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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___to___
Commission file number 0-24000
| | | | | | | | |
| ERIE INDEMNITY COMPANY | |
| (Exact name of registrant as specified in its charter) | |
| | | | | | | | | | | | | | |
| Pennsylvania | | 25-0466020 | |
| (State or other jurisdiction of | | (IRS Employer | |
| incorporation or organization) | | Identification No.) | |
| | | | | | | | | | | | | | | | | | | | |
| 100 Erie Insurance Place, | Erie, | Pennsylvania | | 16530 | |
| (Address of principal executive offices) | | (Zip Code) | |
| | | | | | | | | | | |
| 814 | 870-2000 | |
| (Registrant’s telephone number, including area code) | |
| | | | | | | | |
| Not applicable | |
| (Former name, former address and former fiscal year, if changed since last report) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | | | | | | | |
Class A common stock, | stated value $0.0292 per share | | ERIE | | NASDAQ Stock Market, LLC | |
(Title of each class) | | (Trading Symbol) | | (Name of each exchange on which registered) | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | |
| | | | | | | | |
Smaller reporting company | ☐ | | Emerging growth company | ☐ | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the registrant’s Class A Common Stock as of the latest practicable date was 46,189,068 at October 25, 2024.
The number of shares outstanding of the registrant’s Class B Common Stock as of the latest practicable date was 2,542 at October 25, 2024.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ERIE INDEMNITY COMPANY
STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Operating revenue | | | | | | | |
Management fee revenue - policy issuance and renewal services | $ | 769,162 | | | $ | 649,049 | | | $ | 2,195,734 | | | $ | 1,840,478 | |
Management fee revenue - administrative services | 17,154 | | | 16,151 | | | 51,139 | | | 46,976 | |
Administrative services reimbursement revenue | 206,754 | | | 187,118 | | | 604,349 | | | 544,411 | |
Service agreement revenue | 6,816 | | | 6,620 | | | 19,803 | | | 19,408 | |
Total operating revenue | 999,886 | | | 858,938 | | | 2,871,025 | | | 2,451,273 | |
| | | | | | | |
Operating expenses | | | | | | | |
Cost of operations - policy issuance and renewal services | 613,007 | | | 523,349 | | | 1,757,531 | | | 1,513,690 | |
Cost of operations - administrative services | 206,754 | | | 187,118 | | | 604,349 | | | 544,411 | |
| | | | | | | |
Total operating expenses | 819,761 | | | 710,467 | | | 2,361,880 | | | 2,058,101 | |
Operating income | 180,125 | | | 148,471 | | | 509,145 | | | 393,172 | |
| | | | | | | |
Investment income | | | | | | | |
Net investment income | 17,322 | | | 14,642 | | | 49,235 | | | 30,360 | |
Net realized and unrealized investment gains (losses) | 2,925 | | | (2,227) | | | 2,983 | | | (9,246) | |
Net impairment losses recognized in earnings | (698) | | | (113) | | | (3,763) | | | (1,917) | |
| | | | | | | |
Total investment income | 19,549 | | | 12,302 | | | 48,455 | | | 19,197 | |
| | | | | | | |
| | | | | | | |
Other income | 1,168 | | | 3,001 | | | 7,871 | | | 9,643 | |
Income before income taxes | 200,842 | | | 163,774 | | | 565,471 | | | 422,012 | |
Income tax expense | 41,012 | | | 32,734 | | | 117,186 | | | 86,879 | |
Net income | $ | 159,830 | | | $ | 131,040 | | | $ | 448,285 | | | $ | 335,133 | |
| | | | | | | |
| | | | | | | |
Net income per share | | | | | | | |
Class A common stock – basic | $ | 3.43 | | | $ | 2.81 | | | $ | 9.63 | | | $ | 7.20 | |
Class A common stock – diluted | $ | 3.06 | | | $ | 2.51 | | | $ | 8.57 | | | $ | 6.41 | |
Class B common stock – basic and diluted | $ | 515 | | | $ | 422 | | | $ | 1,444 | | | $ | 1,079 | |
| | | | | | | |
| | | | | | | |
Weighted average shares outstanding – Basic | | | | | | | |
Class A common stock | 46,189,059 | | | 46,189,037 | | | 46,189,038 | | | 46,188,962 | |
Class B common stock | 2,542 | | | 2,542 | | | 2,542 | | | 2,542 | |
| | | | | | | |
Weighted average shares outstanding – Diluted | | | | | | | |
Class A common stock | 52,306,514 | | | 52,299,369 | | | 52,301,001 | | | 52,298,655 | |
Class B common stock | 2,542 | | | 2,542 | | | 2,542 | | | 2,542 | |
| | | | | | | |
Dividends declared per share | | | | | | | |
Class A common stock | $ | 1.275 | | | $ | 1.19 | | | $ | 3.825 | | | $ | 3.57 | |
Class B common stock | $ | 191.25 | | | $ | 178.50 | | | $ | 573.75 | | | $ | 535.50 | |
See accompanying notes to Financial Statements. See Note 11, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Statements of Operations.
