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Solid products, competitive pricing and superior service combine to make up ERIE’s value proposition; the hallmark, above all, is ERIE’s superior service capabilities. This was particularly evident in early 2010 when ERIE experienced a heavier number of weather–related claims. Our claims operation never hesitated. ERIE Employees and Agents worked together to resolve claims quickly and ef fi ciently to the resounding satisfaction of ERIE Customers. 

As we work to strengthen our value proposition for our Customers, Agents, Employees and Shareholders, it’s imperative that we remain focused and invest in those things that propel us forward. ERIE’s business model requires ef fi ciency. Improving our processes to better manage the cost of our operation is paramount to our success. Examples of this can be found throughout the organization from the way we handle document printing and imaging to the way we’re managing our auto quote reports. It’s process improvements like these that contributed to Indemnity’s 2010 management margin of 19.4 percent, up from 18.7 in 2009. 

## 2010 financial results 

Our fi nancial results re fl ect our strong execution. Net income per share-diluted increased 51 percent to $2.85. Strong top-line growth, cost management and a strategic investment approach, strengthened by a favorable investment environment, drove our 2010 results. 

For three years running, ERIE’s Property & Casualty Group has delivered increases in direct written premium, up by 4.5 percent at year-end 2010. This fueled the 4.6 percent increase in Indemnity’s management fee revenue. By comparison, 2010 marks the fi rst time in four years that the property and casualty insurance industry has seen an increase in premium, which Conning Research & Consulting estimates at 0.8 percent. 

For ERIE, volume increases in both personal and commercial policies in force account for most of our premium growth. In fact, considering the economic challenges confronting businesses today, our commercial unit growth was especially strong. We fi nished the year with a healthy all-lines customer retention rate of 90.7 percent, one of the highest in the industry. We also realized a modest increase in average premium per policy as we managed the competitive landscape effectively. We expect continued pricing improvements in personal lines in 2011 with small improvements in commercial lines. Additionally, our 2010 statutory combined ratio remains under 100 at 99–3.4 points better than the industry’s estimated combined ratio of 102.4 (Conning). 

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The balance sheets of both the Exchange and Indemnity continue to be strong. A.M. Best recognized our fi nancial strength in its analysis, renewing the Exchange’s and the property and casualty subsidiaries’ rating of A+ (Superior)—a rating earned by only 8 percent of all insurance groups rated by A.M. Best. Erie Family Life retained its A.M. Best rating of A (Excellent). 

The Ward Group also recognized the strength of the Erie Insurance Group’s balance sheet—as well as the consistency of our fi nancial results—when it again named ERIE to the Ward’s Top 50 Performing Insurance Companies out of 3,000 property/casualty insurers. 

