 12 months to be fully recognizedinwrittenpremium and 24 months to be recognized in earned premiums. Since ratechangesare realized at renewal,ittakes 12 months to implement aratechange to allpolicyholders and another 12 months to earn theincreased or decreased premiums in full. As aresult,certain rate changes approvedin2019 were reflectedin2020, andaportion of therateactions in 2020, primarily those in response to reduceddriving conditions resulting from theCOVID-19 pandemic,will be reflected in 2021. The Exchange continuously evaluates pricing andproduct offerings to meet consumer demands.

Personal lines –Total personal lines premiumswritten increased 1.3% to $5.4 billion in 2020, from $5.3 billion in 2019, driven by an increase in total personal lines policies in forceof2.2%. Whilethe impactsofthe COVID-19 pandemic,including changes in consumerbehavior anddriving patterns, among others,significantly reducednew personal policies written in the second quarterof2020, new personal policies written increased20.7% in thesecond halfof2020, comparedtothe same period last year. Totalpersonallinesyear-over-yearaverage premium per policydecreased0.8% at December31, 2020, comparedto the prior year, driven by personalauto rate reductions. Total personal lines policies in forceincreased 1.8% in 2019 and year- over-year average premium perpolicy increased 2.9% at December 31, 2019.

Commercial lines –Total commercial lines premiumswritten increased 2.6% to $2.2 billion in 2020, compared to 2019, driven by a1.6% increase in total commercial lines policies in forceand a0.9% increase in the total commercial lines year-over-year average premium per policy. While there wasasignificant reduction in newcommercialpolicieswritten in the second quarter of 2020 as aresult of thebusiness disruptions and unfavorableeconomic conditions relatedtothe COVID-19 pandemic,new commercial policies written increased 2.4% in the second half of 2020 compared to the same period last year. The second half of 2020 activitywas primarilydrivenbyanincrease in commercial autopolicies written whichwas partially offset by a decrease in workers compensation policieswritten. Totalcommerciallinespremiums written increased 6.1% in 2019, comparedto2018, driven by a2.4% increase in totalcommerciallinespoliciesinforce and a3.6% increase in thetotal commercial lines year-over-year average premium perpolicy.

Future trends-premium revenue –Through acareful agencyselection process, theExchange plans to continue itseffort to expand the size of itsagencyforce to increase marketpenetration in existing operating territories to contribute to future growth. While our agents initially experienced business declinesresulting from disruptions created by theCOVID-19 pandemic,there have beennosignificant disruptions in theiroperations. The continued impactsofthe COVID-19 pandemic couldmakeit difficultfor our independent agents to writenew business andretainexisting business and/or constrainour ability to recruit new agents.

Changesinpremium levelsattributabletothe growth in policiesinforce directly affectthe profitabilityofthe Exchange and have adirectbearing on our management fee. Our continuedfocus on underwriting discipline and thematuring of pricing sophistication modelshave contributedtothe Exchange's steady policy retention ratios. The continuedgrowth of itspolicy base is dependent upon theExchange's abilitytoretainexisting and attractnew subscribers/policyholders. Alackofnew policy growth or the inabilitytoretainexisting customers couldhave an adverse effectonthe Exchange's premium levelgrowth, and consequentlyour management fee.

30 Changes in premium levels attributabletoratechangesalsodirectly affectthe profitabilityofthe Exchange and have adirect bearing on our management fee.Pricing actions contemplated or takenbythe Exchange are subject to various regulatory requirementsofthe states in which it operates. The pricing actions already implemented, or to be implemented, have an effect on the market competitiveness of theExchange'sinsurance products. Such pricing actions, and those of the Exchange's competitors, could affectthe abilityofthe Exchange's agentstoretainand attractnew business;additionally, exposure reductions and/or changesinmix of businessasaresult of economicconditions couldimpactthe average premium writtenand affiliated assumed by theExchange, as customers may reduce coverages.

The COVID-19 pandemic mayhave anegative impactonthe Exchange's premiums, and therefore our management fees, given recessionary economic conditions and related declinesinconsumeractivityand demand for certain services, as well as the potential for sustained changesindriving patterns. The remaining ratereductions implementedfor personal and commercial autopolicies in response to theCOVID-19 pandemic are estimatedtodecrease premiums by $110 million withacorresponding decrease of $28 million in management feerevenue in 2021. Future premiumscould also be impacted by potentialregulatory changes resulting from the COVID-19 pandemic.

The extent of the impacttothe Exchange's premiums and our management fee cannot be estimatedwith ahigh degree of certaintyatthistimegiven theongoing developmentsrelatedtothis pandemic. See also Part I, Item 1A. "Risk Factors" contained within this report.

31 Policy issuance and renewal services Years endedDecember 31, (dollars in thousands) 2020 %Change 2019 %Change 2018

Management feerevenue -policy issuance and renewalservices,net $1,841,794 1.7 %$1,810,457 5.3 %$1,719,567 Serviceagreement revenue 25,797 (6.6) 27,627 (3.7) 28,677 1,867,591 1.6 1,838,084 5.1 1,748,244 Costofpolicyissuanceand renewalservices 1,588,897 3.3 1,537,949 5.5 1,457,533 Operating income-policyissuance and renewal services $278,694 (7.1) %$300,135 3.2 %$290,711

Policy issuance and renewal services We allocateaportion of the management fee, which currentlyequatesto24.2% of the direct and affiliatedassumed premiums written by theExchange, for providing policyissuanceand renewal services. Thisportion of themanagement fee is recognized as revenue whenthe policyisissuedorrenewed because it is at thattimethatthe servicesweprovide are substantiallycomplete and theexecutedinsurancepolicyistransferredtothe customer. Theincrease in management feerevenue for policy issuance and renewal services wasdriven by theincrease in the direct and affiliatedassumed premiums written by theExchange discussed previously.

Serviceagreement revenue Serviceagreement revenue includesservicechargeswecollect from subscribers/policyholders for providing extendedpayment terms on policies written andaffiliated assumed by theExchange, andlatepayment and policyreinstatement fees. The service charges are fixeddollar amountsper billedinstallment. Thedecrease in serviceagreement revenue reflects the continuedshift to payment plans thatdonot incur servicechargesoroffer apremium discount for certainpayment methods.

Costofpolicy issuance and renewal services Years endedDecember 31, (dollars in thousands) 2020 %Change 2019 %Change 2018

Commissions: Total commissions $1,051,272 2.6 %$1,024,654 4.2 %$983,758 Non-commission expense: Underwriting and policyprocessing $160,646 3.7 %$154,934 3.8 %$149,234 Information technology 173,827 3.7 167,600 16.0 144,495 Salesand advertising 53,212 1.6 52,362 (5.8) 55,608 Customerservice34,638 7.1 32,353 9.9 29,447 Administrative and other 115,302 8.7 106,046 11.6 94,991 Total non-commission expense 537,625 4.7 513,295 8.3 473,775 Total cost of policyissuance and renewal services $1,588,897 3.3 %$1,537,949 5.5 %$1,457,533

Commissions –Commissions increased$26.6 million in 2020 comparedto2019 resulting from higherdirect and affiliated assumedpremiumswritten by theExchange andhigheragent incentive compensation. The Exchange experiencedasignificant decrease in automobileclaimsfrequencyand relatedloss expense beginning in March 2020 that continuedthrough May 2020 drivenbythe COVID-19 pandemic,which contributedtoanincrease in theprofitabilitycomponent of the agent incentive bonuses. Claims frequencyincreased in June 2020 andmaintained consistent levelsthrough the remainder of 2020. Commissions increased $40.9 millionin2019 compared to 2018 resulting from higherdirect and affiliatedassumed premiums written by theExchange, somewhat offset by lower agent incentive costs related to less profitable growth.

Non-commission expense –Non-commission expense increased $24.3 million in 2020 comparedto2019. Underwriting and policy processing costs increased $5.7 million primarilydue to increased personnel costs and underwriting report costs. Information technology costs increased $6.2 million primarilydue to increased personnel costs and hardware andsoftware costs.Administrative and other expenses increased $9.3 million primarilydrivenbyincreased personnel costs.Increased personnel costs in allcategoriesincluded higher incentive plan award accruals related to underwriting performance in 2020

32 compared to targetsand highervacation accrualsasemployees took less vacation in 2020 as aresult of the COVID-19 pandemic.

In 2019, non-commission expense increased$39.5 million compared to 2018. Underwriting and policyprocessing costs increased $5.7 million primarilydue to increased underwriting report costs and other policyacquisition costs.Information technology costs increased $23.1 millionprimarily due to increased professional feesand hardware and software costs. Sales and advertising costs decreased $3.2 milliondue to decreased personnel costs.Customerservicecosts increased $2.9 million primarily due to increased creditcard processing feesand personnel costs.Administrative and other expenses increased $11.1 million primarilydrivenbyanincrease in the long-term incentive plancosts due to ahigher company stock price in 2019 comparedto2018 andseveralmulti-year commitments made to support community development initiatives. Personnel costs in allexpense categories were impacted by increased medicalexpenses,somewhat offset by lower estimatedcosts for incentive plans relatedtosales and underwriting performancein2019 comparedtotargets.

Administrative services Years endedDecember 31, (dollars in thousands) 2020 %Change 2019 %Change 2018

Management feerevenue -administrative services, net $59,463 4.0 %$ 57,204 6.7 %$ 53,632 Administrative services reimbursement revenue 609,435 4.7 582,010 0.3 580,336 Total revenue allocatedtoadministrative services 668,898 4.6 639,214 0.8 633,968 Administrative services expenses Claims handling services 525,072 3.7 506,491 0.1 505,843 Investment management services 36,835 9.5 33,640 4.9 32,065 Life management services 47,528 13.5 41,879 (1.3) 42,428 Operating income-administrative services$59,463 4.0 %$ 57,204 6.7 %$ 53,632

Administrative services We allocateaportion of the management fee, which currentlyequatesto0.8% of the direct and affiliatedassumed premiums written by theExchange, to the administrative services. Thisportion of the management feeisrecognizedasrevenue overa four-yearperiod representing the time over which the services areprovided. We also report reimbursed costs as revenues, whichare recognized monthlyasservices are provided.

Costofadministrative services By virtue of itslegal structure as areciprocalinsurer, the Exchange does not have any employeesorofficers. Therefore, it enters intocontractualrelationships by and through an attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the Exchange withrespecttoits administrative services in accordance withthe subscriber's agreement. TheExchange's insurance subsidiariesalsoutilize Indemnityfor these servicesinaccordancewiththe serviceagreements between each of the subsidiariesand Indemnity. Theamountsincurred for these servicesare reimbursedtoIndemnity at cost in accordance with the subscriber's agreement andthe service agreements. We record these reimbursementsdue from theExchange andits insurance subsidiariesasareceivable.

33 Total investment income Asummary of the resultsofour investment operations is as follows for the years endedDecember 31:

(dollars in thousands) 2020 %Change 2019 %Change 2018 Netinvestment income $29,753 (12.6) %$ 34,059 15.9 %$ 29,387 Netrealizedinvestment gains (losses)6,392 4.7 6,103 NM (2,010) Netimpairment losses recognized in earnings (3,278) NM (195) NM (1,581) Total investment income $32,867 (17.8) %$ 39,967 54.9 %$ 25,796

NM =not meaningful

Netinvestment income Netinvestment income primarily includes interest anddividends on our fixedmaturity andequity security portfolios, net of investment expenses. Netinvestment income decreased by $4.3million in 2020, comparedto2019, primarilydue to decreased income from cash and cash equivalentsdrivenbylowerrates andinvestedbalances, somewhat offset by increased preferred stockincome resulting from higherinvestedbalances. Netinvestment income increased by $4.7 million in 2019, comparedto 2018, primarily due to an increase in cash and cash equivalent andagent loan interest incomereflecting higher invested balances and rates, somewhat offset by decreased incomeonfixed maturitiesdue to lower invested balancesand yields.

Net realized investment gains (losses) Abreakdownofour net realizedinvestment gains (losses) is as follows for the years endedDecember 31:

(in thousands) 2020 2019 2018 Securities sold: Available-for-salesecurities$1,335 $4,619 $(1,297) Equity securities (713) (1) (111) Equity securities change in fairvalue 5,769 1,485 (708) Miscellaneous 1—106 Netrealizedinvestment gains (losses) $6,392 $6,103 $(2,010)

Netrealizedgains of $6.4 million in 2020 were primarilydue marketvalue adjustmentsonequitysecurities and from the sale of available-for-salesecurities. Netrealizedgains of $6.1 million in 2019 were primarilydue to gains from salesofavailable-for- sale securities and increases in fair value of equity securities, while lossesof$2.0 million in 2018 were due to lossesfrom sales of available-for-saleand equity securitiesand decreases in fairvalue of equitysecurities.

Net impairment lossesrecognizedinearnings Netimpairment losses recognized on available-for-sale securitiesin2020 include $2.3 millionofsecurities in an unrealizedloss position where we had intent to sell prior to recovery of our amortized cost basis and $0.7 millionofcredit impairment losses. The remaining impairmentsinclude the change in the current expectedcredit loss allowancerelated to our agent loans. The COVID-19 pandemic's impact on financial marketscontributedtohigher impairment lossesonour available-for-sale securities during 2020 compared to prior years. Net impairment lossesrecognizedin2019 and2018 includedsecurities in an unrealized loss position thatweintended to sell prior to expected recovery of our amortizedcost basis as well as securities in an unrealized loss position where we determined theloss was other-than-temporary based on credit factors.

34 Financial Condition of ErieInsuranceExchange Serving in the capacityofattorney-in-fact for the Exchange,weare dependent on the growthand financialcondition of the Exchange,who is our solecustomer. Thestrength of theExchange andits wholly owned subsidiaries is rated annually by A.M. Best Company through assessing itsfinancialstability andability to pay claims.The ratings are generallybased upon factors relevant to policyholders and arenot directed toward return to investors.The Exchange and each of itsproperty andcasualty subsidiariesare ratedA+"Superior",the second highest financialstrengthrating, whichisassigned to companies thathave achieved superior overall performancewhen compared to the standards established by A.M. Best andhave asuperior ability to meet obligations to policyholders over the long term.OnJuly 8, 2020, the outlook for the financial strengthrating was affirmed as stable. As of December31, 2020, only approximately12% of insurancegroups, in whichthe Exchange is included, are rated A+ or higher.

The financial statementsofthe Exchange arepreparedinaccordancewithstatutory accounting principles prescribed by the Commonwealth of Pennsylvania.Financialstatements prepared understatutory accounting principles focus on the solvencyof the insurer andgenerally provide amore conservative approachthanunder U.S. generallyacceptedaccounting principles. Statutory directwrittenpremiumsofthe Exchange andits wholly owned property andcasualtysubsidiariesgrew 1.7% to $7.6 billion in 2020 from $7.5 billion in 2019. These premiums, along with investment income,are the major sourcesofcashthat support the operations of the Exchange. Policyholders' surplus, determined understatutory accounting principles, was$10.7 billion and $9.5 billion at December 31, 2020 and2019, respectively. The Exchange and itswholly owned property and casualtysubsidiaries' year-over-yearpolicy retention ratio continues to be high at 89.9% at December 31, 2020 and90.0% at December31, 2019.

We have prepared our financialstatements considering thefinancialstrength of theExchange based on itsA.M. Best rating and strong level of surplus. We aremonitoring risks relatedtothe COVID-19 pandemic on an ongoing basis and believe thatthe Exchange falls withinestablished risktolerances. However, see Part I, Item 1A. "Risk Factors" for possible outcomesthat couldimpactthat determination.

35 FINANCIALCONDITION

Investments Our investment portfolio is managedwiththe objective of maximizing after-taxreturns on arisk-adjusted basis. Thefollowing table presentsthe carrying value of our investmentsasofDecember 31:

(dollars in thousands) %to %to 2020 total 2019 total Fixedmaturities $928,236 84 %$730,701 82 % Equity securities: Preferredstock 94,071 964,752 7 Common stock 19 02,381 0 Agent Loans (1) 69,212 667,696 8 Other investments14,325 128,205 3 Total investments $1,105,863 100 %$893,735 100 %

(1) The current portion of agent loans is included with prepaid expenses and other current assets in the Statements of Financial Position.

We continuallyreview our investment portfolio for impairment and determine whetherthe impairment is aresult of creditloss or otherfactors. We individuallyanalyzeall positions with an emphasis on those in asignificant unrealizedloss position. If we have the intent to sell or it's more likely than not thatwewould be required to sell the security before recovery of the amortized cost basis,the entire impairment is recognizedinearnings. Factors considered in the evaluation of credit loss include theextent to whichfairvalue is less than cost andfundamental factors specific to the issuersuch as financial condition, changes in credit ratings, nearand long-term business prospectsand otherfactors, as well as the likelihood of recovery of the amortizedcost of the security. Impairment resulting from creditloss is recognizedinearnings with acorresponding allowanceonthe balance sheet.Webelieve our investment valuation philosophy and accounting practicesresult in appropriateand timely measurement of fairvalue andrecognition of impairment.

Fixed maturities Underour investment strategy, we maintain afixedmaturity portfoliothatisofhighqualityand well diversified withineach market sector. Thisinvestment strategy also achievesabalanced maturityschedule. Our fixedmaturity portfolioismanaged with thegoalofachieving reasonable returns while limiting exposure to risk.

Fixedmaturities are carriedatfairvalue with unrealizedgains and losses, net of deferred taxes, includedinshareholders' equity. Net unrealized gains on fixedmaturities, net of deferred taxes, totaled $23.3 millionatDecember 31, 2020, comparedtonet unrealizedgains of $4.5 million at December31, 2019.

The following table presentsabreakdown of the fair value of our fixedmaturity portfoliobyindustry sector andrating as of December31, 2020: (1)

(in thousands) Non- investment Fair AAA AA ABBB grade value Basic materials $0$0$3,277 $4,053 $8,911 $16,241 Communications 08,932 8,661 22,451 18,973 59,017 Consumer 03,246 25,221 66,057 43,391 137,915 Diversified 0001,072 423 1,495 Energy 07,548 4,701 18,288 11,424 41,961 Financial 01,035 59,632 117,261 12,393 190,321 Industrial0010,220 14,851 18,465 43,536 Structured securities (2) 146,270 168,083 34,018 13,439 0361,810 Technology 05,311 12,308 18,448 11,388 47,455 Utilities003,945 18,997 5,543 28,485 Total $146,270 $194,155 $161,983 $294,917 $130,911 $928,236

(1) Ratings are supplied by S&P, Moody’s, and Fitch. The table is based upon the lowest rating for each security. (2) Structured securities include residential and commercial mortgage-backed securities, collateralized debt obligations, and asset-backed securities.

36 EquitySecurities Equity securities consist of nonredeemablepreferredand common stockand arecarried at fair value in theStatements of Financial Position withall changesinunrealized gains andlosses reflected in theStatementsofOperations.