ERIE INDEMNITY COMPANY
STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net income | $ | 159,830 | | | $ | 131,040 | | | $ | 448,285 | | | $ | 335,133 | |
| | | | | | | |
Other comprehensive income (loss), net of tax | | | | | | | |
Change in unrealized holding gains (losses) on available-for-sale securities | 20,227 | | | (5,902) | | | 21,014 | | | 2,846 | |
Pension and other postretirement plans | (1,538) | | | (2,742) | | | (6,048) | | | (8,226) | |
Total other comprehensive income (loss), net of tax | 18,689 | | | (8,644) | | | 14,966 | | | (5,380) | |
Comprehensive income | $ | 178,519 | | | $ | 122,396 | | | $ | 463,251 | | | $ | 329,753 | |
See accompanying notes to Financial Statements. See Note 11, "Accumulated Other Comprehensive Income (Loss)", for amounts reclassified out of accumulated other comprehensive income (loss) into the Statements of Operations.
ERIE INDEMNITY COMPANY
STATEMENTS OF FINANCIAL POSITION
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | |
| September 30, | | December 31, | |
| 2024 | | 2023 | |
Assets | (Unaudited) | | | |
Current assets: | | | | |
Cash and cash equivalents (includes restricted cash of $23,547 and $12,542, respectively) | $ | 221,213 | | | $ | 144,055 | | |
Available-for-sale securities | 48,575 | | | 82,017 | | |
| | | | |
Receivables from Erie Insurance Exchange and affiliates, net | 736,973 | | | 625,338 | | |
Prepaid expenses and other current assets, net | 80,141 | | | 69,321 | | |
| | | | |
Accrued investment income | 10,456 | | | 9,458 | | |
Total current assets | 1,097,358 | | | 930,189 | | |
| | | | |
Available-for-sale securities, net | 1,000,282 | | | 879,224 | | |
Available-for-sale securities lent | 8,135 | | | 0 | | |
Equity securities | 85,346 | | | 84,253 | | |
| | | | |
Fixed assets, net | 480,707 | | | 442,610 | | |
Agent loans, net | 79,829 | | | 58,434 | | |
| | | | |
Defined benefit pension plan | 64,172 | | | 34,320 | | |
| | | | |
Other assets, net | 48,318 | | | 42,934 | | |
Total assets | $ | 2,864,147 | | | $ | 2,471,964 | | |
| | | | |
Liabilities and shareholders' equity | | | | |
Current liabilities: | | | | |
Commissions payable | $ | 426,341 | | | $ | 353,709 | | |
Agent incentive compensation | 60,073 | | | 68,077 | | |
Accounts payable and accrued liabilities | 194,649 | | | 175,622 | | |
Dividends payable | 59,377 | | | 59,377 | | |
Contract liability | 42,754 | | | 41,210 | | |
Deferred executive compensation | 15,836 | | | 10,982 | | |
Securities lending payable | 7,905 | | | 0 | | |
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| | | | |
| | | | |
Total current liabilities | 806,935 | | | 708,977 | | |
| | | | |
Defined benefit pension plan | 27,757 | | | 26,260 | | |
| | | | |
Contract liability | 21,220 | | | 19,910 | | |
Deferred executive compensation | 24,010 | | | 20,936 | | |
Deferred income taxes, net | 12,777 | | | 11,481 | | |
Other long-term liabilities | 23,493 | | | 21,565 | | |
Total liabilities | 916,192 | | | 809,129 | | |
| | | | |
Shareholders’ equity | | | | |
Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 shares outstanding | 1,992 | | | 1,992 | | |
Class B common stock, convertible at a rate of 2,400 Class A shares for one Class B share, stated value $70 per share; 3,070 shares authorized; 2,542 shares issued and outstanding | 178 | | | 178 | | |
Additional paid-in-capital | 16,466 | | | 16,466 | | |
Accumulated other comprehensive income (loss) | 1,566 | | | (13,400) | | |
Retained earnings | 3,073,843 | | | 2,803,689 | | |
| | | | |
Total contributed capital and retained earnings | 3,094,045 | | | 2,808,925 | | |
Treasury stock, at cost; 22,110,132 shares held | (1,168,719) | | | (1,169,165) | | |
Deferred compensation | 22,629 | | | 23,075 | | |
Total shareholders’ equity | 1,947,955 | | | 1,662,835 | | |
Total liabilities and shareholders’ equity | $ | 2,864,147 | | | $ | 2,471,964 | | |
See accompanying notes to Financial Statements.
