Best Affirms Ratings for Erie’s P/C Companies; Outlook Stable

May 3, 2005

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Pennsylvania-based Erie Insurance Group’s property and casualty companies (Erie), which are managed by its publicly-traded company, Erie Indemnity Company (Erie Indemnity).

Concurrently, A.M. Best has assigned issuer credit ratings (ICR) of “aa-” to Erie’s property/casualty affiliates. A.M. Best has also assigned an ICR of “a-” to Erie Indemnity. All ratings have a stable outlook.

The rating affirmation of Erie reflects its strong risk-adjusted capitalization, its competitive position in the independent agency channel and favorable business profile.

The stable outlook reflects numerous strategic initiatives to improve operating results as reflected by management’s continued focus on underwriting discipline and profitability as well as quality growth.

Additionally, Erie’s capital position is favorably impacted by the financial position of Erie Indemnity, which as of year-end 2004 had over $1 billion in shareholders’ equity and no long-term debt obligations. Erie maintains a strong market presence reflective of its reputation for excellent customer service and extensive local market knowledge. This combination enables the group to record overall renewal retention ratios of slightly less than 90% across most lines of business. In recent years, Erie furthered its market presence and geographic risk dispersion by cautiously expanding beyond Pennsylvania to over 11 states and the District of Columbia.

Prior year declines in underwriting experience were attributed to inadequate rates, increased loss cost trends and weather-related events. In recent years, improved operating results have been reflective of significant rate actions, overall firm market conditions, reduced catastrophe losses, greater risk segmentation, as well as a steady stream of investment earnings.

The financial strength rating of A+ (Superior) has been affirmed, and issuer credit ratings of “aa-” have been assigned to Erie Insurance Group and its following property/casualty affiliates:

* Erie Insurance Exchange
* Erie Insurance Company
* Erie Insurance Company of New York
* Erie Insurance Property & Casualty Company
* Flagship City Insurance Company.

An issuer credit rating of “a-” has been assigned to Erie Indemnity Company.

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