The following tablepresents an analysisofthe fairvalue of our nonredeemable preferred andcommon stocksecurities by sector as of December31: (in thousands) 2020 2019 Preferred Common Preferred Common Stock stock Stock stock Communications $2,699 $0$1,052 $2,381 Consumer3,068 0508 0 Energy 2,187 19 1,881 0 Financial services 76,575 053,513 0 Industrial800 0980 0 Utilities 8,742 06,818 0 Total $94,071 $19$ 64,752 $2,381

Shareholders'Equity Postretirement benefitplans The funded statusofour postretirement benefitplans is recognizedinthe StatementsofFinancialPosition, with a corresponding adjustment to accumulatedothercomprehensive income (loss), netoftax. At December31, 2020, shareholders' equity amountsrelated to thesepostretirement plans increasedby$20.0 million, netoftax, of which $10.6 million represents amortization of the prior service cost andnet actuarialloss and $9.4 million representsthe current period actuarialgain. The actuarialgainwas drivenbyhigherthanexpected returns on assets which exceededlossesincurredasaresult of thelower discount ratein2020. At December31, 2019, shareholders' equityamounts related to these postretirement plans increased by $1.7 million, netoftax, of which$4.9 million representsamortization of theprior servicecost and netactuarial loss offsetby $3.2 million of current period actuarialloss. The 2019 actuarial loss wasprimarilydue to the change in the discount rate assumption used to measure the future benefit obligations to 3.59% in 2019, from 4.47% in 2018. Although we arethe sponsor of these postretirement plans and record thefundedstatus of theseplans, the Exchange and itssubsidiariesreimburse us for approximately 59% of theannual benefit expense of these plans, which includes pension benefits for employees performing administrative services and theirallocated share of costs for employees in departments thatsupport theadministrative functions.

Home Office Expansion In 2016, we enteredintoacreditagreement for a$100 million senior secureddraw term loan creditfacility("CreditFacility") for the acquisition of real propertyand construction of an officebuilding thatwillserve as part of our principalheadquarters. On January 1, 2019, theCreditFacilityconvertedtoafully-amortizedtermloan withmonthly payments of principaland interest at afixed rate of 4.35% over aperiod of 28 years. We capitalizedapplicableinterest chargesincurredduring the construction period of long-term building projects as part of the historicalcost of the asset. Thebuilding was completed in the fourth quarterof2020.

37 LIQUIDITY ANDCAPITAL RESOURCES

While we did not seeasignificant impactonour sourcesorusesofcashin2020 as aresult of the COVID-19 pandemic,we mayexperience future reductions in our management feerevenue if theExchange’s premium growth is constrained. Also, future disruptions in the marketscould occur which mayaffect our liquidity position. Accordingly, we continue to monitor the sufficiencyofour liquidity andcapital resourcesgiven thepotentialimpact of the COVID-19 pandemic.There is potentialthat the funding requirements for our costs of operations will increase related to agent compensation and technology costs, among others. If our normal operating and investing cash activities were to become insufficient to meet future funding requirements, we believe we have sufficient access to liquidity through our cash position, liquid marketable securities and our $100 million line of creditthat does not expire untilOctober 2023. See broaderdiscussions of potentialrisks to our operations in the Operating Overview and Part I, Item1A. "Risk Factors" containedwithinthisreport.

Sourcesand UsesofCash Liquidity is ameasure of acompany's abilitytogenerate sufficient cash flows to meet the short- and long-term cash requirementsofits businessoperations and growth needs. Our liquidityrequirementshave been metprimarily by funds generated from management feerevenue and incomefrom investments. Cash providedfrom these sourcesisusedprimarily to fund the costs of our management operations including commissions, salariesand wages, pension plans, share repurchases, dividends to shareholders, and the purchase and development of information technology. We expect thatour operating cash needs will be metbyfunds generatedfrom operations.

Volatilityinthe financialmarkets presentschallenges to us as we do occasionallyaccessour investment portfolio as asourceof cash. Some of our fixed incomeinvestments, despite being publiclytraded, maybeilliquid. Volatility in these marketscould impairour ability to sell certain of our fixed incomesecuritiesorcausesuch securitiestosellatdeepdiscounts. We believe we have sufficient liquidity to meet our needs from sources otherthanthe liquidation of securities, evenifmarketvolatilitypersists throughout 2021 and beyond.

Cashflow activities The following table providescondensed cash flow information for theyears endedDecember 31:

(in thousands) 2020 2019 2018 Netcashprovidedbyoperating activities$342,595 $364,527 $263,585 Netcashusedininvesting activities(243,225) (124,634) (81,398) Netcashusedinfinancing activities (274,869) (169,571) (131,491) Net(decrease)increase in cash $(175,499) $70,322 $50,696

Netcashprovidedbyoperating activitieswas $342.6 million in 2020, comparedto$364.5 millionin2019 and$263.6 million in 2018. Decreased cash provided by operating activities in 2020 was primarily due to an increase in cash paidfor agent commissions of $33.3 million due to higherscheduled commissions driven by premium growth, increased generaloperating expenses paid of $17.4 millionand increased administrative servicesexpenses paidof$16.2 million. Offsetting thedecrease in cash provided by operating activities wasanincrease of $42.5 million in management feereceiveddrivenbygrowth in direct and affiliatedassumed premiums written by theExchange, compared to 2019. Increased cash providedbyoperating activities in 2019 was primarily due to an increase of $93.8 million in management feerevenue received driven by growth in direct and affiliated assumed premiums written by theExchange andadecrease in pension contributions and employeebenefits paidof $72.8 million, driven by the$80 millionaccelerated pension contribution in 2018. Offsetting theincrease in cash provided by operating activitieswas increased cash paidfor agent commissions of $41.8 million due to higherscheduled commissions drivenbypremium growth, comparedto2018.

Net cash usedininvesting activitiestotaled$243.2 million in 2020, comparedto$124.6 millionin2019 and$81.4 million in 2018. Net cash usedininvesting activitiesincreased in 2020 as purchases of available-for-sale securities exceeded theproceeds generated from investment sales and maturities/callsofavailable-for-sale securities. Fixed asset purchases decreased $46.5 million in 2020 comparedto2019 primarilydue to the completion of the new home officebuilding in thefourthquarter of 2020 which wasfunded primarilybythe senior secured drawterm loancredit facility. In 2019, we generated more proceeds from investment activity, whichwere offset by higherpurchases of available-for-sale securities and equitysecurities due to portfolio rebalancing. Fixed asset purchases also increased primarilyrelated to the new home officebuilding.

Net cash usedinfinancing activities totaled $274.9 millionin2020, compared to $169.6 million in 2019 and $131.5 millionin 2018. The increase in cash usedin2020, compared to 2019, was due to an increase in dividends paid to shareholders. In

38 addition to the normalquarterly dividends paid in 2020, the Board also declaredaspecialone-time cash dividend of $2.00 on each ClassAshare and$300 on each ClassBshare totaling $93.1 million, whichwas paid in December2020. The increase in cash used in 2019, compared to 2018, wasdue to an increase in dividends paid to shareholders and principal paymentsonthe senior secured drawterm loancredit facility, which commenced January 1, 2019.

No shares of our ClassAnonvoting common stock were repurchased in 2020, 2019 and 2018 in conjunction withour stock repurchase program. In 2011, our Board of Directorsapproved acontinuation of the current stockrepurchase programfor a total of $150 million withnotimelimitation. Thisrepurchase authorityincludes, and is not in addition to, anyunspent amounts remaining underthe prior authorization. We had approximately$17.8 million of repurchase authorityremaining underthis program at December31, 2020, based upon trade date.

We purchase shares of our outstanding ClassAnonvoting common stock outside of our publicly announcedshare repurchase program for certain stock-based incentive plans. We purchased 31,248 shares for $5.8 million in 2020, 15,003 shares for $2.6 million in 2019 and 27,120 sharesfor $3.2 million in 2018 to settle awards for our equity compensation planand to fund the rabbi trust for theoutside director deferredstock compensation planand theincentive compensation deferral plan. All shares were deliveredinthe year they were purchased.

Capital Outlook We regularlyprepare forecasts evaluating thecurrent and future cash requirementsfor both normaland extremeriskevents, including the current COVID-19 pandemic.Should an extreme risk event result in acash requirement exceeding normal cash flows, we have the ability to meet our future funding requirements through various alternativesavailable to us.

Outside of our normal operating and investing cash activities, future funding requirements couldbemet through: 1) cash and cash equivalents, which totalapproximately$161.2 million at December 31, 2020, 2) a$100 million bank revolving line of credit,and 3) liquidation of unpledgedassets heldinour investment portfolio, including preferredand common stock and investment grade bonds which totaledapproximately $646.4 millionatDecember31, 2020. Volatilityinthe financialmarkets couldimpairour ability to sell certain fixed incomesecuritiesorcausesuch securitiestosellatdeepdiscounts. Additionally, we have the ability to curtailormodify discretionary cash outlays such as thoserelated to shareholderdividends and share repurchase activities.

As of December31, 2020, we have access to a$100 millionbank revolving line of creditwitha$25 millionletterofcredit sublimit thatexpiresonOctober30, 2023. As of December31, 2020, atotalof$99.1 millionremains available under the facilitydue to $0.9 million outstanding letters of credit,which reduce the availability for lettersofcreditto$24.1 million. We had no borrowings outstanding on our line of credit as of December31, 2020. Investmentswithafairvalue of $124.9 million were pledgedascollateral on the line at December 31, 2020. These securitieshave no trading restrictions and arereportedas available-for-salesecuritiesand cash and cash equivalents in theStatements of FinancialPosition. The bank requires compliancewithcertain covenants, which include leverage ratios and debt restrictions. We were in compliance with our bank covenantsatDecember 31, 2020.

39 Contractual Obligations We have certain obligations and commitmentstomake future paymentsunder various contracts. As of December31, 2020, the aggregateobligations wereasfollows: Payments due by period 2026 and (in thousands) Total 2021 2022-2023 2024-2025 thereafter

Long-term debt (1) $160,648 $6,183 $12,366 $12,366 $129,733 Home office expansion (2) 13,556 13,556 000 Operating leases (3) 14,537 10,817 3,452 89 179 Other commitments (4) 385,707 244,638 125,434 14,977 658 Gross contractual obligations (5) 574,448 275,194 141,252 27,432 130,570 Estimated reimbursementsfrom affiliates (6) 114,293 68,694 38,891 6,318 390 Net contractual obligations $460,155 $206,500 $102,361 $21,114 $130,180

(1) Long-term debt amount differs from the balance presented on the StatementsofFinancial Position as the amount in the table above includes interest and principal payments. (2) We agreed to the guaranteed maximum price terms of an agreement with our construction manager for the construction of the office building that will serve as part of our principal headquarters. Thebuilding was completed in the fourth quarterof2020. Commitments due in 2021 represent settlement of final construction costs. This project is primarily being funded by thesenior secured draw term loan credit facility included in long- term debt in the table above. Included in these amounts are obligations for furniture and fixtures and information technology costs for the office building. (3) Operating leases represent the total commitment for the lease components of our operating lease agreements. Non-lease component commitments related to these contracts are included in other commitments. See Item 8. "Financial Statementsand Supplementary Data -Note 2, Significant Accounting Policies and Note 8, Leases, of Notes to Financial Statements" contained within this report. (4) Other commitments include various agreements for services, including information technology, support, and maintenanceobligations, and other obligations in the ordinary course of business. These agreements are enforceable and legally binding and specify fixed or minimum quantities to be purchased and the approximate timing of the transaction. The table above also includes agreements that contain cancellation provisions, some of which may require us to pay atermination fee. The amounts under such contracts are included in the table above as we expect to make future cash payments according to the contract terms. (5) The obligation for our unfunded Supplemental Employee Retirement Plan (SERP) for our executive and senior management is not included in gross contractual obligations. The accumulated benefit obligation for this plan at December 31, 2020 is $26.5 million.Weexpect to have sufficient cash flows from operations to meet the future benefit payments as these become due. (6) We are reimbursed from the Exchange and its subsidiaries for aportion of the costs related to othercommitments and operating leases.

Our funding policy for our definedbenefit pension plan is generallytocontribute an amount equaltothe greaterofthe target normalcost for the planyear, or the amount necessary to fund theplanto100%. Historically, this has resulted in an annual pension contribution. In 2018, however, we made accelerated pension contributions totaling $80 million. Following our 2018 contribution, we would not expect to make asubsequent contribution until the sum of the target normalcosts for plan years beginning on andafter December 31, 2017 exceeds $80 million, or earlierifacontribution is necessary to fund theplanto 100%.

Off-Balance Sheet Arrangements Off-balance sheet arrangementsinclude those with unconsolidatedentitiesthat mayhave amaterial current or future effecton our financial condition or resultsofoperations, including materialvariable interests in unconsolidated entities thatconduct certain activities. We have no materialoff-balance sheet obligations.

Enterprise Risk Management The role of our Enterprise Risk Management ("ERM") function is to ensure thatall significant risks areclearlyidentified, understood, proactively managed andconsistentlymonitoredtoachieve strategicobjectives for allstakeholders. Our ERM program views risk holisticallyacross our entire group of companies. It ensures implementation of risk responses to mitigate potential impacts. SeePart I, Item1A. "Risk Factors" containedinthis report for alist of risk factors.

Our ERMprocessisfoundedonagovernanceframework that includesoversight at multiplelevels of our organization, including our Board of Directors and executive management. Accountabilitytoidentify, manage, andmitigateriskis embeddedwithinall functions and areas of our business. We have definedrisk tolerancestomonitor andmanage significant risks withinacceptable levels. In addition to identifying, evaluating, prioritizing, monitoring, andmitigating significant risks, our ERMprocessincludes extremeevent analyses and scenariotesting. Givenour defined tolerancefor risk, risk modeloutput is usedtoquantify the potential variability of future performance and thesufficiency of capitaland liquidity levels.

40 TRANSACTIONS/AGREEMENTS WITH RELATED PARTIES

Board Oversight Our Board of Directorshas abroad oversight responsibility overour intercompany relationships with theExchange. As a consequence,our Board of Directors may be required to make decisions or take actions thatmay not be solely in the interest of our shareholders, such as setting themanagement fee ratepaidbythe Exchange to us and ratifying any other significant activity.

Insurance Holding Company System Most states have enacted legislation that regulates insuranceholding company systems, definedastwo or more affiliated persons,one or more of which is an insurer. TheExchange hasthe following wholly owned property andcasualtysubsidiaries: ErieInsuranceCompany, ErieInsuranceCompany of New York, Erie Insurance Property &Casualty Company and Flagship City InsuranceCompany, and awholly owned life insurance company, Erie Family Life Insurance Company. Indemnityand the Exchange,and itswhollyowned subsidiaries, meet the definition of an insuranceholding company system.

All transactions withinaholding company system affecting themember insurers of the holding company system must be fair and reasonableand any chargesorfeesfor services performed must be reasonable. Approval by the applicableinsurance commissioner is requiredprior to the consummation of transactions affecting the members withinaholding company system.

Intercompany Agreements Subscriber's and services agreements We serve as attorney-in-factfor thesubscribers at theExchange, areciprocal insurance exchange.Eachapplicant for insurance to areciprocal insurance exchange signs asubscriber's agreement that contains an appointment of an attorney-in-fact. Through the designation of attorney-in-fact,weare required to provide policy issuance and renewal services and actasthe attorney-in- factfor theExchange withrespecttoall administrative services, as discussedpreviously. Pursuant to the subscriber's agreement,weearnamanagement fee for these services calculatedasapercentage of thedirectand affiliated assumed premiumswritten by theExchange. By virtue of itslegal structure as areciprocal insurer, theExchange doesnot have any employees or officers. Therefore,itenters intocontractualrelationships by andthrough theattorney-in-fact. TheExchange's insurancesubsidiariesalsoutilize Indemnityfor alladministrative servicesinaccordance with theservice agreementsbetween each of thesubsidiariesand Indemnity. The amounts incurred for alladministrative services are reimbursed to Indemnityat cost in accordance with thesubscriber's agreement andthe serviceagreements. These reimbursementsare settledonamonthly basis.Stateinsurance regulations require that intercompany serviceagreements and anymaterialamendments be approved in advance by the stateinsurance department.

Leased property We leasethe homeoffice from theExchange. Rent is based on rental rates of like property in Erie, Pennsylvania and all operating expensesincluding utilities,cleaning, repairs, real estatetaxes, and propertyinsuranceare theresponsibilityofthe tenant (Indemnity). Rentalcosts of shared facilities are allocated based upon usage or square footage occupied. We also hada lease commitment withEFL for afield officeuntil 2018.

We previously owned three field officesfor which rentalcosts of shared facilities were allocatedbased upon usage or square footage occupied. In 2018, we sold thethree field officestothe Exchange at thecurrent independent appraised value in order to align theownershipinterest of these facilities withthe functions being performedatthese locations, which areclaims-related activities.

Cost Allocation The allocation of costs affectsour financialcondition andthatofthe Exchange andits wholly owned subsidiaries. Management's roleistodetermine thatallocations are consistentlymadeinaccordance with thesubscriber's agreement withthe subscribers at theExchange, intercompany service agreements, and applicableinsurance laws and regulations. Allocation of costs under these various agreementsrequiresjudgment andinterpretation, and such allocations are performedusing a consistent methodology, whichisintendedtoadhere to thetermsand intentions of the underlying agreements.

Intercompany Receivables We have significant receivablesfrom the Exchange and itsaffiliates thatresult in aconcentration of credit risk. Netreceivables from theExchange andotheraffiliates were $494.6 million, or 23.4% of total assets, at December31, 2020 and $468.6 million, or 23.2% of total assets, at December31, 2019. These receivables include management fees due for policyissuance and renewal servicesperformedbyusunder the subscriber's agreement, andcertain costs we incur acting as the attorney-in-fact on behalf of theExchange as well as the serviceprovider for itsinsurancesubsidiarieswithrespect to alladministrative services,

41 as discussedpreviously. Thesereceivablesfrom the Exchange and itsaffiliatesare settled monthly. We continuallymonitor the financial strengthofthe Exchange.

SurplusNote We previously held a$25 million surplus noteissuedtousbyEFL that waspayableondemandonorafter December31, 2018. In 2018, EFL, with the appropriateapproval from thePennsylvania Insurance Commissioner, satisfiedits obligation and repaid the surplus note.EFL paidrelated interest to us of $1.6 million in 2018.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

The significant volatility in the financial marketsand uncertainty resulting from the COVID-19 pandemic continuestoevolve and thepandemic’s ultimate impactand duration remain highly uncertain. We couldexperience future lossesand/or impairments to theportfolioand acontinuedlower interestrateenvironment given thepandemic’s impact on market conditions.

Market Risk Market risk is the risk of lossarising from adverse changes in interest rates, creditspreads, equityprices, or foreign exchange rates, as well as otherrelevant marketrateorpricechanges. The volatilityand liquidityinthe markets in whichthe underlying assets are traded directlyinfluencemarketrisk. The following is adiscussion of our primary risk exposures, including interest raterisk, investment credit risk, concentration risk, liquidityrisk, and equitypricerisk, and how those exposures are currently managedasofDecember31, 2020.