ERIE INDEMNITY COMPANY
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Three and nine months ended September 30, 2024
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A common stock | Class B common stock | Additional paid-in-capital | Accumulated other comprehensive (loss) income | Retained earnings | Treasury stock | Deferred compensation | Total shareholders' equity |
Balance, December 31, 2023 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | (13,400) | | $ | 2,803,689 | | $ | (1,169,165) | | $ | 23,075 | | $ | 1,662,835 | |
| | | | | | | | |
Net income | | | | | 124,552 | | | | 124,552 | |
Other comprehensive loss | | | | (1,830) | | | | | (1,830) | |
Dividends declared: | | | | | | | | |
Class A $1.275 per share | | | | | (58,891) | | | | (58,891) | |
Class B $191.25 per share | | | | | (486) | | | | (486) | |
Net purchase of treasury stock (1) | | | 0 | | | | 0 | | | 0 | |
Deferred compensation | | | | | | (861) | | 861 | | 0 | |
Rabbi trust distribution (2) | | | | | | 709 | | (709) | | 0 | |
Balance, March 31, 2024 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | (15,230) | | $ | 2,868,864 | | $ | (1,169,317) | | $ | 23,227 | | $ | 1,726,180 | |
Net income | | | | | 163,903 | | | | 163,903 | |
Other comprehensive loss | | | | (1,893) | | | | | (1,893) | |
Dividends declared: | | | | | | | | |
Class A $1.275 per share | | | | | (58,891) | | | | (58,891) | |
Class B $191.25 per share | | | | | (486) | | | | (486) | |
Net purchase of treasury stock (1) | | | 0 | | | | 0 | | | 0 | |
Deferred compensation | | | | | | (518) | | 518 | | 0 | |
Rabbi trust distribution (2) | | | | | | 1,538 | | (1,538) | | 0 | |
Balance, June 30, 2024 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | (17,123) | | $ | 2,973,390 | | $ | (1,168,297) | | $ | 22,207 | | $ | 1,828,813 | |
Net income | | | | | 159,830 | | | | 159,830 | |
Other comprehensive income | | | | 18,689 | | | | | 18,689 | |
Dividends declared: | | | | | | | | |
Class A $1.275 per share | | | | | (58,891) | | | | (58,891) | |
Class B $191.25 per share | | | | | (486) | | | | (486) | |
Net purchase of treasury stock (1) | | | 0 | | | | 0 | | | 0 | |
Deferred compensation | | | | | | (422) | | 422 | | 0 | |
| | | | | | | | |
Balance, September 30, 2024 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | 1,566 | | $ | 3,073,843 | | $ | (1,168,719) | | $ | 22,629 | | $ | 1,947,955 | |
(1)Net purchase of treasury stock in 2024 includes the repurchase of our Class A common stock in the open market that were subsequently distributed to satisfy stock-based compensation awards.
(2)Distributions of our Class A shares were made from the rabbi trust to five incentive compensation deferral plan participants in 2024.
ERIE INDEMNITY COMPANY
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Three and nine months ended September 30, 2023
(dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A common stock | Class B common stock | Additional paid-in-capital | Accumulated other comprehensive (loss) income | Retained earnings | Treasury stock | Deferred compensation | Total shareholders' equity |
Balance, December 31, 2022 | $ | 1,992 | | $ | 178 | | $ | 16,481 | | $ | (7,414) | | $ | 2,583,261 | | $ | (1,168,949) | | $ | 22,859 | | $ | 1,448,408 | |
| | | | | | | | |
Net income | | | | | 86,241 | | | | 86,241 | |
Other comprehensive income | | | | 7,752 | | | | | 7,752 | |
Dividends declared: | | | | | | | | |
Class A $1.19 per share | | | | | (54,965) | | | | (54,965) | |
Class B $178.50 per share | | | | | (454) | | | | (454) | |
Net purchase of treasury stock (1) | | | (15) | | | | 0 | | | (15) | |
Deferred compensation | | | | | | (822) | | 822 | | 0 | |
Rabbi trust distribution (2) | | | | | | 416 | | (416) | | 0 | |
Balance, March 31, 2023 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | 338 | | $ | 2,614,083 | | $ | (1,169,355) | | $ | 23,265 | | $ | 1,486,967 | |
Net income | | | | | 117,852 | | | | 117,852 | |
Other comprehensive loss | | | | (4,488) | | | | | (4,488) | |
Dividends declared: | | | | | | | | |
Class A $1.19 per share | | | | | (54,965) | | | | (54,965) | |
Class B $178.50 per share | | | | | (454) | | | | (454) | |
Net purchase of treasury stock (1) | | | 0 | | | | 0 | | | 0 | |
Deferred compensation | | | | | | (621) | | 621 | | 0 | |
Rabbi trust distribution (2) | | | | | | 1,596 | | (1,596) | | 0 | |
Balance, June 30, 2023 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | (4,150) | | $ | 2,676,516 | | $ | (1,168,380) | | $ | 22,290 | | $ | 1,544,912 | |
Net income | | | | | 131,040 | | | | 131,040 | |
Other comprehensive loss | | | | (8,644) | | | | | (8,644) | |
Dividends declared: | | | | | | | | |
Class A $1.19 per share | | | | | (54,965) | | | | (54,965) | |
Class B $178.50 per share | | | | | (454) | | | | (454) | |
Net purchase of treasury stock (1) | | | 0 | | | | 0 | | | 0 | |
Deferred compensation | | | | | | (381) | | 381 | | 0 | |
| | | | | | | | |
Balance, September 30, 2023 | $ | 1,992 | | $ | 178 | | $ | 16,466 | | $ | (12,794) | | $ | 2,752,137 | | $ | (1,168,761) | | $ | 22,671 | | $ | 1,611,889 | |
(1)Net purchase of treasury stock in 2023 includes the repurchase of our Class A common stock in the open market that were subsequently distributed to satisfy stock-based compensation awards.
(2)Distributions of our Class A shares were made from the rabbi trust to five incentive compensation deferral plan participants in 2023.
See accompanying notes to Financial Statements.
