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. 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). 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. 4 2010 financial results 2010 A.M. Best  Company 2010 Ward  Group