Interest Rate Risk We invest primarily in fixedmaturity investments, which comprised 84% of our invested assets at December31, 2020. The value of thefixed maturityportfolio is subjecttointerest raterisk. As marketinterest ratesdecrease, thevalue of the portfolio increases with theoppositeholding true in rising interest rate environments. We do not hedge our exposure to interest rate risk. Acommon measure of theinterest sensitivity of fixed maturityassets is effective duration, acalculation thatutilizesmaturity, coupon rate,yield, andcallterms to calculateanexpected change in fair value givenachange in interest rates. The longer the duration, themore sensitive the assetistomarket interest ratefluctuations. Duration is analyzed quarterly to ensure that it remains in the targeted range.

Asensitivityanalysis is usedtomeasure the potential loss in future earnings, fairvalues, or cash flows of interest-sensitive instrumentsresulting from one or more selected hypothetical changes in interest ratesand othermarket rates or prices over a selected period. Thefollowing pro formainformation is presented assuming a100-basis point parallel increase in interest rates across the yieldcurve at December31ofeachyearand reflects the estimatedeffect on the fairvalue of our fixed maturity portfolio.

Fixed maturitiesinterest-rate sensitivityanalysis

(dollars in thousands) At December31, 2020 2019 Fair value of fixedmaturity portfolio$928,236 $730,701 Fairvalue assuming 100-basis point rise in interestrates $904,287 $710,534 Effective duration (asapercentage) 2.7 2.8

42 While thefixed maturityportfolio is sensitive to interestrates,the future principalcashflowsthat will be receivedby contractualmaturitydateare presentedbelow at December 31, 2020 and2019. Actualcashflowsmay differfrom those stated as aresult of calls, prepayments, or defaults.

Contractual repayments of principalbymaturitydate

(in thousands) Fixedmaturities: December31, 2020 2021 $17,403 2022 48,958 2023 107,507 2024 142,707 2025 110,105 Thereafter452,168 Total $878,848 Fair value $928,236

(in thousands) Fixedmaturities: December31, 2019 2020 $32,473 2021 26,652 2022 60,120 2023 103,345 2024 139,005 Thereafter349,145 Total $710,740 Fair value $730,701

Investment CreditRisk Ourobjective is to earn competitive returns by investing in adiversifiedportfolio of securities. Our portfolios of fixed maturity securities, nonredeemablepreferredstockand, to alesserextent,short-term investmentsare subject to creditrisk. This risk is defined as the potentialloss in fairvalue resulting from adverse changes in theborrower'sabilitytorepay thedebt. We manage thisrisk by performing upfront underwriting analysis and ongoing reviews of creditquality by position andfor the portfolio in total.Wedonot hedge thecreditriskinherent in our fixedmaturity andnonredeemablepreferredstock investments.

Generally, the fixedmaturities in our portfolioare rated by external rating agencies. If not externallyrated, we rate them internallyonabasis consistent with that used by the rating agencies. We classify allfixed maturitiesasavailable-for-sale securities, allowing us to meet our liquidityneeds and provide greaterflexibility to appropriatelyrespond to changesinmarket conditions.

The following tablesshow our fixed maturityinvestments by rating(1): At December31, 2020 (dollars in thousands) Amortizedcost FairvaluePercentoftotal AAA, AA, A$487,752 $502,408 54 % BBB283,219 294,917 32 Total investment grade 770,971 797,325 86 BB 47,870 50,399 5 B63,397 64,611 7 CCC, CC,C,and below 16,552 15,901 2 Total non-investment grade 127,819 130,911 14 Total $898,790 $928,236 100 %

43 At December31, 2019 (dollars in thousands) AmortizedcostFair value Percent of total AAA, AA, A $386,046 $388,278 53 % BBB224,373 226,977 31 Total investment grade 610,419 615,255 84 BB 49,866 51,177 7 B53,782 54,310 8 CCC, CC, C, and below 10,883 9,959 1 Total non-investment grade 114,531 115,446 16 Total $724,950 $730,701 100 %

(1) Ratings aresupplied by S&P, Moody's, and Fitch. The table is based upon the lowest rating for each security.

We are also exposed to aconcentration of creditriskwiththe Exchange. Seethe "Transactions/AgreementswithRelated Parties,Intercompany Receivables"sectionofItem7."Management'sDiscussionand Analysis of Financial Condition and Results of Operations" containedwithinthisreport for further discussion of thisrisk.

Concentration Risk While our portfolio is well diversifiedwithineachmarketsector, there is an inherent risk of concentration in aparticular industry or sector. We continually monitor our level of exposure to individualissuers as well as our allocation to each industry and marketsector against internallyestablished policies. Seethe "Financial Condition" section of Item 7. "Management's Discussion and Analysis of FinancialCondition andResultsofOperations" containedwithinthisreport for detailsof investment holdings by sector.

LiquidityRisk Periods of volatility in the financial marketscan create conditions where fixed maturityinvestments, despitebeing publicly traded, canbecomeilliquid. However, we actively manage thematurityprofileofour fixed maturityportfolio such that scheduled repaymentsofprincipal occur on aregularbasis.

Equity PriceRisk Our portfolioofequity securities, which primarilyincludesnonredeemable preferred stock, is carriedonthe Statementsof FinancialPosition at estimatedfairvalue. Equitysecurities are exposed to the risk of potential loss in estimatedfairvalue resulting from an adverse change in prices("price risk"). We do not hedge our exposure to priceriskinherent in our equity investments.

44 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of IndependentRegisteredPublic Accounting Firm

To theBoard of Directorsand Shareholders of Erie IndemnityCompany

Opinion on the Financial Statements We have audited the accompanying statements of financial position of ErieIndemnityCompany (the "Company") as of December31, 2020 and 2019, the related statements of operations, comprehensive income, shareholders’equity and cash flows for each of the three years in the period endedDecember 31, 2020, and the related notes(collectively referred to as the "financialstatements"). In our opinion, the financial statements present fairly, in allmaterialrespects, the financial position of the Company as of December31, 2020 and 2019, and the results of itsoperations and itscashflowsfor each of the three years in the period endedDecember 31, 2020, in conformity withU.S. generallyacceptedaccounting principles.

We also have audited, in accordance withthe standards of the PublicCompany Accounting Oversight Board (UnitedStates) (PCAOB), the Company’s internalcontrol over financial reporting as of December31, 2020, based on criteria established in Internal Control-Integrated Framework issuedbythe CommitteeofSponsoring Organizations of the Treadway Commission (2013 framework) and our report datedFebruary 25, 2021 expressedanunqualifiedopinion thereon.

Basis for Opinion These financial statements arethe responsibilityofthe Company’s management. Our responsibilityistoexpress an opinion on the Company’s financial statements based on our audits. We are apublicaccounting firm registered with thePCAOBand are required to be independent with respecttothe Company in accordance withthe U.S. federal securitieslaws andthe applicable rulesand regulations of the Securities and Exchange Commission andthe PCAOB.

We conducted our audits in accordance withthe standards of the PCAOB. Those standards require that we planand perform the audittoobtain reasonable assurance about whetherthe financial statementsare free of materialmisstatement,whetherdue to error or fraud. Our audits included performing procedures to assess the risks of materialmisstatement of the financial statements, whether due to error or fraud, and performing procedures that respondtothose risks. Such procedures include examining, on atestbasis, evidence regarding the amounts and disclosures in the financial statements. Ouraudits also included evaluating the accounting principles used and significant estimatesmadebymanagement, as wellasevaluatingthe overall presentation of thefinancialstatements. We believe that our audits provide areasonablebasis for our opinion.

45 Critical AuditMatter

The critical audit matter communicated below is amatterarising from the current period auditofthe financial statements that was communicated or required to be communicatedtothe audit committeeand that: (1) relates to accountsordisclosures that are materialtothe financial statements and(2) involved our especiallychallenging, subjective or complexjudgments. The communication of the critical audit matter does not alterinany way our opinion on the financial statements, taken as awhole, and we are not, by communicating the critical audit matter below,providing aseparate opinion on the critical audit matter or on the accountsordisclosures to whichitrelates.

Proportional Cost Allocation

Description of For the yearended December31, 2020, the Company’s administrative services reimbursement the Matter revenue totaled $609.4 million. The Company’s primary function, as attorney-in-fact, is to perform certain services on behalf of the subscribers at the ErieInsurance Exchange (Exchange)and itsinsurancesubsidiaries, in accordance withthe Subscriber’s Agreement and the serviceagreementswith each of the Exchange’s insurance subsidiaries. As explained in Note 2ofthe financial statements, pursuant to approvedserviceagreements, administrative services, which include costs associatedwith claims handling services, life insurancerelated operating activities, investment management, and operating overhead incurred by the Company on behalf of the Exchange and itsinsurancesubsidiaries, are reimbursed to the Company at cost and recorded as administrative services reimbursement revenue. To determine the proportional cost allocation to each entity, the Company determinesutilization statistics using numerous variables including, among others, employeecount,square footage, vehiclecount, andproject hours.

Auditing management’s proportional cost allocations was complex due to thenumber of costs thatare included in the allocations and thejudgment applied in determining the utilization statistics usedtodetermine theproportionalallocations to each entity.

How We We obtainedanunderstanding, evaluatedthe design and tested the operating effectiveness of Addressed the controls over the Company’s proportional cost allocations process. Thisincluded, among Matter in Our others, testing management’s review controlsover the determinationofthe utilization Audit statistics and ultimate allocation of costs to the Exchange and itsinsurancesubsidiaries.

To test the Company’s proportional cost allocations, our procedures included, among others, evaluating thatthe costs includedinthe allocations are in accordance withthe Subscriber’s Agreement and the serviceagreementswith each of the Exchange’s insurance subsidiaries. We tested thecompleteness and accuracy of the costs subjectedtoallocation through testing of the reconciliation of the costs recorded in the source systemstothe costs thatare allocated. We evaluatedthe allocation of costs to the Exchange and itsinsurancesubsidiarieswith the costs allocated in prior periods.

/s/ Ernst &Young LLP

We have served as the Company's auditor since 2003.

Cleveland, OH February25, 2021

46 ERIEINDEMNITY COMPANY STATEMENTS OF OPERATIONS Years endedDecember 31, 2020, 2019 and 2018 (dollars in thousands,exceptper share data) 2020 2019 2018 Operating revenue Management fee revenue -policyissuanceand renewal services, net $1,841,794 $1,810,457 $1,719,567 Management fee revenue -administrative services, net 59,463 57,204 53,632 Administrative servicesreimbursement revenue 609,435 582,010 580,336 Service agreement revenue 25,797 27,627 28,677 Total operating revenue 2,536,489 2,477,298 2,382,212

Operating expenses Costofoperations -policyissuanceand renewal services 1,588,897 1,537,949 1,457,533 Costofoperations -administrative services 609,435 582,010 580,336 Total operating expenses 2,198,332 2,119,959 2,037,869 Operating income 338,157 357,339 344,343

Investment income Net investment income 29,753 34,059 29,387 Net realizedinvestment gains (losses) 6,392 6,103 (2,010) Net impairment lossesrecognized in earnings (3,278) (195) (1,581) Total investment income 32,867 39,967 25,796

Interest expense, net 731 856 2,460 Other(expense) income (1,778) 255 3,641 Incomebefore incometaxes 368,515 396,705 371,320 Incometax expense 75,211 79,884 83,096 Net income $293,304 $316,821 $288,224

Earnings PerShare Netincome pershare Class Acommon stock –basic $6.30 $6.80 $6.19 ClassAcommon stock–diluted $5.61 $6.06 $5.51 Class Bcommon stock–basicand diluted $$945 $$1,020 $$928

Weighted average sharesoutstanding –Basic Class Acommon stock 46,188,659 46,188,836 46,188,637 Class Bcommon stock 2,542 2,542 2,542

Weighted average sharesoutstanding –Diluted Class Acommon stock 52,313,360 52,319,860 52,315,213 Class Bcommon stock 2,542 2,542 2,542

Seeaccompanying notes to FinancialStatements. SeeNote 14, "AccumulatedOther Comprehensive Income(Loss)", for amounts reclassifiedout of accumulated other comprehensive income (loss) into theStatements of Operations.

47 ERIEINDEMNITY COMPANY STATEMENTS OF COMPREHENSIVE INCOME Years endedDecember 31, 2020, 2019 and 2018 (in thousands) 2020 2019 2018 Netincome $293,304 $316,821 $288,224

Othercomprehensive income, netoftax Change in unrealizedholding gains (losses)onavailable-for-sale securities 18,738 11,718 (9,937) Pension andotherpostretirement plans 19,987 1,698 35,712 Total other comprehensive income,net of tax 38,725 13,416 25,775 Comprehensive income $332,029 $330,237 $313,999

48 ERIEINDEMNITY COMPANY STATEMENTS OF FINANCIALPOSITION At December 31, 2020 and 2019 (dollars in thousands,exceptper share data) 2020 2019 Assets Current assets: Cash and cash equivalents $161,240 $336,739 Available-for-salesecurities 17,697 32,810 Equity securities 19 2,381 Receivablesfrom Erie Insurance Exchange and affiliates, net 494,637 468,636 Prepaid expensesand other current assets49,897 44,943 Federal income taxes recoverable2,664 462 Accrued investment income6,146 5,433 Total current assets 732,300 891,404

Available-for-sale securities, net 910,539 697,891 Equity securities 94,071 64,752 Fixedassets, net 265,341 221,379 Agent loans, net 62,449 60,978 Deferred incometaxes, net 12,341 17,186 Otherassets40,081 62,650 Total assets $2,117,122 $2,016,240

Liabilities andshareholders' equity Current liabilities: Commissions payable $262,338 $262,963 Agent bonuses 110,158 96,053 Accounts payableand accruedliabilities 150,706 134,957 Dividends payable48,200 44,940 Contractliability36,917 35,938 Deferred executive compensation 17,319 10,882 Current portion of long-term borrowings 2,031 1,979 Total current liabilities 627,669 587,712

Defined benefitpension plans 164,346 145,659 Long-term borrowings 93,833 95,842 Contractliability18,878 18,435 Deferred executive compensation 14,904 13,734 Otherlong-term liabilities 9,444 21,605 Total liabilities 929,074 882,987

Shareholders' equity Class Acommon stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 sharesissued; 46,189,068 sharesoutstanding 1,992 1,992 Class Bcommon stock, convertible at arateof2,400 Class Ashares for one Class B share,statedvalue $70 pershare;3,070 shares authorized; 2,542 shares issued and outstanding 178 178 Additionalpaid-in-capital 16,487 16,483 Accumulated other comprehensive loss (78,143) (116,868) Retainedearnings 2,393,624 2,377,558 Total contributed capitaland retained earnings 2,334,138 2,279,343 Treasury stock, at cost;22,110,132 shares held (1,163,670) (1,158,910) Deferred compensation 17,580 12,820 Total shareholders' equity 1,188,048 1,133,253 Total liabilities andshareholders' equity $2,117,122 $2,016,240

Seeaccompanying notes to FinancialStatements.

49 ERIEINDEMNITY COMPANY STATEMENTS OF SHAREHOLDERS'EQUITY Years endedDecember 31, 2020, 2019 and 2018 (dollars in thousands,exceptper share data)

Accumulated Class A Class B Additional other Total common common paid-in- comprehensive Retained Deferred shareholders' stock stock capital income (loss) earnings Treasury stock compensation equity Balance, December 31, 2017 $1,992 $178 $16,470 $(156,059) $2,140,853 $(1,155,668) $9,578 $857,344 Cumulative effect adjustments (1) (38,392) (38,392) Net income 288,224 288,224 Other comprehensive income25,775 25,775 Dividends declared: Class A$3.42 per share (157,964) (157,964) Class B$513.00 per share (1,304) (1,304) Net purchase of treasury stock (2) (11) 0(11) Deferred compensation (2,566) 2,566 0 Rabbi trust distribution (3) 609 (609) 0 Balance, December 31, 2018 $1,992 $178 $16,459 $(130,284) $2,231,417 $(1,157,625) $11,535 $973,672 Net income 316,821 316,821 Other comprehensive income13,416 13,416 Dividends declared: Class A$3.665 per share (169,283) (169,283) Class B$549.75 per share (1,397) (1,397) Net purchase of treasury stock (2) 24 024 Deferred compensation (2,208) 2,208 0 Rabbi trust distribution (3) 923 (923) 0 Balance, December 31, 2019 $1,992 $178 $16,483 $(116,868) $2,377,558 $(1,158,910) $12,820 $1,133,253 Cumulative effect adjustment (1) (1,075) (1,075) Net income 293,304 293,304 Other comprehensive income38,725 38,725 Dividends declared: Class A$5.93 per share (273,902) (273,902) Class B$889.50 per share (2,261) (2,261) Net purchase of treasury stock (2) 404 Deferred compensation (5,465) 5,465 0 Rabbi trust distribution (3) 705 (705) 0 Balance, December 31, 2020 $1,992 $178 $16,487 $(78,143) $2,393,624 $(1,163,670) $17,580 $1,188,048

(1) Cumulative effect adjustments in 2018 are primarily relatedtothe implementation of new revenue recognition guidance effective January 1, 2018. The Cumulativeeffect adjustmentin2020 is related to the implementation of new credit loss allowanceaccounting guidance effective January1,2020. SeeNote 2, "Significant Accounting Policies." (2) Netpurchases of treasury stockin2018, 2019 and 2020 includesthe repurchase of our Class Acommon stock in the openmarketthat weresubsequently distributed to satisfy stock based compensation awards. SeeNote 11, "Incentive and DeferredCompensation Plans". (3) Distributions of our Class Ashareswere made from the rabbi trust to aretireddirector and an incentive compensation deferral plan participant in 2018, 2019 and 2020. See Note 11, "Incentive and Deferred Compensation Plans".

See accompanying notes to FinancialStatements.

