The property and casualty group''s adjusted statutory combined ratio at March 31, 2008 was 88.9% compared to 85.5% at March 31, 2007. The GAAP combined ratio for the company was 92.1% in the first quarter of this year compared to 89.2% last year. The company continues to recognize favorable development of prior accident year loss reserves, which reflect the same trends that the firm was seeing at year-end, improving the loss ratio 5.3 points, or $2.7 million in the first quarter 2008 compared to 10.3 points in the first quarter of 2007.

The Indemnity Company share of catastrophe losses totaled $0.8 million and $0.3 million in the first quarters of 2008 and 2007, respectively.

The catastrophe losses contributed 1.6 points and 0.5 points to the GAAP combined ratio in the first quarter of 2008 and 2007. The first quarter is generally the firm’s best in terms of underwriting results, as underwriting losses are seasonally higher in the second and fourth quarters, so the combined ratio generally increases as the year progresses. In the first quarter of 2008, the firm’s share of the reduction to reserves related to seasonality adjustments was $3.5 million compared to $3.3 million in the first quarter of 2007.

The company''s Investment Operations recorded a loss of $5.2 million during the first quarter 2008 compared to a gain of $29.8 million for the same period in 2007.

Beginning in 2008, the firm adopted an accounting change that affects how the firm accounts for certain assets in its investment portfolio, and adopted the fair value option for its common stock portfolio only under FAS-159 effective January 1, 2008. This portfolio was previously accounted for as an available for sale portfolio where changes in the fair value of those assets were reflected in shareholders equity.

In the first quarter of 2008, the realized losses on investments from changes in the fair value of the common stock were $13.7 million.

At the same time, the firm also recorded impairment charges of $11.9 million pre-tax on its bonds and preferred stock investment. The write-downs were due to continued declines in fair value and credit deterioration on securities in the financial service industry sector; the majority of the impairments relate to securities that are performing in line with anticipated or contractual cash flow.

The private equity and mezzanine debt limited partnerships generated earnings of $5.4 million and $6 million for the quarters ended March 31, 2008 and 2007.

The company’s real estate limited partnerships generated earnings of $2.6 million and $6.5 million in the first quarters of 2008 and 2007. The earnings from limited partnerships were still strong in 2008, but reduced from its very strong earnings from partnerships in 2007, reflecting more challenging conditions in the markets in which the firm has invested.

During the first quarter of 2008, the firm was a very active repurchaser of its stock.

The company repurchased 1,204,651 shares of its outstanding Class-A common stock for a total cost of $60.9 million, or $50.54 per share. The Board of Directors approved an additional $100 million stock repurchase, which becomes effective immediately after the available funds from the current repurchase program are expended. At April 15, 2008, the firm had $14 million remaining under the current plan, which was scheduled to conclude December 31, 2008. Under the newly-approved program, the company may repurchase up to 100 million of it outstanding Class-A common stock through June 30, 2009. The company may repurchase those shares from time-to-time in the open market or by privately-negotiated transactions, depending on prevailing market conditions and, of course, the alternative uses of the Company''s capital.

The firm’s agent recruitment strategy is key to its continued growth in policies.

The company expects to bring on 140 new agencies in 2008 throughout its geographic territory. During the first quarter, the firm appointed 46 new agencies, and it is on pace to meet its goal. The firm is looking at both scratch agencies and existing agencies that will make Erie the lead carrier in their business.

The company is also continuing its work to enter Minnesota in 2009.

As part of this effort, during the first quarter, the firm started to make its presence known to agents in the State to assess preliminary interest. Early indications are that it''s going well, and Erie will be a very welcomed addition in the State.

Key questions and answers from the first quarter fiscal 2008 earnings call conducted by Erie Indemnity Co on May 1, 2008.

Michael Phillips (Stifel Nicolaus): On the new policy administration system and impact on non-commission expenses, what are the benefits of the new system? How you think about the increasing expenses there in light of what that might to do the margins in 2008?

John J. Brinling, Jr.: There are a number of things that we would like to progress to, and principal among them is a real-time system. The system that we have right now is a batch system, meaning that the processing is done overnight in a batch. That causes some problems in terms of doing multiple changes that are done in sequence, they need to be done overnight, and it spreads it out over a couple of day, where more modern technology would give us real time, so we could do those sequentially in no time at all. There''s also other benefits that we''d realize, particularly in terms of interface with our agents being able to download to their systems and so forth. There''s a number of functional things that we would benefit from, and quite frankly, some improved processes that would allow us to operate much more efficiently with less person power at the home office. We could gain some financial advantages by reducing personnel here in the processing area and be able to service our policyholders and agents more efficiently.

Michael Phillips (Stifel Nicolaus): You did mention agent bonuses down a bit this quarter. They''re based on a three-year profitability. I assume 2008 means 2008 minus two years; is that correct?

John J. Brinling, Jr.: Yes. They''re on a three-year rolling and we''re this year looking at the three best years in our history. Our projections are that our loss experience will deteriorate some, which will bring the most recent year down. There''s also a change in the way we handle our life bonuses, and those were paid through the Indemnity Company in the past and reimbursed by the Life Company, and we''ve changed that. That''s affecting the change as well.