ERIE INDEMNITY COMPANY
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| | | | | | | | | | | | | | |
| | Nine months ended September 30, |
| | 2024 | | 2023 |
Cash flows from operating activities | | | | |
Management fee received | | $ | 2,162,259 | | | $ | 1,799,681 | |
Administrative services reimbursements received | | 557,361 | | | 538,943 | |
Service agreement revenue received | | 19,804 | | | 19,367 | |
Net investment income received | | 49,047 | | | 42,579 | |
| | | | |
Commissions paid to agents | | (1,067,993) | | | (889,510) | |
Incentive compensation paid to agents | | (88,299) | | | (112,968) | |
Salaries and wages paid | | (189,088) | | | (178,176) | |
Pension contribution and employee benefits paid | | (90,217) | | | (150,992) | |
General operating expenses paid | | (229,675) | | | (226,949) | |
Administrative services expenses paid | | (581,527) | | | (540,834) | |
Income taxes paid | | (123,881) | | | (68,372) | |
| | | | |
Net cash provided by operating activities | | 417,791 | | | 232,769 | |
| | | | |
Cash flows from investing activities | | | | |
Purchase of investments: | | | | |
Available-for-sale securities | | (373,381) | | | (206,616) | |
Equity securities | | (25,665) | | | (26,195) | |
| | | | |
Other investments | | (7,000) | | | (7) | |
Proceeds from investments: | | | | |
Available-for-sale securities sales | | 156,357 | | | 126,361 | |
Available-for-sale securities maturities/calls | | 152,174 | | | 55,772 | |
Equity securities | | 29,953 | | | 14,919 | |
| | | | |
Other investments | | 0 | | | 853 | |
Purchase of fixed assets | | (78,202) | | | (72,101) | |
| | | | |
Loans to agents and others | | (32,317) | | | (5,473) | |
Collections on agent loans | | 7,675 | | | 6,757 | |
Net cash used in investing activities | | (170,406) | | | (105,730) | |
| | | | |
Cash flows from financing activities | | | | |
| | | | |
| | | | |
Dividends paid to shareholders | | (178,132) | | | (166,256) | |
| | | | |
| | | | |
| | | | |
| | | | |
Net changes in cash collateral for securities lent | | 7,905 | | | — | |
Net cash used in financing activities | | (170,227) | | | (166,256) | |
| | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | 77,158 | | | (39,217) | |
Cash, cash equivalents and restricted cash beginning of period | | 144,055 | | | 142,090 | |
Cash, cash equivalents and restricted cash end of period | | $ | 221,213 | | | $ | 102,873 | |
| | | | |
Supplemental disclosure of noncash transactions | | | | |
Liability incurred to purchase fixed assets | | $ | 10,792 | | | $ | — | |
Operating lease assets obtained in exchange for lease liabilities | | $ | 7,106 | | | $ | 7,674 | |
| | | | |
| | | | |
See accompanying notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Nature of Operations
Erie Indemnity Company ("Indemnity", "we", "us", "our") is a publicly held Pennsylvania business corporation that has since its incorporation in 1925 served as the attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange ("Exchange"). The Exchange, which also commenced business in 1925, is a Pennsylvania-domiciled reciprocal insurer that writes property and casualty insurance.
Our primary function as attorney-in-fact is to perform policy issuance and renewal services on behalf of the subscribers at the Exchange. We also act as attorney-in-fact on behalf of the subscribers at the Exchange with respect to all claims handling and investment management services, as well as the service provider for all claims handling, life insurance and investment management services for the Exchange's insurance subsidiaries, collectively referred to as "administrative services". Acting as attorney-in-fact in these two capacities is done in accordance with a subscriber's agreement (a limited power of attorney) executed individually by each subscriber (policyholder), which appoints Indemnity as each subscriber's attorney-in-fact to transact certain business on their behalf. In accordance with the subscriber's agreement for acting as attorney-in-fact in these two capacities, we retain a management fee calculated as a percentage of the direct and affiliated assumed premiums written by the Exchange.
The policy issuance and renewal services we provide on behalf of the subscribers at the Exchange are related to the sales, underwriting and issuance of policies. The sales related services we provide include agent compensation and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written as well as incentive compensation, which is earned by achieving targeted measures. The underwriting services we provide include underwriting and policy processing. The remaining services we provide include customer service and administrative support. We also provide information technology services that support all the functions listed above. Included in these expenses are allocations of costs for departments that support these policy issuance and renewal functions.
Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the subscribers at the Exchange with respect to its administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. Claims handling services include costs incurred in the claims process, including the adjustment, investigation, defense, recording and payment functions. Life insurance management services include costs incurred in the management and processing of life insurance business. Investment management services are related to investment trading activity, accounting and all other functions attributable to the investment of funds. Included in these expenses are allocations of costs for departments that support these administrative functions. The subscriber's agreement and service agreements provide for reimbursement of amounts incurred for these services to Indemnity. Reimbursements are settled at cost. State insurance regulations require that intercompany service agreements and any material amendments be approved in advance by the state insurance department.
Our results of operations are tied to the growth and financial condition of the Exchange. If any events occurred that impaired the Exchange’s ability to grow or sustain its financial condition, including but not limited to reduced financial strength ratings, disruption in the independent agency relationships, significant catastrophe losses or products not meeting customer demands, the Exchange could find it more difficult to retain its existing business and attract new business. A decline in the business of the Exchange almost certainly could have as a consequence a decline in the total premiums paid and a correspondingly adverse effect on the amount of the management fees we receive. We also have an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for net management fee and other reimbursements. See Note 12, "Concentrations of Credit Risk".
Note 2. Significant Accounting Policies
Basis of presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, refer to the financial statements and footnotes included in our Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission ("SEC") on February 26, 2024.
Use of estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Recently issued accounting standards and disclosure rules
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which requires entities to disclose significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported period of profit or loss, and requires entities with a single reporting segment to provide all disclosures required by Topic 280. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The update is required to be applied retrospectively to prior periods presented in the financial statements, based on the significant segment expense categories identified and disclosed in the period of adoption. This will have no impact on our financial statements. We are currently evaluating the impact of adoption on our disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures", which requires entities to disclose specific categories in an effective tax rate reconciliation, additional information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments can be applied on either a prospective or retrospective basis. This will have no impact on our financial statements. We are currently evaluating the impact of adoption on our disclosures.