50 ERIEINDEMNITY COMPANY STATEMENTS OF CASH FLOWS Years endedDecember 31, 2020, 2019 and 2018 (in thousands) 2020 2019 2018 Cash flowsfromoperating activities Management feereceived $1,887,537 $1,845,075 $1,751,247 Administrative services reimbursements received 587,347 588,255 574,698 Service agreement fee received 25,797 27,627 28,677 Netinvestment incomereceived 35,740 36,442 44,662 Commissions paidtoagents (928,864) (895,563) (853,758) Agentsbonusespaid (108,227) (115,795) (134,314) Salaries andwagespaid (188,070) (186,460) (182,537) Pension contributions and employee benefitspaid (33,098) (42,728) (115,525) General operating expenses paid (253,545) (236,128) (208,036) Administrative servicesexpenses paid (598,753) (582,528) (580,338) Incometaxespaid (82,576) (72,817) (58,814) Interest paid (693) (853) (2,377) Net cash providedbyoperating activities 342,595 364,527 263,585

Cash flowsfrominvestingactivities Purchase of investments: Available-for-salesecurities (396,014) (956,818) (392,895) Equity securities (79,518) (66,760) (4,087) Otherinvestments(1,142) (1,080) (243) Proceeds from investments: Available-for-salesecurities sales101,718 687,347 235,323 Available-for-salesecurities maturities/calls 118,852 303,798 134,396 Equity securities 70,405 16,109 4,162 Otherinvestments613 3,722 3,387 Purchase of fixed assets (55,528) (102,039) (56,297) Proceeds from disposal of fixedassets15777 6,014 Loans to agents(10,098) (17,611) (42,594) Collections on agent loans 7,472 7,921 6,436 Repayment of note receivablefrom ErieFamilyLife Insurance——25,000 Net cash usedininvestingactivities (243,225) (124,634) (81,398)

Cash flowsfromfinancing activities Dividends paid to shareholders (272,902) (167,651) (156,474) Net (payments) proceeds from long-term borrowings (1,967) (1,920) 24,983 Net cash usedinfinancing activities (274,869) (169,571) (131,491)

Net (decrease) increase in cash andcashequivalents(175,499) 70,322 50,696 Cash and cash equivalents, beginning of year336,739 266,417 215,721 Cash and cash equivalents, endofyear $161,240 $336,739 $266,417

Supplemental disclosure of noncash transactions Transfer of investments from otherinvestmentstoequitysecurities$13,041 $3,310 $— Liability incurredtopurchase fixedassets$14,214 $6,800 $8,453 Operating lease assetsobtainedinexchange for newoperating lease liabilities $4,943 $35,483 $—

Seeaccompanying notes to FinancialStatements. SeeNote 18, "Supplementary Data on Cash Flows", for additional supplementalcashflow information.

51 ERIEINDEMNITY COMPANY NOTES TO FINANCIALSTATEMENTS

Note 1. Nature of Operations

ErieIndemnity Company ("Indemnity","we", "us", "our")isapubliclyheldPennsylvania business corporation that has since itsincorporation in 1925 served as the attorney-in-fact for the subscribers (policyholders) at theErie Insurance Exchange ("Exchange"). The Exchange,whichalsocommenced business in 1925, is aPennsylvania-domiciledreciprocal insurer that writesproperty andcasualtyinsurance.

The policy issuance and renewal services we provide to theExchange arerelated to thesales, underwriting andissuance of policies. The salesrelatedservices we provide include agent compensation and certainsalesand advertising support services. Agent compensation includesscheduled commissions to agents based upon premiums written as well as additional commissions and bonusestoagents, which areearnedbyachieving targetedmeasures.Agent compensation comprised approximately 66% of our 2020 policyissuance and renewal expenses. Theunderwriting services we provide include underwriting andpolicy processing and comprised approximately 10% of our 2020 policyissuance and renewal expenses. The remaining servicesweprovide include customer service and administrative support. We also provide information technology services thatsupport allthe functions listed above that comprised approximately11% of our 2020 policy issuance and renewal expenses. Includedinthese expenses are allocations of costs for departmentsthat support these policy issuance and renewal functions.

By virtue of itslegal structure as areciprocal insurer, theExchange doesnot have any employeesorofficers. Therefore, it enters intocontractualrelationships by andthrough an attorney-in-fact.Indemnityserves as the attorney-in-fact on behalf of the Exchange with respect to itsadministrative services. The Exchange's insurance subsidiariesalsoutilize Indemnityfor these services in accordancewiththe serviceagreements between each of the subsidiariesand Indemnity. Claimshandling services include costs incurred in the claims process, including theadjustment,investigation, defense, recording andpayment functions. Life insurance management servicesinclude costs incurredinthe management and processing of life insurance business. Investment management servicesare relatedtoinvestment trading activity, accounting and allotherfunctions attributable to the investmentoffunds. Included in theseexpenses areallocations of costsfor departments thatsupport these administrative functions. The amounts incurred for these servicesare reimbursed to Indemnity at cost in accordancewiththe subscriber's agreement and theservice agreements. Stateinsurance regulations require that intercompany serviceagreements and any materialamendments be approved in advance by the stateinsurance department.

Our results of operations are tied to thegrowth andfinancial condition of the Exchange.Ifany eventsoccurred that impaired the Exchange’s abilitytogrow or sustainits financialcondition, including but not limited to reducedfinancialstrength ratings, disruption in the independent agency relationships, significant catastrophe losses, or products not meeting customer demands, the Exchange couldfinditmore difficult to retainits existingbusiness and attract new business. Adeclineinthe business of the Exchange almost certainlywould have as aconsequenceadeclineinthe total premiums paid and acorrespondingly adverse effectonthe amount of the management fees we receive.Wealsohave an exposure to aconcentration of credit risk relatedto theunsecured receivablesdue from the Exchange for its management fee andcost reimbursements. See Note16, "Concentrations of CreditRisk".

Coronavirus ("COVID-19") pandemic On March 11, 2020, theoutbreakofthe coronavirus ("COVID-19") wasdeclared aglobal pandemic. Thesignificant volatility in thefinancialmarkets, economic disruption anduncertaintyresulting from the COVID-19 pandemic thatbegan in the first quarter of 2020 continues to evolve and thepandemic’s ultimate impactand duration remain highly uncertainatthistime. The Exchange’s previously announcedratereductions thatbecameeffective in thesecond halfof2020, coupled withthe uncertain economicconditions, will likelycontinue to constrainthe Exchange’s premium growth whichwill impactour management fee revenue. TheExchange’s underwriting profitabilityhas improved largely due to declinesinclaimsfrequency. Theextent and

52 duration of changesinconsumerbehavior anddriving patterns and the resulting impact to theExchange’s growthand financial condition remainuncertain.

The economicconditions resulting from the COVID-19 pandemic maynegativelyimpactthe collectabilityofthe Exchange’s premiumsreceivable, however no significant impacthas been noted through the dateofthis report.While our investment portfolio was negativelyimpactedbythe volatility in the financial marketsinthe first quarterof2020, marketssubstantially recoveredthrough theremainderof2020. We are unabletopredict the duration or extent of thebusiness disruption or the financial impactgiven theongoing development of the pandemicand itsimpactsonthe economyand financialmarkets.

53 Note 2. Significant Accounting Policies

Basis of presentation The accompanying financial statements have been preparedinconformity with U.S.generally accepted accounting principles ("GAAP").

Use of estimates The preparation of financialstatementsinconformity with GAAP requiresustomakeestimatesand assumptions thataffectthe reported amountsofassets andliabilities and disclosure of contingent assets andliabilities at the dateofthe financialstatements and thereportedamounts of revenues and expenses during thereporting period. Actualresults coulddifferfrom those estimates.

Recently adoptedaccounting standards We adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments-Credit Losses" whichappliestoour receivablefrom ErieInsuranceExchange andaffiliates, agent loans, and investments, on January 1, 2020. The guidance requires financial assets measured at amortizedcost to be presented at thenet amount expected to be collectedthrough theuse of anew forward-looking current expectedcredit loss modeland credit lossesrelating to available-for-sale debt securities to be recognized through an allowance for credit losses.

For assets measured at amortized cost for which acurrent expectedcredit loss allowance was required, we adopted theguidance using the modified-retrospective approach. At January 1, 2020, we recorded current expected creditloss allowancesrelatedto agent loans of $0.8 million andreceivables from Erie Insurance Exchange and affiliatesof$0.6 million. Thisresultedinthe recording of acumulative effectadjustment,net of taxes, to retainedearnings of $1.1 million. Our available-for-sale investments are not measured at amortizedcost, andtherefore do not require the use of acurrent expected creditloss model. Any creditlosses, however, arerequiredtoberecorded as an allowancefor creditlossesratherthanareduction of thecarrying value of theasset. For available-for-salesecurities, we adopted theguidanceusing theprospective approachand recordedan initial allowancefor creditlossesof$0.6 million at March 31, 2020.

We adopted Accounting Standards Codification ("ASC") 842, "Leases" on January 1, 2019 using theoptionaltransition method, whichpermitsentities to apply thenew guidanceprospectivelywith certainpracticalexpedientsavailable.Weelected the package of practicalexpedientswhich among other things allowed us to carry forward thehistorical lease classifications. We did not electthe hindsight practical expedient in determining the lease term for existing leases. Theadoption of the new standard resulted in the recognition of operating leaseassets of $32.7 million andoperating lease liabilitiesof$32.1 million on the Statement of FinancialPosition at January 1, 2019. Theadoption of thisstandard did not have amaterial impactonour Statement of Operations and hadnoimpactonour netcash flows.

We adopted ASC 606, "Revenuefrom ContractswithCustomers" on January 1, 2018, using themodified retrospective method appliedtoall contracts. UnderASC 606, we determinedthatwehavetwo performance obligations under thesubscriber’s agreement.The first performance obligation is providing policyissuance and renewal services. The second performance obligation is acting as the attorney-in-factonbehalfofthe Exchange,aswellasthe serviceprovider for itsinsurance subsidiaries, with respect to alladministrative services. Upon adoption of ASC 606, the management feeearnedper the subscriber’s agreement, currently 25% of alldirect and affiliatedassumed premiums written by theExchange, is allocated between thetwo performance obligations. Prior to theadoption of ASC 606, the entire management feewas allocatedtothe policy issuance and renewal services. Additionally, theexpenses we incur and related reimbursements we receive relatedtothe administrative services arepresented gross in our Statement of Operations effective January 1, 2018.

On January 1, 2018, we established acontract liability of $48.5 millionrepresenting the portion of revenue not yetearned relatedtothe administrative services to be providedinsubsequent years. We recorded arelateddeferred taxasset of $10.2 million and acumulative effectadjustment thatreducedretained earnings by $38.3 million. The adoption of ASC 606 changed the presentation of our Statement of CashFlows, but had no netimpacttoour cash flows.

Cash and cash equivalents –Cash, moneymarket accountsand othershort-term, highly liquidinvestmentswithamaturity of threemonths or less at thedateofpurchase, are considered cash and cash equivalents.

54 Investments Available-for-salesecurities –Fixed maturitydebt securities and redeemable preferred stockare classifiedasavailable-for-sale and reportedatfairvalue with unrealizedinvestment gains and losses, net of income taxes, recognized in othercomprehensive income.Available-for-salesecuritieswitharemaining maturityof12months or lessand any securitythatweintend to sellas of the reporting date are classifiedascurrent assets.

Available-for-salesecuritiesinanunrealized loss position are evaluatedtodetermine whether theimpairment is aresult of credit loss or other factors. If we have the intent to sellorit's more likely than not thatwewould be required to sell the security before recovery of theamortized cost basis, the entire impairment is recognizedinearnings. Securities thathaveexperienced a decline in fairvalue that we do not intend to sell, andthatwewillnot be requiredtosellbefore recovery, are evaluatedto determine if thedecline in fair value is credit related. Impairment resulting from acredit loss is recognizedinearnings with a corresponding allowanceonthe balance sheet.Future recoveriesofcreditloss result in an adjustment to theallowance and earnings in theperiod thecreditconditions improve. Factors considered in the evaluation of credit loss include theextent to which fair value is less than cost and fundamentalfactors specific to theissuersuch as financial condition, changes in credit ratings, nearand long-term business prospectsand otherfactors, as well as the likelihood of recovery of the amortizedcost of the security. If thequalitative reviewindicates credit impairment, theallowance for credit loss is measured as the amount that the security’s amortizedcost exceeds the present value of cash flowsexpectedtobecollected andislimited to theamount that fairvalue is below amortizedcost.

Equity securities –Non-redeemable preferred andcommon stocks are classifiedasequity securitiesand reported at fair value with changesinfairvalue recognizedinnet realized investment gains (losses). Securities thatweintend to sellasofthe reporting date are classifiedascurrent assets.

Realized gains and lossesand investment income –Realizedgains and losses on salesofavailable-for-sale and equitysecurities are recognized in income based upon thespecificidentification method andreported as net realized investment gains (losses). Interest incomeisrecognizedasearned andincludesamortization of premium andaccretion of discount.Incomeisrecognized based on theconstant effective yield method, which includes periodically updatedprepayment assumptions obtainedfrom third partydatasourcesonour prepaying securities. The effective yield forprepaying securitiesisrecalculated on aretrospective basis.Dividend income is recognized at theex-dividend date.Interest anddividend incomeand the results of our limited partnershipinvestments are reported as netinvestment income. We do not record an allowancefor creditlosses on accrued investment incomeasany amount deemed uncollectible is reversed from interest income in theperiod theexpectedpayment defaults.

Deferred taxes Deferredtax assets andliabilities are recorded for temporary differencesbetween the taxbasis of assets andliabilities and the reported amountsinthe financialstatements, using the statutory taxrates in effectfor theyearinwhich thedifferencesare expected to settle or be realized. Theeffectondeferredtax assets andliabilities of achange in taxrates is recognizedinthe resultsofoperations in theperiod that includesthe enactment date under thelaw. The needfor valuation allowanceson deferred taxassets are estimatedbased upon our assessment of the realizabilityofsuch amounts.

Fixedassets Fixedassetsare stated at costlessaccumulated depreciation and amortization. Fixed assets areprimarilycomprised of software, which includesinternallyusedcapitalized software anddevelopment costs, as well as building andbuilding improvements, equipment,furniture andfixtures, and leasehold improvements. Assetsinuse are depreciated using thestraight- line method over theestimated useful life except for leasehold improvements, which aredepreciatedover theshorteroftheir economicuseful life or thelease term. Software is depreciated overperiods ranging from 3-7 years, buildings and building improvementsare depreciatedover 20-45 years, equipment is depreciatedover 3-10 years, and furniture and fixturesare depreciated over7years. We reviewlong-lived assets for impairment whenever eventsorchangesindicatethat the carrying value maynot be recoverable. Under these circumstances, if the fairvalue were less than thecarrying amount of theasset, we would recognizealoss for thedifference.Wecapitalizeapplicable interest charges incurred during the construction period of significant long-term building projectsaspartofthe historical cost of theasset.

Agent loans Agent loans,the majority of which are senior secured, are carriedatunpaidprincipalbalance with interestrecordedin investment income as earned. Thecurrent portion of agent loans is recordedinprepaidexpenses and othercurrent assets. The adoption of ASU 2016-13 on January 1, 2020 requiresthe recording of acurrent expectedcredit loss allowance on these loans. The allowanceisestimatedusing availableloss history and/or externalloss ratesbasedoncomparable loanlossesand considers current conditions and forecasted information. Whenestablishing the expected creditloss allowance upon implementation of ASU 2016-13, acumulative effectadjustment was recordedtobeginning retained earnings. Future changestothe allowance 55 will be recognizedinearnings as adjustments to net impairment losses. Prior to theadoption of ASU 2016-13, we did not record an allowance for credit losses as the majority of theseloans are senior secured andhave had insignificant default amounts.

Other assets Other assets include operating leaseassets, other investments, and otherlong-term prepaid assets. The determination of whetheranarrangement is alease andthe related leaseclassification is made at inception of acontract. Our leases are classifiedasoperating leases.Operating leaseassetsand liabilities are recorded at inception based on thepresent value of the future minimum leasepaymentsover the lease term at commencement date.Whenanimplicit ratefor thelease is not available, we use our incremental borrowing ratebased on the information available at commencement date to determine thepresent value of future payments. Lease terms include options to extend or terminate the lease when it is reasonablycertain that we will exercise thatoption. Most of our lease contractscontain leaseand non-lease components. Non-lease componentsare expensed as incurred. Operating lease assets are includedinother assets, and thecurrent and noncurrent portions of the operating lease liabilities are includedinaccounts payable and accrued expenses and other long-term liabilities, respectively.

Agent bonus estimates Our more significant agent bonus plan is based upon an individual agency'sproperty andcasualtyunderwriting profitabilityand also includesacomponent for growth in agencypropertyand casualty premiums if the agency's underwriting profitability targetsfor the book of business are met. The estimate for thisagent bonus planisbased upon the performanceover36months, and is modeled on amonthly basis using actualunderwriting resultsfor the twoprior years and current year-to-dateactual resultsand forecastedresultsfor the remainderofthe year. Our second agent bonus plan is basedonanagency's one-year underwriting profitabilityand uses asimilar model but considers actualand forecastedresultsfor acalendar year only. At December31ofeachyear, we useactual dataavailable and record an accrualbased upon the expected payment amount.These costs are includedincost of operations -policyissuance and renewal services.

Recognition of management fee revenue We earn management fees from theExchange underthe subscriber’s agreement for servicesprovided. Pursuanttothe subscriber’s agreement, we mayretainupto25% of alldirect and affiliatedassumedpremiumswritten by theExchange. The management feerateisset at leastannually by our Board of Directors. Themanagement fee revenue is calculated by multiplying the management feeratebythe direct and affiliatedassumedpremiumswritten by theExchange andisallocated between thetwo performance obligations we have under thesubscriber's agreement. Thefirst performanceobligation is to provide policy issuance and renewal services. The second performance obligation is acting as the attorney-in-factwithrespect to theadministrative services.

Management feerevenue allocated to the policy issuance and renewal services is recognized at thetimeofpolicyissuance or renewal, because it is at the time of policy issuance or renewal when theeconomic benefit of the serviceweprovide (the substantiallycompletedpolicy issuance or renewal service)and thecontrol of the promised asset (the executedinsurance policy) transfers to thecustomer.

Management feerevenue allocated to the second performance obligation relatestousacting as the attorney-in-factonbehalfof the Exchange,aswellasthe serviceprovider for itsinsurancesubsidiaries, with respect to theadministrative servicesand is recognized overafour-year period representing thetimeoverwhich theeconomic benefit of the services provided(i.e. management of theadministrative services) transfers to thecustomer.

Administrative services By virtue of itslegal structure as areciprocalinsurer, the Exchange does not have any employeesorofficers. Therefore, it enters intocontractualrelationships by and through an attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the Exchange withrespecttoits administrative services in accordance withthe subscriber's agreement. TheExchange's insurance subsidiariesalsoutilize Indemnityfor these servicesinaccordancewiththe serviceagreements between each of the subsidiariesand Indemnity. Claims handling services include costs incurred in the claims process,including the adjustment, investigation, defense,recording andpayment functions. Life insurance management services include costs incurredinthe management andprocessing of life insurance business. Investment management services are related to investment trading activity, accounting andall other functions attributabletothe investment of funds. Includedinthese expenses are allocations of costs for departmentsthatsupport these administrative functions. Common overhead expenses and certainservicedepartment costs incurredbyusonbehalfofthe Exchange and itsinsurance subsidiariesare reimbursed by the proper entity based upon appropriateutilization statistics(employee count,square footage,vehiclecount, projecthours,etc.) specifically measured to accomplish proportionalallocations, which we believe are reasonable. Theexpenses we incur and relatedreimbursementswe receive for administrative services are presented grossinour Statement of Operations. Reimbursementsare settled on a monthly basis.The amounts incurredfor these services are reimbursed to Indemnityatcostinaccordance with thesubscriber's 56 agreementand the serviceagreements. State insurance regulations require thatintercompany service agreementsand any materialamendments be approvedinadvancebythe state insurance department.

