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Document and Entity Information - USD ($) $ in Billions	12 Months Ended
Document and Entity Information - USD ($) $ in Billions	Dec. 31, 2011	Feb. 17, 2012	Jun. 30, 2011
Entity Registrant Name	ERIE INDEMNITY CO
Entity Central Index Key	0000922621
Document Type	10-K
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1.9
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Class A
Entity Common Stock, Shares Outstanding		47,741,429
Class B
Entity Common Stock, Shares Outstanding		2,545

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Revenues
Premiums earned									$ 4,214	$ 3,987	$ 3,869
Net investment income									433	433	433
Net realized investment (losses) gains									(4)	313	412
Net impairment losses recognized in earnings									(2)	(6)	(126)
Equity in earnings (losses) of limited partnerships									149	128	(369)
Other income									34	35	36
Total revenues	$ 1,418	$ 796	$ 1,245	$ 1,365	$ 1,401	$ 1,357	$ 916	$ 1,216	4,824	4,890	4,255
Benefits and expenses
Insurance losses and loss expenses									3,444	2,900	2,728
Policy acquisition and underwriting expenses									1,022	969	1,003
Goodwill impairment										22
Total benefits and expenses	993	1,101	1,419	953	984	952	967	988	4,466	3,891	3,731
Income (loss) from operations before income taxes and noncontrolling interests	425	(305)	(174)	412	417	405	(51)	228	358	999	524
Provision for income taxes									90	339	78
Net income	281	(180)	(107)	274	254	275	(31)	162	268	660	446
Less: Net income attributable to noncontrolling interest in consolidated entity - Exchange	255	(227)	(159)	230	242	221	(80)	115	99	498	338
Net income attributable to Indemnity	$ 26	$ 47	$ 52	$ 44	$ 12	$ 54	$ 49	$ 47	169	162	108
Indemnity
Revenues
Net investment income									16	37	42
Net realized investment (losses) gains									3	(1)	10
Benefits and expenses
Income (loss) from operations before income taxes and noncontrolling interests									256	269	154
Provision for income taxes									85	104	49
Net income									$ 169	$ 162	$ 108
Class A \| Indemnity
Net income attributable to Indemnity per share
Common stock - basic (in dollars per share)	$ 0.55	$ 0.97	$ 1.05	$ 0.88	$ 0.25	$ 1.05	$ 0.96	$ 0.92	$ 3.45	$ 3.18	$ 2.10
Common stock - diluted (in dollars per share)	0.49	0.87	0.94	0.78	0.22	0.94	0.86	0.82	$ 3.08	$ 2.85	$ 1.89
Weighted average shares outstanding attributable to Indemnity - Basic
Common stock - basic (in shares)									48,875,316	50,705,607	51,250,606
Weighted average shares outstanding attributable to Indemnity - Diluted
Common stock - diluted (in shares)									55,057,437	56,884,894	57,428,999
Class B \| Indemnity
Net income attributable to Indemnity per share
Common stock - basic (in dollars per share)	81.76	146.67	158.33	126.48	40.93	150.87	138.21	132.83	$ 522.47	$ 462.83	$ 312.45
Common stock - diluted (in dollars per share)	$ 81.76	$ 146.67	$ 158.33	$ 126.48	$ 40.93	$ 150.87	$ 138.21	$ 132.83	$ 522.47	$ 462.83	$ 312.45
Weighted average shares outstanding attributable to Indemnity - Basic
Common stock - basic (in shares)									2,546	2,546	2,549
Weighted average shares outstanding attributable to Indemnity - Diluted
Common stock - diluted (in shares)									2,546	2,546	2,549