In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, "The Enhancement and Standardization of Climate-Related Disclosures for Investors", requiring registrants to disclose certain climate-related information in registration statements and annual reports. The final rules include disclosure of climate-related risks that are reasonably likely to have a material impact on a registrant’s business, results of operations or financial condition. Disclosures related to significant effects of severe weather events and other natural conditions and amounts related to carbon offsets and renewable energy credits or certificates are required in the financial statements in certain circumstances. Disclosure requirements will phase in for fiscal years beginning in 2025 and be applied prospectively upon adoption. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending ongoing litigation. We are currently evaluating the impact of adoption on our disclosures.
Other assets
Other assets primarily include limited partnership investments, other loans receivable, held-to-maturity securities, operating lease assets and other long-term prepaid assets. Limited partnership investments are recorded using the equity method of accounting. Other loans receivable include loans issued to fund real estate development projects supporting revitalization efforts in our community. The loans are carried at unpaid principal balance, including any paid-in-kind interest capitalized as additional principal, if applicable, net of a current expected credit loss allowance. Any current portion of other loans receivable is recorded in prepaid expenses and other current assets. Held-to-maturity securities are carried at amortized cost, net of a current expected credit loss allowance. The allowances are calculated using the estimated value of, and priority rights to, collateral in the event of default or external loss rates based on comparable losses, and considers current market conditions and forecasted information. Changes to the allowances are recognized in earnings as adjustments to net impairment recoveries (losses) or other income (expense) depending on the nature of the asset. Interest on other loans receivable and held-to-maturity securities is recorded primarily in investment income as earned.
Securities lending
Beginning in May 2024 we entered into securities lending transactions, managed by a third-party banking institution, whereby securities are loaned to unaffiliated financial institutions for short periods of time. The securities lending activity is accounted for as a secured borrowing and therefore the securities loaned, primarily available-for-sale securities, are carried as invested assets on our Statement of Financial Position, while the obligation to return the cash collateral is recorded as a current liability. The cash collateral received at the inception of the loan is reinvested and the related income is recognized in net investment income. Noncash collateral is not recorded in the Statements of Financial Position, as we do not have the right to sell, repledge, or otherwise reinvest the noncash collateral.
The collateral is required to equal a minimum of 102% of the estimated fair value of the securities loaned, and maintained at a level greater than or equal to 100% for the duration of the loan. We monitor the ratio of the collateral held to the estimated fair value of the securities loaned on a daily basis and obtain additional collateral as necessary. A securities lending transaction may be terminated at any time by the borrower or the lender. If terminated, we would repay our securities lending obligations from the sale of reinvested collateral or the proceeds of sales from our investment portfolio, which includes liquid securities.
Note 3. Revenue
The majority of our revenue is derived from the subscriber’s agreement between us and the subscribers (policyholders) at the Exchange. In accordance with the subscriber’s agreement, we retain a management fee calculated as a percentage, not to exceed 25%, of all direct and affiliated assumed written premiums of the Exchange. We allocate a portion of our management fee revenue, currently 25% of the direct and affiliated assumed written premiums of the Exchange, between the two performance obligations we have under the subscriber’s agreement. The first performance obligation is to provide policy issuance and renewal services to the subscribers (policyholders) at the Exchange, and the second is to act as attorney-in-fact on behalf of the subscribers at the Exchange, as well as the service provider for the Exchange's insurance subsidiaries, with respect to all administrative services.
The transaction price, including management fee revenue and administrative services reimbursement revenue, includes variable consideration and is allocated based on the estimated standalone selling prices developed using industry information and other available information for similar services. A constraining estimate of variable consideration exists related to the potential for management fees to be returned if a policy were to be cancelled mid-term. Management fees are returned to the Exchange when policyholders cancel their insurance coverage mid-term and premiums are refunded to them. The constraining estimate is determined using the expected value method, based on both historical and current information. The estimated transaction price, as reduced by the constraint, reflects consideration expected for performance of our services. We update the transaction price and the related allocation at least annually based upon the most recent information available or more frequently if there have been significant changes in any components considered in the transaction price.
The first performance obligation is to provide policy issuance and renewal services that result in executed insurance policies between the Exchange or one of its insurance subsidiaries and the subscriber (policyholder). The subscriber (policyholder) receives economic benefits when substantially all the policy issuance or renewal services are complete and an insurance policy is issued or renewed by the Exchange or one of its insurance subsidiaries. It is at the time of policy issuance or renewal that the allocated portion of revenue is recognized.
Consistent with its legal structure as a reciprocal insurer, the Exchange does not have any employees or officers. Therefore, it enters into contractual relationships by and through the subscribers' attorney-in-fact. Indemnity serves as the attorney-in-fact on behalf of the subscribers at the Exchange with respect to its administrative services as enumerated in the subscriber's agreement. The Exchange's insurance subsidiaries also utilize Indemnity for these services in accordance with the service agreements between each of the subsidiaries and Indemnity. Collectively, these services represent a second performance obligation under the subscriber’s agreement and the service agreements. The revenue allocated to this performance obligation is recognized over a four-year period representing the time over which these services are provided. The portion of revenue not yet earned is recorded as a contract liability in the Statements of Financial Position. During the three and nine months ended September 30, 2024, we recognized revenue of $8.7 million and $35.6 million, respectively, that was included in the contract liability balance as of December 31, 2023. During the three and nine months ended September 30, 2023, we recognized revenue of $7.7 million and $31.5 million, respectively, that was included in the contract liability balance as of December 31, 2022. The administrative services expenses we incur and the related reimbursements we receive are recorded gross in the Statements of Operations.