Recognition of serviceagreement revenue Serviceagreement revenue consistsofservicechargeswecollect from policyholders for providing multiplepayment plans on policies written by theExchange andits property andcasualtysubsidiaries. Servicecharges, which areflatdollar chargesfor each installment billedbeyond thefirst installment,are recognized as revenue whenbills are rendered to the policyholder. Serviceagreement revenue also includes late payment and policyreinstatement fees, which arealso recognized as revenue when bills are rendered to the policyholder.

Reclassifications Certain amountspreviouslyreported in the 2019 and 2018 financialstatementshavebeenreclassifiedfor comparative purposes to conform to the current period’s presentation. “Limited partnership investments” has now been combined within“Other assets” in theStatements of Financial Position and “Equity in earnings (losses) of limitedpartnerships” is now included in “Net investment income” in theStatements of Operations. Thereclassifications had no effectonpreviously reportednet income.

57 Note 3. Revenue

The majority of our revenue is derivedfrom thesubscriber’s agreement between us and thesubscribers (policyholders) at the Exchange.Pursuant to the subscriber’s agreement, we earn amanagement feecalculated as apercentage,not to exceed25%, of alldirectand affiliated assumed written premiumsofthe Exchange.

We allocateaportion of our management feerevenue,currently25% of the direct and affiliatedassumed writtenpremiumsof the Exchange,between thetwo performance obligations we have under thesubscriber’s agreement. Thefirst performance obligation is to provide policy issuance and renewal services to thesubscribers (policyholders) at theExchange, andthe second is to actasattorney-in-fact on behalf of theExchange, as well as the serviceprovider for itsinsurancesubsidiaries, with respect to alladministrative services. The transaction price,including management feerevenue and administrative service reimbursement revenue, is allocatedbased on theestimated standalone selling prices developedusing industry information and otheravailableinformation for similarservices. We updatethe transaction priceallocation annuallybased upon themost recent information available or more frequentlyifthere have beensignificant changesinany components considered in the transaction price. In 2020, we reviewed the transaction price allocation quarterly to considerthe most current economicconditions related to theCOVID-19 pandemic.The reviews resultedinnomaterial change to the allocation.

The first performance obligation is to provide policy issuance and renewal services thatresult in executed insurance policies between theExchange or one of itsinsurance subsidiariesand the subscriber(policyholder). Thesubscriber(policyholder), receives economicbenefits whensubstantiallyall thepolicyissuance or renewal servicesare completeand an insurance policy is issued or renewed by the Exchange or one of itsinsurancesubsidiaries. It is at the time of policy issuance or renewal that the allocated portion of revenue is recognized.

The Exchange,byvirtue of itslegal structure as areciprocal insurer, doesnot have any employeesorofficers. Therefore, it enters intocontractualrelationships by andthrough an attorney-in-fact.Indemnityserves as the attorney-in-fact on behalf of the Exchange with respect to itsadministrative services in accordancewiththe subscriber's agreement. TheExchange's insurancesubsidiariesalsoutilize Indemnityfor these services in accordancewiththe serviceagreements between each of the subsidiariesand Indemnity. Collectively, these services represent asecond performance obligation underthe subscriber’s agreement and theservice agreements. The revenue allocated to thisperformance obligation is recognizedover time as these services are provided. The portion of revenue not yet earned is recordedasacontract liability in theStatementsofFinancial Position. The administrative services expenses we incur and therelated reimbursementswereceive arerecordedgross in the StatementsofOperations.

Indemnityrecords areceivablefrom the Exchange for management fee revenue when the premium is written or assumed from affiliates by the Exchange.Indemnitycollectsthe management fee from theExchange when theExchange collects the premiumsfrom the subscribers (policyholders). As the Exchange issuespolicieswith annual terms only, cash collections generally occur within one year.

The amount of management fee revenue we receive canvarydue to the potentialofmid-termcancellations. Managementfees arereturned to theExchange when policyholders cancel their insurance coverage mid-term andunearned premiums are refundedtothem.Wemaintain an estimatedallowance to reduce the management fee to its estimatednet realizable value to account for the potential of mid-term policy cancellations based on historical cancellation rates. In 2020, our historical cancellation rateswereadjustedtoinclude thepotentialfor increased cancellations giventhe current economic conditions relatedtothe COVID-19 pandemic.Thisestimatedallowance has beenallocated betweenthe two performance obligations consistent with therevenue allocation proportions.

The following table disaggregatesrevenue by our two performance obligations for the years ended December 31:

(in thousands) 2020 2019 2018 Management fee revenue -policy issuance and renewal services, net $1,841,794 $1,810,457 $1,719,567

Management fee revenue -administrative services, net 59,463 57,204 53,632 Administrative services reimbursement revenue 609,435 582,010 580,336 Total administrative services $668,898 $639,214 $633,968

58 Note 4. Earnings PerShare

ClassAand ClassBbasic earnings per share and ClassBdilutedearnings per share are calculatedunder thetwo-class method. The two-class method allocates earnings to each class of stock based upon itsdividend rights. Class Bshares are convertible intoClass Ashares at aconversion ratioof2,400 to 1. See Note 13, "CapitalStock".

Class Adiluted earnings per share arecalculated underthe if-converted method, which reflectsthe conversion of ClassBshares to ClassAshares. Diluted earnings per share calculations include the dilutive effectofassumed issuance of stock-based awards under compensation plans that have the option to be paidinstockusing the treasury stock method. See Note 11, "Incentive and DeferredCompensation Plans".

Areconciliation of the numerators and denominators usedinthe basic anddilutedper-share computations is presentedas follows for eachclass of common stock:

(dollars in thousands, except pershare data) For the years ended December 31, 2020 2019 2018 Allocated Weighted Per- Allocated Weighted Per- Allocated Weighted Per- net income shares share net income shares share net income shares share (numerator) (denominator) amount (numerator) (denominator) amount (numerator) (denominator) amount Class A–Basic EPS: Income availableto Class Astockholders $290,902 46,188,659 $6.30 $314,227 46,188,836 $6.80 $285,864 46,188,637 $6.19 Dilutive effect of stock- based awards 023,901 —030,224 —025,776 — Assumed conversion of Class Bshares 2,402 6,100,800 —2,594 6,100,800 —2,360 6,100,800 — Class A–Diluted EPS: Income availabletoClass Astockholders on Class Aequivalent shares $293,304 52,313,360 $5.61 $316,821 52,319,860 $6.06 $288,224 52,315,213 $5.51 Class B–Basic EPS: Income availabletoClass Bstockholders $2,402 2,542 $945 $2,594 2,542 $1,020 $2,360 2,542 $928 Class B–Diluted EPS: Income availabletoClass Bstockholders $2,401 2,542 $945 $2,593 2,542 $1,020 $2,359 2,542 $928

59 Note 5. FairValue

Financial instruments carried at fair value Our available-for-sale and equitysecurities are recorded at fair value,whichisthe price thatwouldbereceivedtosellthe asset in an orderlytransaction betweenwilling marketparticipantsasofthe measurement date.

Valuation techniques usedtoderive the fairvalue of our available-for-sale and equitysecurities are based upon observable and unobservableinputs. Observableinputs reflectmarketdataobtainedfrom independent sources.Unobservableinputs reflectour own assumptions regarding fairmarket value for these securities. Financialinstruments are categorized based upon the following characteristics or inputstothe valuation techniques:

•Level 1–Quoted prices(unadjusted) in active marketsfor identical assets or liabilities thatthe reporting entitycan access at themeasurement date.

•Level 2–Inputs otherthanquotedprices includedwithinLevel 1thatare observable for the assetorliability, either directly or indirectly.

•Level 3–Unobservableinputs for the assetorliability.

In limitedcircumstances we adjust the pricereceivedfrom thepricing servicewhen, in our judgment,abetterreflection of fair value is available based upon corroborating information and our knowledge andmonitoring of market conditions such as a disparity in priceofcomparablesecuritiesand/or non-binding brokerquotes. In other circumstances, certainsecurities are internallypriced because prices are not provided by thepricing service.

Whenaprice from thepricing serviceisnot available, valuesare determined by obtaining broker/dealer quotes and/or market comparables. When available,weobtain multiplequotes for the same security. Theultimatevalue for these securities is determinedbased upon our best estimate of fairvalue using corroborating marketinformation. As of December31, 2020, nearly allofour available-for-sale and equitysecurities were pricedusing athird party pricing service.

60 Thefollowing tablespresent our fair value measurementsonarecurring basis by asset classand level of input as of:

December 31, 2020 (in thousands) Total Level 1Level 2Level 3 Available-for-sale securities: Corporate debt securities $566,425 $1,281 $559,319 $5,825 Residential mortgage-backedsecurities 112,179 0111,242 937 Commercial mortgage-backed securities 120,201 0100,739 19,462 Collateralized debt obligations 110,447 0110,447 0 Other debt securities 18,984 018,984 0 Total available-for-sale securities 928,236 1,281 900,731 26,224 Equity securities -nonredeemable preferred and common stock: Financial services sector 76,575 24,981 51,594 0 Utilities sector 8,742 3,957 4,785 0 Consumer sector 3,068 576 2,492 0 Communications sector 2,699 2,699 00 Energy sector 2,206 676 1,530 0 Industrial sector 800 800 00 Total equitysecurities 94,090 33,689 60,401 0 Total $1,022,326 $34,970 $961,132 $26,224

December 31, 2019 (in thousands) Total Level 1Level 2Level 3 Available-for-sale securities: Corporate debt securities $454,880 $2,683 $443,873 $8,324 Residential mortgage-backedsecurities 125,343 0125,343 0 Commercial mortgage-backed securities 67,541 064,220 3,321 Collateralized debt obligations 77,856 077,856 0 Other debt securities 5,081 05,081 0 Total available-for-sale securities 730,701 2,683 716,373 11,645 Equity securities -nonredeemable preferred and common stock: Financial services sector 53,513 14,927 38,586 0 Utilities sector 6,818 3,190 3,628 0 Communications sector 3,433 3,433 00 Energy sector 1,881 01,881 0 Industrial sector 980 0980 0 Consumer sector 508 0508 0 Total equitysecurities 67,133 21,550 45,583 0 Total $797,834 $24,233 $761,956 $11,645

61 We reviewthe fairvalue hierarchy classifications each reporting period. Transfers between hierarchy levels mayoccur due to changes in available market observableinputs.

Level 3Assets –Year-to-DateChange:

Beginning Included Ending balance at Included in other Transfers Transfers balance at December 31, in comprehensive into out of December 31, (in thousands) 2019 earnings(1) income Purchases Sales Level 3(2) Level 3(2) 2020 Available-for-sale securities: Corporate debt securities $8,324 $(2) $(156) $7,180 $(1,405) $10,526 $(18,642) $5,825 Residential mortgage-backed securities 0(19) (48) 287 (1,539) 11,496 (9,240) 937 Commercial mortgage-backed securities 3,321 (183) 913 12,281 (2,334) 39,591 (34,127) 19,462 Collateralized debt obligations 00 3247 00(250) 0 Total available-for-salesecurities 11,645 (204) 712 19,995 (5,278) 61,613 (62,259) 26,224 Nonredeemable preferred stock 0151 02,836 00(2,987) 0 Total Level 3securities $11,645 $(53) $712 $22,831 $(5,278) $61,613 $(65,246) $26,224

Level 3Assets –Year-to-DateChange:

Beginning Included Ending balance at Included in other Transfers Transfers balance at December 31, in comprehensive into out of December 31, (in thousands) 2018 earnings(1) income Purchases Sales Level 3(2) Level 3(2) 2019 Available-for-sale securities: Corporate debt securities $12,577 $10$ 146 $2,020 $(7,415) $11,542 $(10,556) $8,324 Residential mortgage-backed securities 04 15 921 (32) 0 (908) 0 Commercial mortgage-backed securities 0(9) (21) 478 (1,068) 7,281 (3,340) 3,321 Collateralized debt obligations 00 12,300 00(2,301) 0 Total Level3available-for-sale securities $12,577 $5$141 $5,719 $(8,515) $18,823 $(17,105) $11,645

(1) These amounts are reported as net investment income and net realized investment gains (losses) for each of the periods presentedabove. (2) Transfers into and/or (out) of Level 3are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.

Financial instruments not carriedatfairvalue The following table presentsthe carrying valuesand fairvalues of financial instruments categorizedasLevel 3inthe fair value hierarchy thatare recordedatcarrying value as of: December 31, 2020 December 31, 2019 (in thousands) Carrying Value Fair Value Carrying Value Fair Value Agent loans (1) $69,212 $73,854 $67,696 $71,602 Long-term borrowings (2) 96,113 113,054 98,080 101,888

(1) The discount rate used to calculate fair value at December 31, 2020 is reflective of an increase in the BB+ financial yield curve due to the market volatility resulting from the COVID-19 pandemic. (2) The discount rate used to calculate fair value at December 31, 2020 is reflective of adecline in U.S. Treasury bond yields due to the market volatility resulting from the COVID-19 pandemic.

62 Note 6. Investments

Available-for-salesecurities SeeNote 5, "Fair Value" for additional fairvalue disclosures. The following tables summarize the cost andfairvalue, netof credit loss allowance,ofour available-for-salesecurities as of: December 31, 2020 Amortized Gross unrealized Gross unrealized Estimated fair (in thousands) cost gains losses value Corporate debt securities $546,096 $21,843 $1,514 $566,425 Residential mortgage-backedsecurities 108,840 3,373 34 112,179 Commercial mortgage-backed securities 115,346 5,090 235 120,201 Collateralized debt obligations 110,121 657 331 110,447 Other debt securities 18,387 606 918,984 Total available-for-sale securities, net $898,790 $31,569 $2,123 $928,236

December 31, 2019 Amortized Gross unrealized Gross unrealized Estimated fair (in thousands) cost gains losses value Corporate debt securities $450,295 $6,289 $1,704 $454,880 Residential mortgage-backedsecurities 124,337 1,056 50 125,343 Commercial mortgage-backed securities 67,210 479 148 67,541 Collateralized debt obligations 78,059 44 247 77,856 Other debt securities 5,049 71 39 5,081 Total available-for-sale securities, net $724,950 $7,939 $2,188 $730,701

The amortizedcostand estimatedfairvalue of available-for-sale securitiesatDecember 31, 2020, areshown below by remaining contractual term to maturity. Expectedmaturities maydiffer from contractualmaturitiesbecauseborrowers may have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 2020 Amortized Estimated (in thousands) cost fair value Due in one year or less $17,393 $17,553 Due after one year through five years 419,019 435,504 Due after five years through ten years 185,849 189,711 Due after ten years 276,529 285,468 Total available-for-sale securities (1) $898,790 $928,236

(1) The contractual maturities of our available-for-sale securities are included in the table. However, given our intent to sell certain impaired securities, these securities are classified as current assets in our Statements of Financial Position at December 31, 2020.

63 Thebelow securities have beenevaluatedand determined to be temporary declinesinfairvalue for which we expect to recover our entire principalplusinterest. Thefollowing tables present available-for-salesecuritiesbasedonlength of time in agross unrealizedloss position as of:

December 31, 2020 Less than 12 months 12 months or longerg Total Fair Unrealized Fair Unrealized Fair Unrealized No. of (dollars in thousands) value losses value losses value losses holdingsg Corporate debt securities $39,693 $644 $7,952 $870 $47,645 $1,514 257 Residential mortgage-backedsecurities 8,163 34 008,163 34 13 Commercial mortgage-backed securities 16,582 235 0016,582 235 31 Collateralized debt obligations 50,036 232 10,899 99 60,935 331 65 Other debt securities 1,019 9001,019 94 Total available-for-salesecurities $115,493 $1,154 $18,851 $969 $134,344 $2,123 370 Quality breakdown of available-for-sale securities: Investment grade $86,807 $561 $10,899 $99$97,706 $660 119 Non-investment grade 28,686 593 7,952 870 36,638 1,463 251 Total available-for-salesecurities $115,493 $1,154 $18,851 $969 $134,344 $2,123 370

December 31, 2019 Less than 12 months 12 months or longerg Total Fair Unrealized Fair Unrealized Fair Unrealized No. of (dollars in thousands) value losses value losses value losses holdingsg Corporate debt securities $25,804 $342 $15,699 $1,362 $41,503 $1,704 158 Residential mortgage-backedsecurities 16,712 50 0016,712 50 7 Commercial mortgage-backed securities 21,981 147 372 122,353 148 30 Collateralized debt obligations 20,889 33 41,010 214 61,899 247 49 Other debt securities 2,350 39 002,350 39 2 Total available-for-salesecurities $87,736 $611 $57,081 $1,577 $144,817 $2,188 246 Quality breakdown of available-for-sale securities: Investment grade $76,315 $287 $46,390 $218 $122,705 $505 100 Non-investment grade 11,421 324 10,691 1,359 22,112 1,683 146 Total available-for-sale securities $87,736 $611 $57,081 $1,577 $144,817 $2,188 246

Credit loss allowance on investments As of December31, 2020, the current expectedcredit loss allowance on agent loans is $1.1 millionand thecreditloss allowanceonavailable-for-sale securities is $0.2 million.

Netinvestment income Investment income,net of expenses, wasgeneratedfrom thefollowing portfolios for the years ended December31:

(in thousands) 2020 2019 2018 Available-for-sale securities (1) $22,631 $22,496 $24,978 Equity securities 4,147 1,418 628 Cash equivalents and other 4,436 11,206 4,806 Total investment income 31,214 35,120 30,412 Less: investment expenses 1,461 1,061 1,025 Investment income, net of expenses $29,753 $34,059 $29,387

(1) Includes interest earned on note receivable from EFL of $1.6 million in 2018. The note was repaid in full in 2018.

64 Realized investment gains (losses) Realized gains (losses) on investmentswereasfollows for the years endedDecember 31:

(in thousands) 2020 2019 2018 Available-for-sale securities: Gross realized gains $3,920 $6,258 $1,892 Gross realized losses ((2,585)) ((1,639)) ((3,189)) Net realized gains (losses) on available-for-sale securities 1,335 4,619 (1,297) Equity securities 5,056 1,484 (819) Miscellaneous 10106 Net realized investment gains (losses) $6,392 $6,103 $(2,010)

The portion of net unrealizedgains and losses recognized during the reporting period relatedtoequitysecurities heldatthe reporting date is calculatedasfollows for the years endedDecember 31:

(in thousands) 2020 2019 2018 Equity securities: Net gains (losses) recognized during the period $5,056 $1,484 $(819) Less: net (losses) gains recognized on securitiessold (469) 360((86)) Net unrealized gains (losses) recognized on securities heldatreporting date $5,525 $1,124 $(733)

Netimpairment losses recognized in earnings Upon adoption of ASU 2016-13 on January 1, 2020, impairmentsonavailable-for-sale securities thatare deemed to be credit related arerecognizedinearnings with acorresponding available-for-salesecurityallowance. All unrealizedlossesrelatedto factors otherthancredit are recorded in othercomprehensive income. Prior to January 1, 2020, we hadthe intent to sellall credit-impaired available-for-sale securities; therefore, theentire amount of the impairment chargeswas included in earnings and no impairmentswererecognizedinother comprehensive income.See also Note2,"Significant Accounting Policies".

