A.M. Best Affirms Ratings of Erie's Property and Casualty Companies a

A.M. Best Affirms Ratings of Erie's Property and Casualty Companies and Erie Family Life; Assigns Issuer Credit Ratings

    Business Editors

    OLDWICK, N.J.--(BUSINESS WIRE)--May 3, 2005--A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Erie Insurance Group's property and casualty companies (Erie), which are managed by its publicly-traded company, Erie Indemnity Company (Erie Indemnity) (NASDAQ: ERIE). Additionally, A.M. Best has affirmed the financial strength rating of A (Excellent) of Erie's life affiliate, Erie Family Life Insurance Company (Erie Family Life) (OTC BB: ERIF) (all of Erie, PA).
    Concurrently, A.M. Best has assigned issuer credit ratings (ICR) of "aa-" to Erie's property/casualty affiliates and has assigned an ICR of "a" to Erie Family Life. 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 affirmation of Erie Family Life's rating reflects the competitive advantage it derives from Erie's favorable property/casualty regional business, a positive statutory operating earnings trend and a favorable level of risk-adjusted capitalization. This rating also recognizes Erie Family Life's integral position within Erie and Erie's demonstrated financial support for the life company.
    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

    The financial strength rating of A (Excellent) has been affirmed and an issuer credit rating of "a" has been assigned to Erie Family Life Insurance Company.
    An issuer credit rating of "a-" has been assigned to Erie Indemnity Company.
    For Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
    For current Best's Ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit http://www.ambest.com/pc.
    A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.

--30--RG/ny*

CONTACT: A.M. Best Co. Public Relations: Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Striegel, 908-439-2200, ext. 5378 rachelle.striegel@ambest.com or Analysts: Maurice Thomas - P/C, 908-439-2200, ext. 5794 maurice.thomas@ambest.com or Rodolphe di Maio - L/H, 908-439-2200, ext. 5521 rodolphe.dimaio@ambest.com

KEYWORD: NEW JERSEY INDUSTRY KEYWORD: INSURANCE SOURCE: A.M. Best Co.

Copyright Business Wire 2005