Indemnity records a receivable from the Exchange for management fee revenue when the premium is written or assumed from affiliates by the Exchange. Indemnity collects the management fee from the Exchange when the Exchange collects the premiums from the subscribers (policyholders). As the Exchange issues policies with annual terms only, cash collections generally occur within one year.
The following table disaggregates revenue by our two performance obligations:
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| Three months ended September 30, | | | Nine months ended September 30, | | |
(in thousands) | 2024 | 2023 | | | | 2024 | 2023 | |
Management fee revenue - policy issuance and renewal services | $ | 769,162 | | $ | 649,049 | | | | | $ | 2,195,734 | | $ | 1,840,478 | | | |
| | | | | | | | | |
Management fee revenue - administrative services | 17,154 | | 16,151 | | | | | 51,139 | | 46,976 | | | |
Administrative services reimbursement revenue | 206,754 | | 187,118 | | | | | 604,349 | | 544,411 | | | |
Total revenue from administrative services | $ | 223,908 | | $ | 203,269 | | | | | $ | 655,488 | | $ | 591,387 | | | |
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Note 4. Earnings Per Share
Class A and Class B basic earnings per share and Class B diluted earnings per share are calculated under the two-class method. The two-class method allocates earnings to each class of stock based upon its dividend rights. Class B shares are convertible into Class A shares at a conversion ratio of 2,400 to 1. See Note 10, "Capital Stock".
Class A diluted earnings per share is calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the dilutive effect of assumed issuance of stock-based awards under compensation plans that have the option to be paid in stock using the treasury stock method.
A reconciliation of the numerators and denominators used in the basic and diluted per-share computations is presented as follows for each class of common stock:
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| | Three months ended September 30, |
| | 2024 | | 2023 |
(dollars in thousands, except per share data) | | Allocated net income (numerator) | | Weighted shares (denominator) | | Per-share amount | | Allocated net income (numerator) | | Weighted shares (denominator) | | Per-share amount |
Class A – Basic EPS: | | | | | | | | | | | | |
Income available to Class A stockholders | | $ | 158,521 | | | 46,189,059 | | | $ | 3.43 | | | $ | 129,967 | | | 46,189,037 | | | $ | 2.81 | |
Dilutive effect of stock-based awards | | 0 | | | 16,655 | | | — | | | 0 | | | 9,532 | | | — | |
Assumed conversion of Class B shares | | 1,309 | | | 6,100,800 | | | — | | | 1,073 | | | 6,100,800 | | | — | |
Class A – Diluted EPS: | | | | | | | | | | | | |
Income available to Class A stockholders on Class A equivalent shares | | $ | 159,830 | | | 52,306,514 | | | $ | 3.06 | | | $ | 131,040 | | | 52,299,369 | | | $ | 2.51 | |
Class B – Basic EPS: | | | | | | | | | | | | |
Income available to Class B stockholders | | $ | 1,309 | | | 2,542 | | | $ | 515 | | | $ | 1,073 | | | 2,542 | | | $ | 422 | |
Class B – Diluted EPS: | | | | | | | | | | | | |
Income available to Class B stockholders | | $ | 1,309 | | | 2,542 | | | $ | 515 | | | $ | 1,073 | | | 2,542 | | | $ | 422 | |
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| | Nine months ended September 30, |
| | 2024 | | 2023 |
(dollars in thousands, except per share data) | | Allocated net income (numerator) | | Weighted shares (denominator) | | Per-share amount | | Allocated net income (numerator) | | Weighted shares (denominator) | | Per-share amount |
Class A – Basic EPS: | | | | | | | | | | | | |
Income available to Class A stockholders | | $ | 444,614 | | | 46,189,038 | | | $ | 9.63 | | | $ | 332,389 | | | 46,188,962 | | | $ | 7.20 | |
Dilutive effect of stock-based awards | | 0 | | | 11,163 | | | — | | | 0 | | | 8,893 | | | — | |
Assumed conversion of Class B shares | | 3,671 | | | 6,100,800 | | | — | | | 2,744 | | | 6,100,800 | | | — | |
Class A – Diluted EPS: | | | | | | | | | | | | |
Income available to Class A stockholders on Class A equivalent shares | | $ | 448,285 | | | 52,301,001 | | | $ | 8.57 | | | $ | 335,133 | | | 52,298,655 | | | $ | 6.41 | |
Class B – Basic EPS: | | | | | | | | | | | | |
Income available to Class B stockholders | | $ | 3,671 | | | 2,542 | | | $ | 1,444 | | | $ | 2,744 | | | 2,542 | | | $ | 1,079 | |
Class B – Diluted EPS: | | | | | | | | | | | | |
Income available to Class B stockholders | | $ | 3,670 | | | 2,542 | | | $ | 1,444 | | | $ | 2,744 | | | 2,542 | | | $ | 1,079 | |
Note 5. Fair Value
Financial instruments carried at fair value
Our available-for-sale and equity securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.
Valuation techniques used to derive the fair value of our available-for-sale and equity securities are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources. Unobservable inputs reflect our own assumptions regarding fair market value for these securities. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:
•Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
•Level 3 – Unobservable inputs for the asset or liability.
Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service. Our Level 1 securities are valued using an exchange traded price provided by the pricing service. Pricing service valuations for Level 2 securities include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.
Although virtually all of our prices are obtained from third party sources, we also perform internal pricing reviews, including evaluating the methodology and inputs used to ensure that we determine the proper classification level of the financial instrument and reviewing securities with price changes that vary significantly from current market conditions or independent price sources. Price variances are investigated and corroborated by market data and transaction volumes. We have reviewed the pricing methodologies of our pricing service as well as other observable inputs and believe that the prices adequately consider market activity in determining fair value.
In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes. In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.
When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables. When available, we obtain multiple quotes for the same security. The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information. As of September 30, 2024, nearly all of our available-for-sale and equity securities were priced using a third party pricing service.
The following tables present our fair value measurements on a recurring basis by asset class and level of input as of:
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| | September 30, 2024 |
(in thousands) | | Total | | Level 1 | | Level 2 | | Level 3 |
Available-for-sale securities: | | | | | | | | |
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Corporate debt securities (1) | | $ | 648,513 | | | $ | 0 | | | $ | 644,872 | | | $ | 3,641 | |
Collateralized debt obligations | | 110,272 | | | 0 | | | 110,272 | | | 0 | |
Commercial mortgage-backed securities | | 137,355 | | | 0 | | | 121,595 | | | 15,760 | |
Residential mortgage-backed securities | | 135,175 | | | 0 | | | 135,175 | | | 0 | |
Other debt securities | | 25,677 | | | 0 | | | 25,677 | | | 0 | |
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Total available-for-sale securities | | 1,056,992 | | | 0 | | | 1,037,591 | | | 19,401 | |
Equity securities: | | | | | | | | |
Financial services sector | | 71,759 | | | 1,025 | | | 67,249 | | | 3,485 | |
Utilities sector | | 5,705 | | | 0 | | | 5,705 | | | 0 | |
Energy sector | | 1,571 | | | 0 | | | 1,571 | | | 0 | |
Consumer sector | | 4,337 | | | 57 | | | 2,780 | | | 1,500 | |
Technology sector | | 1,974 | | | 0 | | | 0 | | | 1,974 | |
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Total equity securities | | 85,346 | | | 1,082 | | | 77,305 | | | 6,959 | |
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Total | | $ | 1,142,338 | | | $ | 1,082 | | | $ | 1,114,896 | | | $ | 26,360 | |
(1)This includes $8.1 million of securities lent under a securities lending agreement.
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| | December 31, 2023 |
(in thousands) | | Total | | Level 1 | | Level 2 | | Level 3 |
Available-for-sale securities: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
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Corporate debt securities | | $ | 588,688 | | | $ | 0 | | | $ | 584,182 | | | $ | 4,506 | |
Collateralized debt obligations | | 112,468 | | | 0 | | | 112,468 | | | 0 | |
Commercial mortgage-backed securities | | 102,720 | | | 0 | | | 91,726 | | | 10,994 | |
Residential mortgage-backed securities | | 140,055 | | | 0 | | | 138,521 | | | 1,534 | |
Other debt securities | | 17,310 | | | 0 | | | 17,310 | | | 0 | |
| | | | | | | | |
Total available-for-sale securities | | 961,241 | | | 0 | | | 944,207 | | | 17,034 | |
Equity securities: | | | | | | | | |
Financial services sector | | 69,900 | | | 816 | | | 63,750 | | | 5,334 | |
Utilities sector | | 5,810 | | | 0 | | | 5,810 | | | 0 | |
Energy sector | | 3,901 | | | 0 | | | 3,901 | | | 0 | |
Consumer sector | | 3,915 | | | 0 | | | 2,415 | | | 1,500 | |
Technology sector | | 500 | | | 0 | | | 0 | | | 500 | |
Industrial sector | | 180 | | | 0 | | | 180 | | | 0 | |
Communications sector | | 47 | | | 47 | | | 0 | | | 0 | |
Total equity securities | | 84,253 | | | 863 | | | 76,056 | | | 7,334 | |
Total | | $ | 1,045,494 | | | $ | 863 | | | $ | 1,020,263 | | | $ | 24,368 | |
We review the fair value hierarchy classifications each reporting period. Transfers between hierarchy levels may occur due to changes in available market observable inputs.
