Erie Reports Storm Losses, Loss Reserve Increases

December 25, 2002

Erie Insurance Group announced that its property and casualty companies would increase loss and loss adjustment expense reserves by approximately $184 million in the fourth quarter of 2002. The company also reported its expected losses due to recent storms.

The reserve increases, all related to the Group’s direct business, are being taken in response to loss experience in the Group’s auto, homeowners and workers’ compensation lines of business. Increased loss severity, particularly in automobile bodily injury and catastrophic medical claims in the workers’ compensation line, is the primary driver of these increased reserve indications.

The reserve increases will result in after-tax charges to Erie Indemnity Company of approximately $.03 to $.06 in the fourth quarter. These charges are a result of the portion of this reserve increase that is attributable to the insurance subsidiaries of Erie Indemnity Company. The charges take into effect recoveries expected under an intercompany reinsurance agreement with Erie Insurance Exchange.

Erie Insurance Group expects to incur more than 4,500 claims as a result of damage caused by tornados and hail on November 10 and 11 and ice storms on December 4 and 5, 2002. The November losses occurred primarily in Pennsylvania and Ohio, while the December storms occurred primarily in North Carolina.

At this time, Erie Insurance Group estimates the combined exposure from claims arising from these storms will result in incurred losses of approximately $21 to $24 million, all in its direct insurance business. Erie Indemnity Company will incur losses in its underwriting operations of $.01 per share after taxes due to these storms in the fourth quarter.

Erie Indemnity Company is the principal management company for the member companies of the Erie Insurance Group, which includes the Erie Insurance Exchange, Flagship City Insurance Company, Erie Insurance Company, Erie Insurance Property and Casualty Company, Erie Insurance Company of New York and Erie Family Life Insurance Company.

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