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - USD ($) $ in Millions	Dec. 31, 2011	Dec. 31, 2010
Available-for-sale securities, at fair value:
Fixed maturities	$ 7,840	$ 7,543
Equity securities	589	594
Trading securities, at fair value	2,335	2,334
Limited partnerships	1,290	1,324
Other invested assets	20	20
Total investments	12,074	11,815
Cash and cash equivalents (Exchange portion of $174 and $120, respectively)	185	430
Premiums receivable from policyholders	976	942
Reinsurance recoverable	166	201
Deferred income taxes	19
Deferred acquisition costs	487	467
Other assets (Exchange portion of $322 and $357, respectively)	441	489
Total assets	14,348	14,344
Liabilities
Losses and loss expense reserves	3,499	3,584
Life policy and deposit contract reserves	1,671	1,603
Unearned premiums	2,178	2,082
Deferred income taxes	147	283
Total liabilities	8,055	8,010
Indemnity's shareholders' equity
Total Indemnity shareholders' equity	781	912
Total equity	6,293	6,334
Total liabilities, shareholders' equity and noncontrolling interest	14,348	14,344
Indemnity
Available-for-sale securities, at fair value:
Fixed maturities	548	264
Equity securities	25	24
Trading securities, at fair value	27	28
Limited partnerships	208	216
Other invested assets	1	1
Total investments	809	533
Cash and cash equivalents (Exchange portion of $174 and $120, respectively)	11	310
Deferred income taxes	19	0
Other assets (Exchange portion of $322 and $357, respectively)	119	132
Total assets	1,237	1,312
Liabilities
Deferred income taxes	0	26
Other liabilities	455	382
Total liabilities	456	400
Indemnity's shareholders' equity
Additional paid-in-capital	16	8
Accumulated other comprehensive loss	(105)	(53)
Retained earnings	1,894	1,827
Total contributed capital and retained earnings	1,807	1,784
Treasury stock, at cost, 20,427,758 and 18,235,094 shares, respectively	(1,026)	(872)
Total Indemnity shareholders' equity	781	912
Total liabilities, shareholders' equity and noncontrolling interest	1,237	1,312
Exchange
Available-for-sale securities, at fair value:
Fixed maturities	7,292	7,279
Equity securities	564	570
Trading securities, at fair value	2,308	2,306
Limited partnerships	1,082	1,108
Other invested assets	19	19
Total investments	11,265	11,282
Cash and cash equivalents (Exchange portion of $174 and $120, respectively)	174	120
Premiums receivable from policyholders	976	942
Reinsurance recoverable	166	201
Deferred acquisition costs	487	467
Other assets (Exchange portion of $322 and $357, respectively)	322	357
Total assets	13,390	13,369
Liabilities
Losses and loss expense reserves	3,499	3,584
Life policy and deposit contract reserves	1,671	1,603
Unearned premiums	2,178	2,082
Deferred income taxes	147	257
Other liabilities	105	76
Total liabilities	7,878	7,867
Indemnity's shareholders' equity
Accumulated other comprehensive loss	287	277
Noncontrolling interest in consolidated entity - Exchange	5,512	5,422
Total liabilities, shareholders' equity and noncontrolling interest	13,390	13,369
Class A \| Indemnity
Indemnity's shareholders' equity
Common stock	2	2
Class B \| Indemnity
Indemnity's shareholders' equity
Common stock	$ 0	$ 0

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2011	Dec. 31, 2010
Cash and cash equivalents	$ 185	$ 430
Other assets	441	489
Indemnity
Fixed maturities, amortized cost	535	257
Equity securities, cost	24	20
Trading securities, cost	23	21
Limited partnerships, cost	185	202
Cash and cash equivalents	11	310
Other assets	$ 119	$ 132
Treasury stock (in shares)	20,427,758	18,235,094
Exchange
Fixed maturities, amortized cost	$ 6,829	$ 6,863
Equity securities, cost	531	503
Trading securities, cost	2,021	1,773
Limited partnerships, cost	1,003	1,083
Cash and cash equivalents	174	120
Other assets	$ 322	$ 357
Class A \| Indemnity
Common stock, stated value per share	$ 0.0292	$ 0.0292
Common stock, authorized (in shares)	74,996,930	74,996,930
Common stock, issued (in shares)	68,289,600	68,289,600
Common stock, outstanding (in shares)	47,861,842	50,054,506
Class B
Ratio for converting shares of Class B common stock into shares of Class A common stock, numerator (in Class A shares)	2,400
Ratio for converting shares of Class B common stock into shares of Class A common stock, denominator (in Class B shares)	1
Class B \| Indemnity
Ratio for converting shares of Class B common stock into shares of Class A common stock, numerator (in Class A shares)	2,400	2,400
Ratio for converting shares of Class B common stock into shares of Class A common stock, denominator (in Class B shares)	1	1
Common stock, stated value per share	$ 70	$ 70
Common stock, authorized (in shares)	2,546	2,546
Common stock, issued (in shares)	2,546	2,546
Common stock, outstanding (in shares)	2,546	2,546