Impairmentsonavailable-for-sale securities and agent loans were as followsfor the years endedDecember31:

(in thousands) 2020 2019 2018 Available-for-salesecurities: Intent to sell $2,274 $195 $1,581 Creditimpaired 707 —— Total available-for-salesecurities2,981 195 1,581 Agent loans -expected creditlosses 297 —— Net impairment lossesrecognizedinearnings $3,278 $195 $1,581

65 Note 7. Fixed Assets

The following tablesummarizesour fixed assets by category as of December31:

(in thousands) 2020 2019 Software $196,139 $191,709 Land, buildings, andbuilding improvements 121,332 5,068 Equipment 37,426 14,546 Furniture andfixtures 20,998 1,934 Leaseholdimprovements1,313 1,313 Projectsinprogress 47,277 22,992 Construction in progress —122,801 Total fixedassets, gross 424,485 360,363 Less: Accumulateddepreciation andamortization (159,144) (138,984) Fixedassets, net $265,341 $221,379

Land, buildings, andbuilding improvements, equipment,and furniture and fixturesincreased due to thecompletion of anew officebuilding serving as part of our principal headquarters in thefourthquarter of 2020. Thebuilding wasfinanced using a senior secured drawterm loancredit facility. See Note 9, "Borrowing Arrangements". Interest capitalized during construction was $3.5 million, $3.4 million, and$1.5 million for theyears endedDecember31, 2020, 2019 and 2018, respectively. Projects in progress include certaincomputersoftware andsoftware developments costs for internaluse that are not yetsubject to amortization. Depreciation and amortization of fixed assets totaled $21.2 million, $16.8 million and$13.4 million for theyears endedDecember31, 2020, 2019 and 2018, respectively, andisincludedincost of operations -policyissuance and renewal services.

Note 8. Leases

The following table summarizes our lease assets and liabilitiesasofDecember31:

(in thousands) 2020 2019 Operating leaseassets $14,381 $22,401

Operating leaseliabilities -current $10,713 $11,289 Operating leaseliabilities -long-term 3,643 10,665 Total operating lease liabilities$14,356 $21,954

We currentlyhave leases for realestate,technology equipment, copiers, and vehicles.Our largest operating leaseassetat December31, 2020 of $6.3 million is for office space leased from the Exchange,including the home office. Under this lease, rent is based on rentalrates of like propertyand alloperating expenses arethe responsibilityofthe tenant (Indemnity). The lease agreement expiresDecember 31, 2021. See Note 15, "Related Party".

Operating leasecosts for the years ended December 31, 2020 and2019 totaled $13.1 millionand $14.0 million, respectively. Of this amount, theExchange andits subsidiariesreimbursed us $5.3 millionand $6.0 millionfor the years ended December 31, 2020 and 2019, respectively, whichrepresents the allocated share of lease costs supporting administrative services activities.

66 Note 9. Borrowing Arrangements

Bank Line of Credit As of December31, 2020, we have access to a$100 millionbank revolving line of creditwitha$25 millionletterofcredit sublimit thatexpiresonOctober30, 2023. As of December31, 2020, atotalof$99.1 millionremains available under the facilitydue to $0.9 million outstanding letters of credit,which reducesthe availabilityfor letters of credit to $24.1 million. We had no borrowings outstanding on our line of credit as of December31, 2020. Investmentswithafairvalue of $124.9 million were pledgedascollateral on the line at December 31, 2020. Thesecuritiespledgedascollateral have no trading restrictions and arereportedasavailable-for-salesecuritiesand cash and cash equivalents as of December31, 2020. The banks require compliancewithcertain covenants, which include leverage ratios and debt restrictions, for our line of credit.Weare in compliancewithall covenants at December31, 2020.

Term Loan CreditFacility In 2016, we enteredintoacreditagreement for a$100 million senior secureddrawtermloan creditfacility("CreditFacility") for the acquisition of realproperty andconstruction of an officebuilding to serve as part of our principal headquarters. On January 1, 2019, theCreditFacilityconverted to afully-amortized term loanwith monthlypaymentsofprincipal and interest at afixed rate of 4.35% over aperiod of 28 years. Investments with afairvalue of $126.5 millionwerepledgedascollateral for the facilityand arereportedasavailable-for-salesecuritiesand cash and cash equivalents as of December31, 2020. The bank requires compliancewithcertain covenants, which include leverage ratios, debt restrictions and minimum net worth, for our CreditFacility. We are in compliance with allcovenantsatDecember 31, 2020.

The remaining unpaid balance from theCreditFacilityisreported at carrying value, netofunamortized loan origination and commitment feesaslong-term borrowings.See Note 5, "Fair Value" for the estimatedfairvalue of these borrowings.

Annual principal payments The following table sets forth future principal payments:

(in thousands) Principal Year payments 2021 $2,031 2022 2,109 2023 2,226 2024 2,302 2025 2,449 Thereafter84,996

67 Note 10. Postretirement Benefits

Pension plans Our pension plans consist of anoncontributory definedbenefit pension plancovering substantially allemployees and an unfunded supplementalemployee retirement plan ("SERP") for certainmembers of executive andsenior management.The pension plans provide benefitstocovered individualssatisfying certain ageand servicerequirements. The defined benefit pension plan andSERPeachprovide benefitsthrough afinal average earnings formula.

Although we arethe sponsor of these postretirement plans and record the funded status of these plans, the Exchange andits subsidiariesreimburse us for approximately59% of the annualbenefitexpense of these plans, which representspension benefitsfor employeesperforming administrative services and theirallocated share of costs for employees in departments that support the administrative functions. For our fundedpension plan, amountsare settledincashfor the portion of pension costs allocated to the Exchange and itssubsidiaries. For our unfunded plans, we pay theobligations when due andamounts are settledincash between entities whenthere is apayout.

Costofpension plans Pension plan cost includes the following components:

(in thousands) 2020 2019 2018 Servicecost for benefitsearned$43,492 $33,854 $38,052 Interestcost on benefitobligation 37,578 39,306 35,382 Expected return on plan assets (49,411) (47,484) (51,260) Prior service costamortization 1,343 1,394 1,353 Netactuarial loss amortization 12,125 5,113 12,809 Pension plan cost (1) $45,127 $32,183 $36,336

(1) Pension plan costs represent the total cost before reimbursements to Indemnity from the Exchange and its subsidiaries.

Actuarial assumptions The following table describes the assumptions at December31usedtomeasure the year-end obligations and the net periodic benefit costs for the subsequent year: 2020 2019 2018 2017 Employeepension plan: Discount rate 2.96 %3.59 %4.47 %3.73 % Expected return on assets 6.00 6.00 6.75 6.75 Compensation increases (1) 3.21 3.21 3.32 3.32 SERP: Discount rate –pre-retirement/post-retirement (2) 2.86 3.59/3.09 4.47/3.97 3.73/3.23 Rate of compensation increase 5.00 5.00 5.00 5.00

(1) The rate of compensation increase for the employee plan is age-graded. An equivalent single compensation increase rate of 3.21% in 2020 and 2019 and 3.32% in 2018 would produce similar results. (2) In 2020, the SERPdiscount rate methodology was revised to utilize SERP specific cash outflows independent of the employee pension plan discount rate, eliminating adifference between pre-retirement and post-retirement rates.

The economicassumptions thathavethe most impact on the postretirement benefitsexpenseare thediscount rate and thelong- term rate of return on planassets. The discount rate assumption usedtodetermine thebenefitobligation for allperiods presented was based upon ayield curve developed from corporate bond yield information.

The pension plan'sexpectedlong-term rateofreturn representsthe average rate of return to be earned on plan assets over the period the benefitsincluded in the benefit obligation aretobepaid. To determine the expected long-term rate of return assumption, we utilizedmodels based upon rigorous historical analysis and forward-looking views of thefinancialmarkets based upon keyfactors suchashistoricalreturns for the assetclass' applicable indices, the correlations of the assetclassesunder various marketconditions and consensus views on future real economicgrowth andinflation. Theexpectedfuture return for each asset classisthen combined by considering correlations betweenassetclassesand the volatilities of each asset classto produce areasonablerange of asset return results withinwhich our expectedlong-term rateofreturn assumption falls.

68 Funding policy/fundedstatus In 2018, we made acceleratedpension contributions totaling $80 million. Following our 2018 contributions, we would not expect to make asubsequent contribution until the sum of thetargetnormal costs for planyears beginning on and after December31, 2017 exceeds $80 million, or earlierifacontribution is necessary to fund theplanto100%. At thattime, our funding policywill again generallybetocontributeanamount equal to thegreater of thetargetnormal cost for theplanyear, or the amount necessary to fund theplanto100%. Additional contributions maybenecessary or desirable due to future plan changes, our particularbusinessorinvestment strategy, or pending lawchanges. The following table sets forth thefundedstatus of the pension plans and theamountsrecognizedinthe Statements of FinancialPosition at December31:

(in thousands) 2020 2019 Fundedstatus at endofyear $(165,098) $(146,842)

Pension liabilities –due within one year (1) $(752) $(1,183) Pension liabilities –due afterone year (164,346) (145,659) Net amount recognized $(165,098) $(146,842)

(1) The current portion of pension liabilities is included in accounts payable and accrued liabilities.

Benefit obligations Benefitobligations are describedinthe following tables. Accumulatedand projectedbenefit obligations represent the obligations of apension plan for past service as of the measurement date. Theaccumulated benefitobligation is the present value of pension benefitsearnedasofthe measurement datebased on employeeservice and compensation prior to thatdate. It differs from the projected benefitobligation in that the accumulatedbenefit obligation includes no assumptions to reflect expected future compensation. The following table sets forth areconciliation of beginning and ending balancesofthe projected benefit obligation, as well as the accumulatedbenefit obligation at December 31:

(in thousands) 2020 2019 Projected benefit obligation, beginning of year $1,054,467 $886,165 Servicecost for benefitsearned43,492 33,854 Interest cost on benefit obligation 37,578 39,306 Plan amendments 0452 Actuarialloss 134,470 138,144 Benefitspaid (23,848) (43,454) Projected benefit obligation, endofyear $1,246,159 $1,054,467

Accumulated benefit obligation, endofyear $1,006,884 $858,209

Projected benefitobligations increased$191.7 million at December 31, 2020 compared to December31, 2019 due primarilyto actuariallossesresulting from the lowerdiscount rate used to measure the future benefit obligations. The discount rate decreased to 2.96% in 2020 from 3.59% in 2019. The decrease in benefits paid of $19.6 millionin2020 compared to 2019 was primarily due to apension plan amendment made in 2019 offering aone-timelump sum payment to formervestedemployees.

69 Both thedefined benefitplanand the SERPhad projected benefitobligations in excess of plan assets at December 31:

(in thousands) Projected Benefit Obligation in Excess of PlanAssets 2020 2019 Projected benefitobligation $1,246,159 $1,054,467 Planassets1,081,061 907,625

The SERPhad accumulated benefitobligations in excess of plan assets at December31:

(in thousands) AccumulatedBenefitObligation in Excess of Plan Assets 2020 2019 Accumulatedbenefit obligation $26,462 $23,411 Planassets——

Pension assets The following table sets forth areconciliation of beginning and ending balancesofthe fair value of planassetsatDecember 31:

(in thousands) 2020 2019 Fairvalue of plan assets, beginning of year $907,625 $767,569 Actualgainonplanassets 195,713 182,002 Employercontributions 1,571 1,508 Benefits paid (23,848) (43,454) Fairvalue of plan assets, endofyear $1,081,061 $907,625

Accumulated other comprehensiveloss Netactuarial loss and prior servicecost included in accumulatedothercomprehensive loss thatwerenot yet recognized as componentsofnet benefitcosts were as follows:

(in thousands) 2020 2019 Netactuarial loss $118,721 $142,678 Prior service cost9,570 10,913 Netamount not yetrecognized$128,291 $153,591

Other comprehensiveincome Amounts recognizedinother comprehensive income for pension plans were as follows:

(in thousands) 2020 2019 Netactuarial (gain) loss arising during theyear$(11,832) $3,626 Amortization of net actuarialloss (12,125) (5,113) Amortization of prior service cost(1,343) (1,394) Amendments (1) 0452 Total recognized in othercomprehensive income $(25,300) $(2,429)

(1) In 2019, there was one new SERPparticipant.

70 Asset allocation The employeepension plan utilizes areturn seeking and aliability assetmatching allocation strategy. It is basedupon the understanding that 1) equity investmentsare expectedtooutperform debt investments over thelong-term, 2) thepotential volatility of short-term returns from equities is acceptable in exchange for thelargerexpected long-term returns, and 3) a portfolio structuredacross investment stylesand markets(both domestic and foreign) reducesvolatility. As aresult,the employeepension plan's investment portfolio utilizes abroadly diversified asset allocation across domesticand foreign equity and debt markets. The investment portfolioiscomposed of commingledpools and aseparate account thatare dedicated exclusively to the management of employee benefit planassets.

The target and actual assetallocations for the portfolioare as follows for the years endedDecember31:

Target asset Target asset Actualasset Actualasset allocation allocation allocation allocation Assetallocation: 2020 2019 2020 2019 Equity securities: U.S. equitysecurities 27 % (1) 27 %28% 28 % Non-U.S. equitysecurities 18 (2) 18 18 18 Total equity securities45454646 Debt securities54(3) 54 53 53 Other 1 (4) 111 Total 100 %100 %100 %100 %

(1) U.S. equity securities – 23% seek to achieve excess returns relative to the Russell 2000 Index. The remaining 77% of the allocation to U.S. equity securities are comprised of equity index funds that track the S&P 500. (2) Non-U.S. equity securities – 11% are allocated to international small cap investments, while another 21% are allocated to international emerging market investments. The remaining 68% of the Non-U.S. equity securities are allocated to investments seeking to achieve excess returns relative to an international market index. (3) Debt securities – 33% are allocated to long U.S. Treasury Strips, 67% are allocated to U.S. corporate bonds with an emphasis on long duration bonds rated Aorbetter. (4) Institutional money market fund.

71 Thefollowing tablespresent fair value measurementsfor the pension planassetsbymajor category and levelofinput as of: December31, 2020 Fair value measurementsofplan assets using: (in thousands) Total Level 1Level 2Level 3 Equity securities: U.S. equitysecurities $296,624 $0$296,624 $0 Non-U.S. equitysecurities 196,971 134,841 62,130 0 Total equitysecurities 493,595 134,841 358,754 0 Debt securities 574,910 0574,910 0 Other12,556 12,556 00 Total $1,081,061 $147,397 $933,664 $0

December31, 2019 Fair value measurementsofplanassets using: (in thousands) Total Level 1Level 2Level 3 Equity securities: U.S. equitysecurities $248,585 $0$248,585 $0 Non-U.S. equitysecurities 165,752 0165,752 0 Total equitysecurities414,337 0414,337 0 Debt securities 482,497 0482,497 0 Other10,791 10,791 00 Total $907,625 $10,791 $896,834 $0

Estimatesoffairvaluesofthe pension plan assets areobtained primarilyfrom thetrustee and custodianofour pension plan. Our Level1category includes amoney marketmutualfund andaseparateaccount for which the fairvalue is determined using an exchange tradedpriceprovided by thetrusteeand custodian. Our Level 2category includescommingled pools. Estimates of fairvalues for securities heldbyour commingledpools areobtained primarilyfrom thetrustee and custodian. Trusteeand custodian valuation methodologiesfor Level2securities include multipleverifiable, observable inputsincluding benchmark yields, reported trades, broker/dealer quotes, issuers spreads, two-sided markets, benchmark securities, bids,offers,and referencedata.

Estimated future benefit payments The following table sets forth amountsofbenefits expectedtobepaidover thenext10years from our pension plans as of:

(in thousands) Year ending Expected future December 31, benefit payments 2021 $25,940 2022 29,162 2023 33,450 2024 36,643 2025 40,136 2026 -2030 248,536

72 Employee savings plan Allfull-timeand regular part-timeemployeesare eligibletoparticipate in aqualified 401(k) savingsplan. We match100% of the participant contributions up to 3% of compensation and50% of participant contributions over 3% and up to 5% of compensation. Matching contributions paidtothe plan were$15.8 million in 2020, $14.9 million in 2019, and $13.9 millionin 2018. In 2018, we made an additional discretionary employer contribution of $5.4 million, as away of sharing thetax savings realizedfrom thelower corporate income taxratethat becameeffective January 1, 2018 with our employees. The Exchange and itssubsidiariesreimbursed us for approximately59% of the matching anddiscretionary contributions. Employeesare permittedtoinvest theemployer-matching contributions in our ClassAcommon stock. Employees, other than executive and senior officers, may sell thesharesatany time without restriction, provided they areincompliancewithapplicableinsider trading laws; salesbyexecutive andsenior officers are subject to additionalpre-clearancerestrictions imposed by our insider trading policies. The plan acquires shares in theopenmarket necessary to meet theobligations of the plan. Planparticipants held0.2 million sharesofour Class Acommon stock at December 31, 2020 and2019.

Note 11. Incentive and DeferredCompensation Plans

We have two incentive plans and twodeferred compensation plans for our executives, senior vice presidents and other selected officers, and twodeferredcompensation plans for our outside directors.

Annual incentive plan Our annual incentive plan("AIP") is abonus planthatpayscashtoour executives,senior vice presidents andotherselected officers annually. Participantscan electtodefer up to 100% of the award undereitherthe deferred compensation planorthe incentive compensation deferralplan. If thefunding qualifier is met, plan participantsare eligibletoreceive theincentive based upon attainment of corporate and individual performancemeasures,which caninclude various financial measures.The measures are established at the beginning of each yearbythe Executive Compensation and Development Committeeofour Board of Directors("ECDC"), with ultimate approvalbythe fullBoard of Directors. The corporateperformance measures includedthe growth in directwrittenpremium and statutory combinedratio of theExchange andits property andcasualty subsidiariesfor all periods presented.

Long-term incentive plan Our long-term incentive plan ("LTIP") is aperformancebased incentive plan designedtorewardexecutives, senior vice presidents andotherselected officers who can have asignificant impactonour long-term performance and to furtheralign the interests of such employees with those of our shareholders. The LTIP permits grants of performancesharesorunits,or phantom shares to be satisfied with shares of our Class Acommon stock or cash payment as determinedbythe ECDC. Participants canelect to defer up to 100% of the award underthe incentive compensation deferral plan. The ECDC determines the form of theaward to be granted at thebeginning of each performance period, whichisgenerallyathree-yearperiod. The numberofshares of the Company's common stock authorizedfor grant under theLTIP is 1.5 million shares, withnoone person abletoreceive more than 250,000 shares or the equivalent of $5 million during any one performanceperiod. We repurchase our Class Acommon stockonthe open markettosettlestock awards under the plan. We do not issue new shares of common stocktosettlestockawards.LTIPawards are consideredvested at theend of each applicable performanceperiod.