Level 3 Assets – 2024 Quarterly Change:
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(in thousands) | | Beginning balance at June 30, 2024 | | Included in earnings(1) | | Included in other comprehensive income (loss) | | Purchases | | Sales | | Transfers into Level 3(2) | | Transfers out of Level 3(2) | | Ending balance at September 30, 2024 |
Available-for-sale securities: | | | | | | | | | | | | | | | | |
Corporate debt securities | | $ | 8,543 | | | $ | (166) | | | $ | 45 | | | $ | 865 | | | $ | (392) | | | $ | 1,142 | | | $ | (6,396) | | | $ | 3,641 | |
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Commercial mortgage-backed securities | | 25,220 | | | (408) | | | 670 | | | 1,102 | | | (28) | | | 1,312 | | | (12,108) | | | 15,760 | |
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Total available-for-sale securities | | 33,763 | | | (574) | | | 715 | | | 1,967 | | | (420) | | | 2,454 | | | (18,504) | | | 19,401 | |
Equity securities | | 8,498 | | | 517 | | | — | | | 0 | | | 0 | | | 0 | | | (2,056) | | | 6,959 | |
Total Level 3 securities | | $ | 42,261 | | | $ | (57) | | | $ | 715 | | | $ | 1,967 | | | $ | (420) | | | $ | 2,454 | | | $ | (20,560) | | | $ | 26,360 | |
Level 3 Assets – 2024 Year-to-Date Change:
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(in thousands) | | Beginning balance at December 31, 2023 | | Included in earnings(1) | | Included in other comprehensive income (loss) | | Purchases | | Sales | | Transfers into Level 3(2) | | Transfers out of Level 3(2) | | Ending balance at September 30, 2024 |
Available-for-sale securities: | | | | | | | | | | | | | | | | |
Corporate debt securities | | $ | 4,506 | | | $ | (141) | | | $ | 66 | | | $ | 5,704 | | | $ | (1,215) | | | $ | 4,966 | | | $ | (10,245) | | | $ | 3,641 | |
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Commercial mortgage-backed securities | | 10,994 | | | (1,077) | | | 889 | | | 2,907 | | | (33) | | | 18,960 | | | (16,880) | | | 15,760 | |
Residential mortgage- backed securities | | 1,534 | | | (5) | | | (24) | | | 0 | | | (40) | | | 0 | | | (1,465) | | | 0 | |
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Total available-for-sale securities | | 17,034 | | | (1,223) | | | 931 | | | 8,611 | | | (1,288) | | | 23,926 | | | (28,590) | | | 19,401 | |
Equity securities | | 7,334 | | | 664 | | | — | | | 2,019 | | | (84) | | | 544 | | | (3,518) | | | 6,959 | |
Total Level 3 securities | | $ | 24,368 | | | $ | (559) | | | $ | 931 | | | $ | 10,630 | | | $ | (1,372) | | | $ | 24,470 | | | $ | (32,108) | | | $ | 26,360 | |
Level 3 Assets – 2023 Quarterly Change:
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(in thousands) | | Beginning balance at June 30, 2023 | | Included in earnings(1) | | Included in other comprehensive income (loss) | | Purchases | | Sales | | Transfers into Level 3(2) | | Transfers out of Level 3(2) | | Ending balance at September 30, 2023 |
Available-for-sale securities: | | | | | | | | | | | | | | | | |
Corporate debt securities | | $ | 5,123 | | | $ | 10 | | | $ | 123 | | | $ | 1,661 | | | $ | (511) | | | $ | 730 | | | $ | (3,031) | | | $ | 4,105 | |
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Commercial mortgage-backed securities | | 6,533 | | | (182) | | | (56) | | | 0 | | | (366) | | | 1,478 | | | 0 | | | 7,407 | |
Residential mortgage- backed securities | | 12 | | | 0 | | | 0 | | | 0 | | | (7) | | | 0 | | | 0 | | | 5 | |
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Total available-for-sale securities | | 11,668 | | | (172) | | | 67 | | | 1,661 | | | (884) | | | 2,208 | | | (3,031) | | | 11,517 | |
Equity securities | | 4,730 | | | 33 | | | — | | | 1,000 | | | 0 | | | 0 | | | (1,807) | | | 3,956 | |
Total Level 3 securities | | $ | 16,398 | | | $ | (139) | | | $ | 67 | | | $ | 2,661 | | | $ | (884) | | | $ | 2,208 | | | $ | (4,838) | | | $ | 15,473 | |
Level 3 Assets – 2023 Year-to-Date Change:
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(in thousands) | | Beginning balance at December 31, 2022 | | Included in earnings(1) | | Included in other comprehensive income (loss) | | Purchases | | Sales | | Transfers into Level 3(2) | | Transfers out of Level 3(2) | | Ending balance at September 30, 2023 |
Available-for-sale securities: | | | | | | | | | | | | | | | | |
Corporate debt securities | | $ | 3,686 | | | $ | (4) | | | $ | 245 | | | $ | 3,193 | | | $ | (1,256) | | | $ | 3,883 | | | $ | (5,642) | | | $ | 4,105 | |
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Commercial mortgage-backed securities | | 10,910 | | | (542) | | | 44 | | | 1,455 | | | (551) | | | 1,944 | | | (5,853) | | | 7,407 | |
Residential mortgage-backed securities | | 4,184 | | | (5) | | | 96 | | | 0 | | | (115) | | | 33 | | | (4,188) | | | 5 | |
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Total available-for-sale securities | | 18,780 | | | (551) | | | 385 | | | 4,648 | | | (1,922) | | | 5,860 | | | (15,683) | | | 11,517 | |
Equity securities | | 3,779 | | | 26 | | | — | | | 1,958 | | | 0 | | | 0 | | | (1,807) | | | 3,956 | |
Total Level 3 securities | | $ | 22,559 | | | $ | (525) | | | $ | 385 | | | $ | 6,606 | | | $ | (1,922) | | | $ | 5,860 | | | $ | (17,490) | | | $ | 15,473 | |
(1)These amounts are reported as net investment income and net realized and unrealized investment gains (losses) for each of the periods presented above.
(2)Transfers into and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
Financial instruments not carried at fair value
The following table presents the carrying values and fair values of financial instruments categorized as Level 3 in the fair value hierarchy that are recorded at carrying value as of:
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| | September 30, 2024 | | December 31, 2023 |
(in thousands) | | Carrying value | | Fair value | | Carrying value | | Fair value |
Agent loans, net | | $ | 91,636 | | | $ | 87,797 | | | $ | 67,787 | | | $ | 66,445 | |
Other loans receivable, net (1) | | 10,938 | | | |