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST - USD ($) $ in Millions	Total	Indemnity	Indemnity Total Indemnity shareholders' equity	Indemnity Common stock	Indemnity Common stock Class A	Indemnity Common stock Class B	Indemnity Additional paid-in capital	Indemnity Accumulated other comprehensive income	Indemnity Retained earnings	Indemnity Retained earnings Class A	Indemnity Retained earnings Class B	Indemnity Treasury stock	Exchange Noncontrolling interest in consolidated entity - Exchange
Balance at Dec. 31, 2008							$ 8	$ (136)	$ 1,729			$ (811)	$ 3,967
Increase (decrease) in shareholders' equity
Net income	$ 108								108
Dividends declared - Class A ($2.0975, $1.955 and $1.83 per share, respectively) and Class B ($314.625, $293.25 and $274.50 per share, respectively)									(94)	$ (94)	$ 0
Cumulative effect of change in accounting principle, net of tax (Note 2)	(101)	$ (6)						(6)	6
Unrealized (losses) gains, net of tax (Note 19)		75						75
Postretirement plans, net of tax (Note 19)		24						24
Net purchase of treasury stock												(3)
Comprehensive income	1,063												856
Balance at Dec. 31, 2009	5,725		$ 902	$ 2	$ 2	$ 0	8	(43)	1,749			(814)	4,823
Increase (decrease) in shareholders' equity
Net income	162								162
Dividends declared - Class A ($2.0975, $1.955 and $1.83 per share, respectively) and Class B ($314.625, $293.25 and $274.50 per share, respectively)									(99)	(99)	0
Unrealized (losses) gains, net of tax (Note 19)		(6)						9
Reclassification of unrealized gain on sale of P&C affiliated subsidiaries, net of tax	(15)							(15)	15
Postretirement plans, net of tax (Note 19)		(4)						(4)
Net purchase of treasury stock												(58)
Comprehensive income	766												599
Balance at Dec. 31, 2010	6,334		912	2	2	0	8	(53)	1,827			(872)	5,422
Increase (decrease) in shareholders' equity
Net income	169								169
Dividends declared - Class A ($2.0975, $1.955 and $1.83 per share, respectively) and Class B ($314.625, $293.25 and $274.50 per share, respectively)									(102)	$ (101)	$ (1)
Unrealized (losses) gains, net of tax (Note 19)		(11)						(11)
Postretirement plans, net of tax (Note 19)		$ (41)						(41)
Net purchase of treasury stock												(154)
Comprehensive income	207												90
Net realized gains (losses)	8						8
Balance at Dec. 31, 2011	$ 6,293		$ 781	$ 2	$ 2	$ 0	$ 16	$ (105)	$ 1,894			$ (1,026)	$ 5,512

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST (Parenthetical) - Indemnity - $ / shares	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Class A
Dividends declared (in dollars per share)	$ 2.0975	$ 1.955	$ 1.83
Class B
Dividends declared (in dollars per share)	$ 314.625	$ 293.25	$ 274.50

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash flows from operating activities
Premiums collected	$ 4,276	$ 4,055	$ 3,964
Net investment income received	458	445	421
Limited partnership distributions	166	122	81
Service agreement fee received	33	34	35
Commissions and bonuses paid to agents	(583)	(532)	(535)
Losses paid	(2,953)	(2,398)	(2,241)
Loss expenses paid	(439)	(419)	(405)
Other underwriting and acquisition costs paid	(531)	(517)	(552)
Income taxes (paid) recovered	(67)	(69)	121
Net cash provided by operating activities	360	721	889
Purchase of investments:
Fixed maturities	(1,801)	(1,760)	(1,938)
Preferred stock	(119)	(179)	(176)
Common stock	(1,742)	(1,495)	(1,450)
Limited partnerships	(209)	(165)	(174)
Sales/maturities of investments:
Fixed maturity sales	631	562	510
Fixed maturity calls/maturities	950	1,009	734
Preferred stock	113	135	210
Common stock	1,652	1,376	1,394
Sale of and returns on limited partnerships	163	142	15
Purchase of property and equipment	(11)	(33)	(14)
Net (distributions) collections on agent loans	(1)	3	(2)
Net (distributions) collections on life policy loans	(1)	0	1
Net cash (used in) provided by investing activities	(375)	(405)	(890)
Cash flows from financing activities
Annuity and supplementary contract deposits and interest	95	111	183
Annuity and supplementary contract surrenders and withdrawals	(81)	(79)	(129)
Universal life deposits and interest	29	38	39
Universal life surrenders	(16)	(35)	(39)
Purchase of treasury stock	(155)	(57)	(3)
Dividends paid to shareholders	(102)	(98)	(93)
Decrease in collateral from securities lending	0	0	(285)
Redemption of securities lending collateral	0	0	285
Net cash used in financing activities	(230)	(120)	(42)
Net (decrease) increase in cash and cash equivalents	(245)	196	(43)
Cash and cash equivalents at beginning of year	430	234	277
Cash and cash equivalents at end of year	$ 185	$ 430	$ 234

Nature of Operations

12 Months Ended

Dec. 31, 2011

Nature of Operations

Nature of Operations

Note 1. Nature of Operations

Erie Indemnity Company (“Indemnity”) is a publicly held Pennsylvania business corporation that has been the managing attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange (“Exchange”) since 1925. The Exchange is a subscriber owned, Pennsylvania-domiciled reciprocal insurer that writes property and casualty insurance.