The LTIP providesthe recipient the right to earn performance shares or units, or phantom stockbased on thelevelof achievement of performancegoals as definedbyus. Performance measures andapeergroup of property andcasualty companies to be usedfor comparison are determined by theECDC. Theperformance measures for allperiods presented were the reported growth in direct written premium andstatutory combinedratio of theExchange andits property andcasualty subsidiariesand return on investedassetsoverathree-yearperformanceperiod as compared to the resultsofthe peer group over thesameperiod. Becausethe awardisbased upon acomparison to resultsofapeergroup over athree-year period, the award accrual is based upon estimatesofprobable resultsfor the remaining performanceperiod. This estimate is subjectto variability if our resultsorthe resultsofthe peer group aresubstantially different than theresults we project.

The fairvalue of LTIP awards is measured at each reporting dateatthe current share price of our Class Acommon stock. A liability is recordedand compensation expense is recognizedratablyover theperformance period.

73 At December31, 2020, the planawards for the 2018-2020 performanceperiod, which will be grantedasacash awardwere fullyvested. Distributions will be made in 2021 oncepeergroup financialinformation becomesavailable.The estimatedplan award based upon the peergroup information as of September30, 2020 is $11.2 million. At December 31, 2019, thefully vestedcashawards for the 2017-2019 performance period thatwere not deferredtotaled $7.4 millionand werepaidto participants in June 2020. At December 31, 2018, theawards paid in cash for the 2016-2018 performance period were fully vestedand resultedina$8.2 million payment to planparticipants in June 2019. At December 31, 2017, theawards for the 2015-2017 performanceperiod were fullyvestedand resulted in a$8.3 millionpayment to plan participantsinJune 2018. The ECDC has determinedthatthe plan awards for the2019-2021 and2020-2022 performanceperiods will be paid in cash.

The Exchange and itssubsidiaries reimburse us for compensation costs of employees performing administrative services. Earned compensation costs are allocated to these entitiesand reimbursed to us in cash once the payout is made. Thetotal compensation cost charged to operations relatedtothese LTIP awards was $12.0 million in 2020, $7.3 millionin2019, and $6.3 million in 2018. The related taxbenefits recognized in income were $2.5 millionin2020, $1.5 millionin2019, and $1.3 million in 2018. The Exchange and itssubsidiariesreimburse us for approximately48% of the annualcompensation cost of these plans. At December31, 2020, there was$6.8 million of totalunrecognizedcompensation cost for non-vestedLTIP awards related to open performance periods. Unrecognizedcompensation is expectedtoberecognized overaperiod of two years.

Deferredcompensation plan Our deferredcompensation plan allows executives,senior vice presidents andotherselected officers to electtodeferreceipt of aportion of theircompensation andAIP cashawards untilalaterdate. Employer 401(k) matching contributions thatare in excess of theannual contribution or compensation limits are also creditedtothe participant accountsfor those who elected to deferreceipt of some portion of their base salary. Participantsselect hypotheticalinvestment funds for theirdeferralswhich are credited withthe hypotheticalreturns generated.

Incentive compensation deferral plan We have an unfunded, non-qualified incentive compensation deferralplanfor participantsofthe AIP andLTIP. Participants canelect to deferupto100% of theirannualAIP awardand/or up to 100% of theirLTIPaward for each performance period. Deferredawards will be creditedtoadeferred stock account as creditsdenominated in Class Ashares of the Company stock untilretirement or otherseparation from service from theCompany. Participantsare 100% vested at date of deferral.The shares are heldinarabbi trust, whichwas established to hold thesharesearnedunder boththe incentive compensation deferral planand thedeferredstock compensation planfor outside directors. The rabbi trust is classifiedand accountedfor as equity in amannerconsistent withthe accounting for treasury stock. Dividends received on thesharesinthe rabbi trust areused to purchase additional shares.Vested share creditswillbepaidtoparticipants from therabbi trust upon separation from service in approximate equalannual installments of ClassAshares for aperiod of three years. In 2020, the rabbi trust purchased 3,934 shares of our common stockinthe openmarket at an average price of $155.92 for $0.6 million to satisfy the liabilityfor the 2019 AIP awards and18,126 shares at an average price of $185.31 for $3.4 million to satisfy the liabilityfor the 2017-2019 LTIP performance period awards deferred underthe incentive compensation deferralplan. In 2019, therabbi trust purchased 4,387 shares of our common stockinthe openmarket at an average price of $176.34 for $0.8 million to satisfy the liabilityfor the 2018 AIP awards deferredunder theincentive compensation deferral plan. In 2018, the rabbi trust purchased 12,005 shares of our common stockinthe openmarket at an average price of $119.28 for $1.4 million to satisfy the liabilityfor the 2017 AIP awards deferred underthe incentive compensation deferralplan.

Deferredcompensation plans for outside directors We have adeferredcompensation plan for our outside directors thatallows participantstodeferreceipt of aportion of their annualcompensation untilalaterdate. Participantsselect hypotheticalinvestment funds for theirdeferralswhich arecredited with thehypothetical returns generated.

We also have adeferred stockcompensation plan for our outside directors to furtheralign theinterests of directors with those of our shareholders thatprovides for aportion of thedirectors' annualcompensation in sharesofour Class Acommon stock. Each director vests in thegrant 25% every three months over the course of ayear. Dividends paid by us are credited to each director's account whichvest immediately. We do not issue new shares of common stock to directors. Our practiceisto repurchase sharesofour Class Acommon stock in the open markettosatisfy theseawards,which areheldinthe rabbi trust.

74 Therabbi trust purchased7,401 shares of our common stock on theopenmarket at an average price of $201.78 for $1.5 million in 2020, 7,370 shares at an average price of $194.62 for $1.4 million in 2019, and 9,285 shares at an average priceof$122.19 for $1.1 million in 2018 to satisfy the liabilityofthe stockcompensation plan for outside directors. The shares aredistributed to theoutside director from the rabbi trust upon ending board service. Thetotalcompensation charged to operations relatedto these awards totaled $0.9 million, $1.1 million and$0.8 million in 2020, 2019 and 2018, respectively.

The following table sets forth areconciliation of beginning and ending balancesofour deferredexecutive compensation liability as of December31:

(in thousands) 2020 2019 2018 Deferredexecutive compensation, beginningofthe year $24,616 $26,182 $30,057 Annual incentive plan awards 5,619 2,745 4,751 Long-term incentive planawards 12,381 7,267 6,331 Employermatch and hypothetical earnings on deferred compensation 2,962 2,700 1,484 Total planawards and earnings 20,962 12,712 12,566 Total planawards paid(10,121) (12,852) (14,482) Compensation deferred 4,668 1,579 1,928 Distributions from thedeferredcompensation plans (2,081) (797) (1,321) Forfeitures (1) (356) —— Funding of rabbi trust for deferredstock compensation planfor outside directors (1,493) (1,434) (1,165) Funding of rabbi trust for incentive compensation deferral plan(3,972) (774) (1,401) Deferredexecutive compensation, end of the year $32,223 $24,616 $26,182

(1) Forfeitures are the result of aplan participant who separated from service with the Company.

Equity compensation plan We also have an equity compensation plan("ECP") which is designedtorewardkey employees, as determined by theECDC or the chief executive officer, who can have asignificant impactonour long-term performance and to furtheralign theinterests of suchemployees with those of our shareholders.The ECPpermits grants of restricted shares, restricted share units and other share based awards,tobesatisfied with shares of our Class Acommon stockorcash. The ECDC determinesthe form of the award to be grantedatthe beginning of each performanceperiod. Thenumber of shares of the Company's Class Acommon stock authorizedfor grant under theECP is 100,000 shares,with no one person abletoreceive more than 5,000 sharesina calendar year. We do not issue new shares of common stocktosatisfy planawards.Share awards aresettled through the repurchase of our ClassAcommon stock on theopenmarket.Restricted share awards maybeentitled to receive dividends payable during theperformance period, or, if subject to performance goals, to receive dividend equivalentspayableupon vesting. Dividend equivalentsmay provide for thecrediting of interest or hypotheticalreinvestment experiencepayableafter expiration of theperformance period. Vesting conditions are determinedatthe time the award is grantedand mayinclude continuation of employment for aspecificperiod, satisfaction of performancegoals and thedefinedperformanceperiod, andthe satisfaction of anyotherterms and conditions as determinedtobeappropriate. Theplanistoremainineffectuntil December 31, 2022, unless earlieramendedorterminated by our Board of Directors.

To date,all awards have been satisfiedwith sharesofour Class Acommon stock. In 2020, we purchased 1,787 ClassAshares with an average share price of $165.82 and amarket value of $0.3 milliontosatisfy the liability for the2017 plan year. In 2019, we purchased 3,246 ClassAshares with an average share price of $132.35 and amarket value of $0.4 milliontosatisfy the liability for the2016 plan year. In 2018, we purchased 5,830 shareswithanaverage share price of $117.39 and amarket value of $0.7 milliontosatisfy the liability for the2015 plan year andremainder of the2014 plan year awards. Thetotal compensation chargedtooperations related to these ECPawards was $0.7 million in 2020, $0.5 millionin2019, and$0.4 million in 2018. The Exchange and itssubsidiariesreimburse us for earnedcompensation costs of employeesperforming administrative services, which canfluctuateeachyearbased on theplanparticipants. The Exchange andits subsidiaries reimbursed us for approximately 59%, 49%, and68% of the awards paidin2020, 2019, and2018 respectively. Unearned compensation expense of $0.6 millionisexpected to be recognizedover aperiod of threeyears.

75 Note 12. Income Taxes

The provision for income taxes consistsofthe following for the years ended December31:

(in thousands) 2020 2019 2018 Current income taxexpense $80,373 $76,535 $84,454 Deferredincome tax(benefit)expense (5,162) 3,349 (1,358) Incometax expense $75,211 $79,884 $83,096

Areconciliation of the provision for income taxes,withamounts determined by applying the statutory federalincometax rate to pre-tax income, is as followsfor the years endedDecember 31:

(in thousands) 2020 2019 2018 Incometax at statutory rate $77,388 $83,308 $77,977 Tax-exempt interest —(123) (1,305) (Decrease) increase in unrecognized taxbenefits —(3,088) 3,088 Other, net(2,177) (213) 3,336 Incometax expense $75,211 $79,884 $83,096

Temporary differences and carry-forwards,whichgive rise to deferredtax assets and liabilities, are as followsasof December31:

(in thousands) 2020 2019 Deferredtax assets: Pension and other postretirement benefits$29,065 $25,720 Other employee benefits14,544 11,835 Deferredrevenue 3,872 3,755 Allowancefor management fee returned on cancelledpolicies 3,515 3,421 Unrealized lossesoninvestments1,083 — Other 2,692 1,663 Total deferred taxassets 54,771 46,394 Deferredtax liabilities: Depreciation 29,978 19,454 Unrealized gains on investments7,540 4,181 Prepaidexpenses3,800 4,890 Commissions 884 545 Other228 138 Total deferred taxliabilities42,430 29,208 Netdeferredtax asset $12,341 $17,186

If we determine thatany of our deferred taxassets will not result in future taxbenefits, avaluation allowance must be establishedfor the portion of the assets that are not expectedtoberealized. We had no valuation allowancerecordedat December31, 2020 or 2019.

76 Areconciliation of unrecognized taxbenefits for the years ended December31isasfollows:

(in thousands) 2020 2019 2018 Balanceatthe beginning of the year $0$3,088 $0 Additions for current year taxpositions ——7,719 Reductions for current yeartax positions ——(4,631) Additions for prior year taxpositions —4,631 — Reductions for prior yeartax positions —(7,719) — Balanceatthe end of the year $0$0$3,088

The uncertain taxposition including $3.1 millionoftax expense and $0.9 millionofinterest expenserecordedin2018 was settled during 2019. This settlementreduced our effective taxrateby1.0% in 2019. Theamountsrecordedin2018 resulted from thedifference in measuring the taxliability at theprevious taxrateand thecurrent enacted taxrate. The recording of the uncertain taxposition andrelated interest expense increased our 2018 effective taxrateby1.0%.

Taxyears ending December 31, 2019, 2018 and2017 remainopen to IRS examination. We are not currently underIRS audit, nor have we beennotifiedofanupcoming IRS audit.

We are the attorney-in-fact for the subscribers (policyholders) at theExchange, areciprocal insuranceexchange. In that capacity, we provide allservicesand facilitiesnecessary to conduct the Exchange's insurance business. Indemnity andthe Exchange togetherconstituteasingleinsurance business. Consequently, we arenot subjecttostatecorporateincomeor franchise taxes in states where theExchange conductsits businessand the statescollectpremium taxinlieuofcorporate income or franchise tax, as aresult of the Exchange's remittanceofpremium taxesinthosestates.

77 Note 13. Capital Stock

ClassAand Bcommon stock We have twoclasses of common stock: ClassAwhich hasadividend preference and ClassBwhichhas voting powerand a conversion right.Eachshare of Class Acommon stockoutstanding at the time of the declaration of anydividend upon shares of Class Bcommon stockshall be entitled to adividend payable at the same time,atthe same record date, andinanamount at least equal to 2/3of1.0% of any dividend declared on each share of ClassBcommon stock. We maydeclare andpay a dividend in respecttoClass Acommon stock without anyrequirement thatany dividend be declared andpaidinrespect to Class Bcommon stock. Sole shareholdervoting power is vestedinClass Bcommon stockexcept insofar as any applicablelaw shall permit Class Acommon shareholders to voteasaclass in regards to any changesinthe rights, preferences, and privileges attaching to ClassAcommon stock. Holders of Class Bshares may, at their option, convert their sharesinto ClassAshares at the rateof2,400 ClassAshares per ClassBshare. There were no sharesofClass Bcommon stockconvertedintoClass A common stockin2020, 2019 or 2018.

Stock repurchases Our Board of Directorsauthorizedastockrepurchaseprogrameffective January 1, 1999 allowing therepurchase of our outstanding ClassAnonvoting common stock. In 2011, our Board of Directorsapproved acontinuation of the current stock repurchase programfor atotal of $150 million, withnotimelimitation. Treasuryshares are recorded in the Statements of Financial Position at total cost based upon trade date.There werenoshares repurchased underthisprogram during 2020, 2019 or 2018. We had approximately$17.8 million of repurchase authorityremaining underthisprogram at December 31, 2020, based upon trade date.

We made stockrepurchases in 2020, 2019, and2018 outside of our publiclyannounced share repurchase programrelated to stock-based awards. SeeNote 11, "Incentive and Deferred Compensation Plans"for additionalinformation.

78 Note 14. AccumulatedOther Comprehensive Income (Loss)

Changes in accumulated other comprehensive income ("AOCI") (loss) by component, including amountsreclassified to other comprehensive income("OCI") (loss) and the related line item in theStatements of Operations where netincomeispresented, are as follows for the year ended December 31:

(in thousands) 2020 2019 2018 Income Income Income Before Tax Tax Net Before Tax Tax Net Before Tax Tax Net Investment securities: AOCI (loss), beginning of year $5,664 $1,189 $4,475 $(9,169) $(1,926) $(7,243) $3,410 $716 $2,694 OCI (loss) before reclassifications 22,074 4,636 17,438 19,257 4,044 15,213 (15,372) (3,228) (12,144) Realized investment (gains) losses (1,335) (280) (1,055) (4,619) (970) (3,649) 1,297 272 1,025 Impairment losses 2,981 626 2,355 195 41 154 1,581 332 1,249 Cumulative effect of adopting ASU 2016-01 (1) ——— ——— (85) (18) (67) OCI (loss) 23,720 4,982 18,738 14,833 3,115 11,718 (12,579) (2,642) (9,937) AOCI (loss), end of year $29,384 $6,171 $23,213 $5,664 $1,189 $4,475 $(9,169) $(1,926) $(7,243)

Pension and other postretirement plans: AOCI (loss), beginning of year $(153,600) $(32,257) $(121,343) $(155,749) $(32,708) $(123,041) $(200,954) $(42,201) $(158,753) OCI (loss) before reclassifications 11,832 2,485 9,347 (4,085) (858) (3,227) 31,401 6,594 24,807 Amortization of prior service costs (2) 1,343 282 1,061 1,394 293 1,101 1,353 284 1,069 Amortization of net actuarial loss (2) 12,125 2,546 9,579 4,840 1,016 3,824 12,451 2,615 9,836 OCI 25,300 5,313 19,987 2,149 451 1,698 45,205 9,493 35,712 AOCI (loss), end of year $(128,300) $(26,944) $(101,356) $(153,600) $(32,257) $(121,343) $(155,749) $(32,708) $(123,041)

Total AOCI (loss), beginning of year $(147,936) $(31,068) $(116,868) $(164,918) $(34,634) $(130,284) $(197,544) $(41,485) $(156,059) Investment securities23,720 4,982 18,738 14,833 3,115 11,718 (12,579) (2,642) (9,937) Pension and other postretirement plans 25,300 5,313 19,987 2,149 451 1,698 45,205 9,493 35,712 OCI 49,020 10,295 38,725 16,982 3,566 13,416 32,626 6,851 25,775 AOCI (loss), end of year $(98,916) $(20,773) $(78,143) $(147,936) $(31,068) $(116,868) $(164,918) $(34,634) $(130,284)

(1) Areclassification of unrealized losses of equity securities from AOCI (loss) to retained earnings was required at January 1, 2018 as aresult of new accounting guidance. (2) These components of AOCI (loss) are included in the computation of net periodic pension cost.See Note 10, "Postretirement Benefits", for additional information.

79 Note 15. RelatedParty

Management fee Amanagement fee is chargedtothe Exchange for servicesweprovide under thesubscriber's agreement with subscribers at the Exchange.The fee is apercentage of directand affiliated assumed premiums written by theExchange. This percentage rateis determinedatleast annually by our Board of Directorsbut cannot exceed 25%. Themanagement fee ratechargedthe Exchange was 25% in 2020, 2019 and 2018. TheBoard of Directorselected to maintainthe fee at 25% beginning January 1, 2021.

There is no provision in thesubscriber's agreement for termination of our appointment as attorney-in-fact by the subscribers at the Exchange and theappointment is not affected by apolicyholder's disabilityorincapacity.

Insurance holding company system Most stateshaveenactedlegislation that regulates insurance holding company systems, definedastwo or more affiliated persons, one or more of which is an insurer. The Exchange has the following whollyownedpropertyand casualty subsidiaries: ErieInsuranceCompany, ErieInsuranceCompany of New York, Erie Insurance Property &Casualty Company and Flagship City InsuranceCompany, and awholly owned life insurance company, Erie Family Life Insurance Company. Indemnityand the Exchange,and itswhollyowned subsidiaries, meet the definition of an insuranceholding company system.

