What are Erie Indemnity's Business Segments?
Our primary purpose is to manage the affairs at the Exchange for the benefit of
the policyholders. The Exchange is our sole customer and our earnings primarily
come from management fees based on the direct and assumed premiums written by
the Exchange. We have no direct competition in providing these services to the
Exchange.
The Exchange generates revenue by insuring preferred and standard risks, with
personal lines comprising 70% of direct and assumed premiums written and commercial
lines comprising the remaining 30%. The principal personal lines products are
private passenger automobile and homeowners. The principal commercial lines
products are commercial multi-peril, workers compensation and commercial automobile.
Historically, due to policy renewal and sales patterns, the Exchange’s
direct and assumed premiums written are greater in the second and third quarters
than in the first and fourth quarters of the calendar year.
The Exchange is represented by independent agencies that serve as its sole
distribution channel. In addition to their principal role as salespersons, the
independent agents play a significant role as underwriting and service providers
and are an integral part of the Exchange’s success.
Our results of operations are tied to the growth and financial condition of
the Exchange. If any events occurred that impaired the Exchange’s ability
to grow or sustain its financial condition, including but not limited to lower
financial strength ratings, significant catastrophe losses, disruption in the
independent agency relationships, or products offered not meeting customer demands,
the Exchange could experience difficulty retaining its existing business and
attracting new business. A decline in the business of the Exchange would likely
result in a reduction of total premiums paid and a corresponding decrease in
the amount of the management fees we receive. We also have an exposure to a
concentration of credit risk related to the unsecured receivables due from the
Exchange for its management fee.
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