Indemnity’s primary function is to perform certain services for the Exchange relating to the sales, underwriting and issuance of policies on behalf of the Exchange. This is done in accordance with a subscriber’s agreement (a limited power of attorney) executed by each subscriber (policyholder), which appoints Indemnity as their common attorney-in-fact to transact business on their behalf and to manage the affairs of the Exchange. Pursuant to the subscriber’s agreement and for its services as attorney-in-fact, Indemnity earns a management fee calculated as a percentage of the direct premiums written by the Exchange and the other members of the Property and Casualty Group (defined below), which are assumed by the Exchange under an intercompany pooling arrangement.

Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance by acting as the common attorney-in-fact and decision maker for the subscribers (policyholders) at the Exchange.

Through December 31, 2010, Indemnity also operated as a property and casualty insurer through its wholly owned subsidiaries, Erie Insurance Company (“EIC”), Erie Insurance Company of New York (“ENY”) and Erie Insurance Property and Casualty Company (“EPC”). EIC, ENY and EPC, together with the Exchange and its wholly owned subsidiary, Flagship City Insurance Company (“Flagship”), are collectively referred to as the “Property and Casualty Group”. The Property and Casualty Group operates in 11 Midwestern, Mid-Atlantic and Southeastern states and the District of Columbia and primarily writes private passenger auto (47%), homeowners (22%), commercial multi-peril (12%), commercial automobile (7%), and workers compensation (7%) lines of insurance based upon 2011 direct written premiums. On December 31, 2010, Indemnity sold all of the outstanding capital stock of its wholly owned property and casualty insurance subsidiaries to the Exchange.

Erie Family Life Insurance Company (“EFL”) is an affiliated life insurance company that underwrites and sells individual and group life insurance policies and fixed annuities. On March 31, 2011, Indemnity sold its 21.6% ownership interest in EFL to the Exchange. There was no gain or loss resulting from this sale as Indemnity is the primary decision maker for the Exchange.

All property and casualty and life insurance operations are now owned by the Exchange, and Indemnity functions solely as the management company.

The consolidated financial statements of Erie Indemnity Company reflect the results of Indemnity and its variable interest entity, the Exchange, which we refer to collectively as the “Erie Insurance Group” (“we,” “us,” “our”).

“Indemnity shareholder interest” refers to the interest in Erie Indemnity Company owned by the Class A and Class B shareholders. “Noncontrolling interest” refers to the interest in the Erie Insurance Exchange held for the subscribers (policyholders).

Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Significant Accounting Policies

Significant Accounting Policies

Note 2. Significant Accounting Policies

Retrospective adoption of new accounting principle

On June 12, 2009, the Financial Accounting Standards Board (“FASB”) updated Accounting Standards Codification (“ASC”) 810, Consolidation, which amended the existing guidance for determining whether an enterprise is the primary beneficiary of a variable interest entity (“VIE”). As of January 1, 2010 Erie Indemnity Company adopted the new accounting principle on a retrospective basis since inception. The 2009 financial information within this report has previously been conformed to this consolidated presentation.

This guidance changed the methodology for assessing whether an enterprise is the primary beneficiary of a VIE by requiring a qualitative analysis to determine if an enterprise’s variable interest gives it a controlling financial interest.

The qualitative analysis looks at the power to direct activities of the VIE that most significantly impact economic performance and the right to receive benefits (or obligation to absorb losses) from the VIE that could be significant.

In accordance with this updated accounting guidance, Indemnity is deemed to be the primary beneficiary of the Exchange given the significance of the management fee to the Exchange and Indemnity’s power to direct the Exchange’s significant activities. Under the previously issued accounting guidance, Indemnity was not deemed the primary beneficiary of the Exchange and its financial position and operating results were not consolidated with Indemnity’s. Following adoption of the updated accounting guidance, as primary beneficiary of the Exchange, Erie Indemnity Company has consolidated Indemnity and the Exchange’s financial position and operating results. Furthermore, upon consolidation of the Exchange, 100% of the ownership of EFL resides within the consolidated entity and consequently EFL’s financial results are also consolidated.

There was no cumulative effect to Indemnity’s shareholders’ equity from consolidation of the Exchange and EFL. The noncontrolling interest in total equity represents the amount of the Exchange’s subscribers’ (policyholders’) equity.