All transactions withinaholding company system affecting themember insurers of the holding company system must be fair and reasonableand any chargesorfeesfor services performed must be reasonable. Approval by the applicableinsurance commissioner is requiredprior to the consummation of transactions affecting the members withinaholding company system.

Office leases We leasethe homeoffice from theExchange. SeeNote 8, "Leases". Lease expense totaled $6.1 millioninboth2020 and 2019 and $6.0 millionin2018. Operating expenses,including utilities, cleaning, repairs, real estate taxes, and property insurance, totaled $15.7 million, $16.7 million, and$13.5 million in 2020, 2019, and 2018, respectively. TheExchange andits subsidiariesreimburse us for rent costs andrelated operating expenses of shared facilities usedtoperform administrative services, which areallocatedbased upon usage or square footage occupied. Reimbursementsrelatedtothe use of this space totaled $4.6 million, $4.2 million, and$3.9 million in 2020, 2019, and 2018, respectively. We also had alease commitment with EFLfor afield officeuntil 2018. Annual rentals paidtoEFL under this lease totaled$0.4 million in 2018.

We previously ownedthreefield offices for which rentalcosts of shared facilities were allocatedbased upon usage or square footage occupied. In 2018, we sold thefield offices we owned to theExchange at thecurrent independent appraised value in order to align theownership interest of these facilities with thefunctions being performedatthese locations, which areclaims- related activities. We recognized againonthe sale of $3.4 million, whichisincludedin"Other (expense) income".

Notes receivablefrom EFL We previously held a$25 million surplus note issued to us by EFL that waspayableondemandonorafter December31, 2018. In 2018, EFL,withthe appropriateapproval from thePennsylvania Insurance Commissioner, satisfied itsobligation and repaid the surplus note.EFL paidrelated interest to us of $1.6 million in 2018.

Note 16. Concentrations of CreditRisk

Financial instruments that couldpotentially expose us to concentrations of creditriskinclude our unsecuredreceivables from the Exchange.Alarge majority of our revenue and receivablesare from the Exchange and itsaffiliates. Seealso Note1, "Nature of Operations".Net managementfee amounts andotherreimbursementsdue from theExchange andits affiliateswere $494.6 million and$468.6 million at December 31, 2020 and2019, respectively. Given thefinancialstrength of theExchange and historical experience of no credit losses, we previously didnot record acredit loss allowancetothese receivables. Upon adoption of ASU 2016-13, we recorded an allowancefor current expected creditlossesof$0.6 million related to the receivables from theExchange andaffiliates. Seealso Note2,"Significant Accounting Policies". There was no material change to this allowanceasofDecember 31, 2020.

80 Note 17. Commitments and Contingencies

In 2020, we enteredintoanagreement with abank for theestablishment of aloanparticipation program for agent loans. The maximum amount of loans to be funded through thisprogram is $100 million. We have committedtofund aminimum of 30% of each loan executedthrough this program.AsofDecember 31, 2020, the total loans executedunder this agreement totaled $14.9 million, of whichour portion of the loans is $6.4 million. Additionally, we have agreed to guaranteeaportion of the funding provided by theother participantsinthe programinthe event of default. As of December31, 2020, our maximum potential amount of future payments on theguaranteedportion is $1.5 million. All loan payments under theparticipation program are current as of December31, 2020.

We are involved in litigation arising in the ordinary course of conducting business.Inaccordancewithcurrent accounting standards for loss contingenciesand based upon information currentlyknown to us, we establish reserves for litigation when it is probablethat aloss associatedwith aclaim or proceeding hasbeen incurredand theamount of the loss or range of loss can be reasonablyestimated. Whennoamount within therange of loss is abetterestimate thanany other amount,weaccrue the minimum amount of the estimable loss. To the extent thatsuch litigation against us mayhave an exposure to aloss in excess of the amount we have accrued, we believe thatsuch excess would not be materialtoour financial condition, resultsofoperations, or cash flows. Legalfeesare expensed as incurred. We believe thatour accrualsfor legalproceedings are appropriateand, individuallyand in the aggregate, arenot expected to be material to our financialcondition, results of operations, or cashflows.

We review alllitigation on an ongoing basis when making accrual and disclosure decisions. For certainlegal proceedings, we cannot reasonablyestimate lossesorarange of loss, if any, particularlyfor proceedings that are in theirearly stages of development or where theplaintiffs seek indeterminate damages. Various factors, including, but not limitedto, theoutcomeof potentially lengthy discovery and theresolution of important factual questions, may need to be determined before probability canbeestablished or before aloss or range of loss can be reasonably estimated. If theloss contingencyinquestion is not both probableand reasonably estimable, we do not establish an accrualand the matter willcontinue to be monitored for any developmentsthat would make theloss contingencyboth probable and reasonablyestimable.Inthe event that alegal proceeding resultsinasubstantialjudgment against, or settlement by, us, there canbenoassurance thatany resulting liabilityor financial commitment would not have amaterialadverse effectonour financialcondition, results of operations, or cashflows.

81 Note 18. SupplementaryData on Cash Flows

Areconciliation of net income to netcashprovidedbyoperating activitiesaspresentedinthe StatementsofCashFlows is as follows for the years endedDecember 31: (in thousands) 2020 2019 2018

Cash flowsfromoperating activities: Netincome$293,304 $316,821 $288,224 Adjustmentstoreconcile net income to netcashprovidedbyoperating activities: Depreciation and amortization 21,195 16,813 13,368 Deferredincome tax(benefit)expense (5,162) 3,349 (1,358) Lease amortization expense 13,108 13,959 — Realized (gains) losses and impairmentsoninvestments(3,114) (5,908) 3,591 (Gain) loss on disposal of fixed assets (15) 75 (3,047) Net investment income 5,878 543 6,423 Increase (decrease) in deferred compensation 7,611 (1,541) (3,886) Increase in receivablesfrom affiliates(26,548) (19,505) (30,804) (Increase)decrease in accruedinvestment income (713) (170) 1,590 (Increase)decrease in federal income taxes recoverable(2,202) 7,700 21,738 Decrease (increase)inprepaidpension 41,227 28,798 (47,335) (Increase)decrease in prepaid expensesand other assets (2,569) (9,407) 6,446 (Decrease) increase in accounts payableand accruedexpenses (14,307) (3,627) 11,039 (Decrease) increase in commissions payable(625) 21,390 13,449 Increase (decrease) in accruedagent bonuses14,105 (7,409) (19,066) Increase in contract liability 1,422 2,646 3,213 Net cash providedbyoperating activities$342,595 $364,527 $263,585

Note 19. Subsequent Events

No itemswereidentified in thisperiod subsequent to thefinancialstatement datethat required adjustment or additional disclosure.

82 ITEM 9. CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTSONACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controlsand Procedures We maintaindisclosure controls andprocedures designedtoensure thatinformation required to be disclosed in our reportsfiled under theSecuritiesExchange Act of 1934, as amended, is recorded, processed, summarized andreported withinthe time periods specifiedinthe Securitiesand Exchange Commission rulesand forms, and that such information is accumulated and communicatedtomanagement,including our ChiefExecutive Officerand ChiefFinancialOfficer, as appropriate,toallow for timely decisions regarding required disclosures.

As requiredbythe Securities and Exchange Commission Rule 13a-15(e), we carriedout an evaluation, under thesupervision and withthe participation of management, including our ChiefExecutive Officerand ChiefFinancialOfficer, of the effectiveness of thedesign and operation of our disclosure controlsand procedures as of December31, 2020. Based upon the foregoing, our ChiefExecutive Officerand ChiefFinancialOfficer concluded that our disclosure controls and procedureswere effective.

ChangesinInternal Control over Financial Reporting There hasbeennochange in our internal controls overfinancial reporting during our most recent fiscalquarterthathas materiallyaffected, or is reasonablylikelytomaterially affectour internal controls overfinancial reporting. Our process for evaluating controls and proceduresiscontinuous andencompassesconstant improvement of thedesign and effectiveness of established controls and procedures.

Management's Report on Internal Control overFinancial Reporting Management is responsible for establishing andmaintaining adequate internalcontrol over financialreporting of ErieIndemnity Company, as definedinRules13a-15(f) under theExchange Act. Under the supervision andwiththe participation of our management, including our ChiefExecutive Officerand ChiefFinancial Officer, we conductedanevaluation of the effectiveness of theErie IndemnityCompany'sinternalcontrol over financialreporting based upon theframework in the Internal Control-IntegratedFramework issued in 2013 by theCommitteeofSponsoring Organizations of the Treadway Commission. Based upon our evaluation underthe framework in the Internal Control-IntegratedFramework issuedin2013, management hasconcluded that ErieIndemnity Company's internal control overfinancial reporting was effective as of December31, 2020.

/s/ Timothy G. NeCastro /s/ Gregory J. Gutting /s/ JulieM.Pelkowski Timothy G. NeCastro Gregory J. Gutting Julie M. Pelkowski President and Executive Vice President Senior Vice President ChiefExecutive Officerand ChiefFinancialOfficer and Controller February 25, 2021 February 25, 2021 February 25, 2021

Our independent auditor, Ernst &Young LLP, aregistered public accounting firm, hasissued an attestationreport on our internalcontrol over financialreporting. Thisreport appears on the following page.

ITEM 9B. OTHERINFORMATION

There was no additional information in the fourth quarterof2020 thathas not already been filedinaForm 8-K.

83 Report of IndependentRegisteredPublic Accounting Firm

To theBoard of Directorsand Shareholders of Erie IndemnityCompany

Opinion on Internal Control overFinancial Reporting

We have auditedErieIndemnity Company’s internalcontrol over financialreporting as of December31, 2020, based on criteria established in InternalControl-Integrated Framework issued by theCommitteeofSponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Erie IndemnityCompany (the "Company") maintained, in allmaterial respects, effective internalcontrol over financialreporting as of December31, 2020, based on theCOSO criteria.

We also have audited, in accordance with thestandards of the PublicCompany Accounting Oversight Board (United States) (PCAOB), the statementsoffinancialposition of the Company as of December31, 2020 and 2019, andthe related statements of operations, comprehensive income,shareholders’ equity, andcashflows for each of the threeyears in theperiod ended December31, 2020 and therelated notes(collectivelyreferred to as thefinancialstatements) of the Company and our report dated February 25, 2021 expressedanunqualifiedopinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control overfinancial reporting andfor its assessment of the effectiveness of internal control overfinancial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibilityistoexpress an opinion on the Company’s internal control over financialreporting based on our audit.Weare apublic accounting firm registered withthe PCAOB and arerequiredtobe independent withrespecttothe Company in accordancewiththe U.S. federalsecuritieslawsand the applicablerules and regulations of the Securities and Exchange Commission and thePCAOB.

We conductedour auditinaccordance with thestandards of the PCAOB.Those standards require that we planand perform the audittoobtain reasonableassurance about whethereffective internalcontrol over financialreporting was maintainedinall materialrespects.

Our audit includedobtaining an understanding of internalcontrol over financialreporting, assessing the risk thatamaterial weakness exists,testing andevaluating the design andoperating effectiveness of internal control based on the assessedrisk, and performing such other proceduresasweconsidered necessary in thecircumstances. We believe thatour audit providesa reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

Acompany’s internal control overfinancial reporting is aprocess designed to provide reasonable assurance regarding the reliabilityoffinancial reporting andthe preparation of financialstatements for externalpurposes in accordancewithgenerally acceptedaccounting principles. Acompany’s internal control overfinancial reporting includes thosepoliciesand procedures that(1) pertain to the maintenance of records that,inreasonabledetail, accurately andfairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recordedasnecessary to permit preparation of financialstatements in accordancewithgenerally accepted accounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets thatcould have amaterialeffectonthe financialstatements.

Because of itsinherent limitations, internal control overfinancial reporting may not prevent or detect misstatements.Also, projections of any evaluationofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changesinconditions, or that the degreeofcompliance with thepoliciesorprocedures maydeteriorate.

/s/Ernst &YoungLLP

Cleveland, OH February25, 2021

84 PARTIII

ITEM10. DIRECTORS, EXECUTIVEOFFICERS ANDCORPORATE GOVERNANCE

The information with respect to our outside directors, audit committee and audit committee financial experts and Section 16(a)beneficialownership reporting compliance, is incorporated hereinbyreferencetothe information statement on Schedule14C to be filed with the Securitiesand Exchange Commission no laterthan120 days after December31, 2020.

We have adopted aCode of Conduct thatapplies to allofour outside directors, officers and employees. We have previously filed acopy of theCode of Conduct as Exhibit 14.3 to theRegistrant's Form 10-K filedwith theSecurities and Exchange Commission on February 25, 2016. In addition to this, we have adopted aCode of Ethics for Senior Financial Officers that also appliestoour ChiefExecutive Officer, ChiefFinancialOfficer, ChiefAccounting Officer andany other person performing similarfunctions. We have previously filed acopy of theCode of Ethics for Senior Financial Officers as Exhibit14.4 to the Registrant's Form 8-K filedwith theSecuritiesand Exchange Commission on June 1, 2016. Our Code of Conduct and Code of Ethicsfor Senior Financial Officers are also availableonour websiteatwww.erieinsurance.com.

Executive Officers of the Registrant Age as of Name 12/31/2020 PrincipalOccupation andPositions for Past Five Years

President &Chief Executive Officer: Timothy G. NeCastro 60 President andChief Executive Officer sinceJanuary 2017; Chief Executive Officer, August 2016 through December2016; President and ChiefExecutive OfficerDesignate, June 2016 through July 2016; Senior Vice President,WestRegion, February 2010 through June 2016; Director, ErieFamilyLifeInsuranceCompany ("EFL"), ErieInsuranceCompany ("EIC"), Flagship City Insurance Company ("Flagship"), ErieInsuranceCompany of NewYork ("ENY") and ErieInsuranceProperty&Casualty Company ("EPC"). Executive Vice Presidents: Lorianne Feltz51Executive Vice President, Claims &Customer Service since November2016; Senior Vice President, Customer Service,January 2011 through November 2016.

Gregory J. Gutting 57 Executive Vice President and ChiefFinancialOfficer sinceAugust 2016; InterimExecutive Vice President andChiefFinancialOfficer, October2015 through July 2016; Senior Vice President and Controller, March 2009 through September2015; Director, EFL, EIC,Flagship, ENYand EPC.

Robert C. Ingram,III 62 Executive Vice President and ChiefInformation Officersince August 2012; Director, EFL, EIC, Flagship, ENYand EPC.

Douglas E. Smith 46 Executive Vice President,Sales&Products since November2016; Senior Vice President, Personal Lines, November2008 through October2016.

Dionne WallaceOakley53Executive VicePresident, HumanResources&Strategy since January 2018; Senior Vice President, HumanResources, September 2012 through December 2017.

85 ITEM 11. EXECUTIVE COMPENSATION

The information requiredbythisitemwithrespecttoexecutive compensation is incorporatedbyreferencetothe information statement on Schedule14C to be filed with the Securitiesand Exchange Commission no laterthan 120 days afterDecember 31, 2020.

ITEM 12. SECURITYOWNERSHIPOFCERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATEDSTOCKHOLDER MATTERS

The information with respect to security ownership of certain beneficial owners and management andsecurities authorized for issuanceunderequity compensation plans, is incorporated by reference to theinformation statement on Schedule14C to be filed with the Securities and Exchange Commission no laterthan120 days after December31, 2020.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information with respect to certainrelationships with our outside directors is incorporated by reference to theinformation statement on Schedule14C to be filed with the Securitiesand Exchange Commission no laterthan 120 days afterDecember 31, 2020.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information requiredbythisitemisincorporatedbyreferencetothe information statement on Schedule14C to be filed with theSecuritiesand Exchange Commission no laterthan120 days after December31, 2020.

86 PARTIV

ITEM 15. EXHIBITSAND FINANCIAL STATEMENT SCHEDULES

(a)The following documentsare filedaspart of thisreport:

1. Financial Statements Included in PartII, Item 8. "FinancialStatementsand Supplementary Data"containedinthis report.

Erie IndemnityCompany: •Report of Independent Registered PublicAccounting Firm on the EffectivenessofInternalControl over Financial Reporting •Report of Independent Registered PublicAccounting Firm on the Financial Statements •Statements of Operations for the threeyears endedDecember 31, 2020, 2019 and 2018 •Statements of Comprehensive Incomefor thethree years ended December31, 2020, 2019 and2018 •Statements of FinancialPosition as of December31, 2020 and 2019 •Statements of Shareholders'Equityfor the threeyears endedDecember 31, 2020, 2019 and 2018 •Statements of CashFlows for the three years ended December31, 2020, 2019 and2018 •NotestoFinancial Statements

2. Financial Statement Schedules Allschedules are not required, not applicable,orthe information is includedinthe financialstatementsornotes thereto.

Page 3. Exhibit Index 88

ITEM 16. FORM 10-K SUMMARY

None.

87 SIGNATURES

Pursuant to the requirementsofSection13or15(d) of theSecurities Exchange Actof1934, theRegistrant has duly caused this report to be signedonits behalfbythe undersigned, thereuntoduly authorized.

February 25, 2021 ERIE INDEMNITYCOMPANY (Registrant)

By: /s/ Timothy G. NeCastro Timothy G. NeCastro, President andCEO (Principal Executive Officer)

Pursuant to the requirementsofthe SecuritiesExchange Actof1934, this report hasbeensignedbelow by the following persons on behalfofthe Registrant and in the capacitiesand on thedateindicated.

February 25, 2021 /s/ Timothy G. NeCastro Timothy G. NeCastro, President andCEO (PrincipalExecutive Officer)

/s/ GregoryJ.Gutting GregoryJ.Gutting, Executive VicePresident andCFO (Principal Financial Officer)

/s/ JulieM.Pelkowski JulieM.Pelkowski,Senior Vice President andController (PrincipalAccounting Officer)

Board of Directors:

/s/ J. Ralph Borneman, Jr. /s/ C. ScottHartz J. Ralph Borneman, Jr. C. ScottHartz

/s/ Eugene C. Connell/s/ BrianA.Hudson, Sr. Eugene C. Connell BrianA.Hudson, Sr.

/s/ Salvatore Correnti/s/ George R. Lucore Salvatore CorrentiGeorge R. Lucore

/s/ LuAnn Datesh /s/ Thomas W. Palmer LuAnn Datesh Thomas W. Palmer

/s/Jonathan HirtHagen /s/ Elizabeth Hirt Vorsheck JonathanHirt Hagen Elizabeth Hirt Vorsheck

/s/ ThomasB.Hagen Thomas B. Hagen, Chairman

92 The words of ERIE’s co-founder H.O. Hirt to “never lose the human touch” took on a more powerful meaning in 2020. In the absence of handshakes and close conversations, we found diff erent ways to connect. We found creative ways to help. We found new ways to serve. The human touch was not lost in 2020; a more meaningful way to provide it was found.

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Member • Erie Insurance Group Home Offi ce • 100 Erie Insurance Place on Perry Square • Erie, Pennsylvania 16530 814.870.2000 • erieinsurance.com • An Equal Opportunity Employer

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