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Indemnity together with its affiliated companies in which Indemnity holds a majority voting or economic interest.

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.

Reclassifications

Certain amounts previously reported in the 2010 and 2009 consolidated indirect method of cash flows in Note 21, “Supplementary Data on Cash Flows,” have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on previously reported net cash provided by operating activities.

Principles of consolidation

We consolidate the Exchange as a variable interest entity for which Indemnity is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation. The required presentation of noncontrolling interests is reflected in the consolidated financial statements. Noncontrolling interests represent the ownership interests of the Exchange, all of which is held by parties other than Indemnity (i.e., the Exchange’s subscribers (policyholders)). Noncontrolling interests also include the Exchange subscribers’ ownership interest in EFL.

Presentation of assets and liabilities – While the assets of the Exchange are presented separately in the Consolidated Statements of Financial Position, the Exchange’s assets can only be used to satisfy the Exchange’s liabilities or for other unrestricted activities. ASC 810, Consolidation, does not require separate presentation of the Exchange’s assets; however, because the shareholders of Indemnity have no rights to the assets of the Exchange and, conversely, the Exchange has no rights to the assets of Indemnity, we have presented the invested assets of the Exchange separately on the Consolidated Statements of Financial Position along with the remaining consolidated assets reflecting the Exchange’s portion parenthetically. Liabilities are required under ASC 810, Consolidation, to be presented separately for the Exchange on the Consolidated Statements of Financial Position as the Exchange’s creditors do not have recourse to the general credit of Indemnity.

Rights of shareholders of Indemnity and subscribers (policyholders) of the Exchange – The shareholders of Indemnity, through the management fee, have a controlling financial interest in the Exchange; however, they have no other rights to or obligations arising from assets and liabilities of the Exchange. The shareholders of Indemnity own its equity but have no rights or interest in the Exchange’s (noncontrolling interest) income or equity. The noncontrolling interest equity represents the Exchange’s equity held for the interest of its subscribers (policyholders), who have no rights or interest in the Indemnity shareholder interest income or equity.

All intercompany assets, liabilities, revenues and expenses between Indemnity and the Exchange have been eliminated in the Consolidated Statements of Financial Position and Operations.

Adopted accounting pronouncements

On April 1, 2009, we adopted new accounting guidance under FASB ASC 320, Investments — Debt and Equity Securities. This guidance amended the other-than-temporary impairment (OTTI) model for debt securities and requires that credit-related losses and securities in an unrealized loss position that we intend to sell be recognized in earnings, with the remaining decline recognized in other comprehensive income. Additionally, this accounting guidance modified the presentation of OTTI in the statement of operations with the total OTTI presented along with an offset for the amount of OTTI recognized in other comprehensive income. Disclosures include further disaggregation of securities, methodology, inputs related to credit-related loss impairments and a rollforward of credit-related loss impairments. The adoption of this guidance required a cumulative effect adjustment to reclass previously recognized non-credit other-than-temporary impairments from retained earnings to other comprehensive income. The net impact of the cumulative effect adjustment increased retained earnings and decreased other comprehensive income by $6 million, net of tax. Disclosures regarding our impairment methodology are included in this note under the caption Investments. The remaining disclosures regarding credit and non-credit related impairments have been provided in Note 7.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures about Fair Value Measurements. This guidance updated the disclosures on FASB ASC 820, Fair Value Measurements and Disclosures. The additional disclosures include the amounts and reasons for significant transfers between the levels in the fair value hierarchy, the expansion of fair market disclosures by each class of assets, disclosure of the policy for recognition of level transfers, and disclosure of the valuation techniques used for all Level 2 and Level 3 assets. These disclosures were effective for periods beginning after December 15, 2009 and have been included in Note 6, “Fair Value.” An additional disclosure requirement to present purchases, sales, issuances, and settlements of Level 3 activity on a gross basis became effective with periods beginning after December 15, 2010. The additional disclosures required by this guidance have also been included in Note 6.

Pending accounting pronouncements

In October 2010, the FASB issued ASU 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts. This guidance modifies the definition of the types of costs incurred by insurance entities that can be capitalized in the acquisition of new and renewal insurance contracts. The amendments in this guidance specify that the costs are limited to incremental direct costs that result directly from successful contract transactions and would not have been incurred by the insurance entity had the contract transactions not occurred. These costs must be directly related to underwriting, policy issuance and processing, medical and inspection reports and sales force contract selling. The amendments also specify that advertising costs are only included as deferred acquisition costs if the direct-response advertising criteria are met. ASU 2010-26 is effective for interim and annual reporting periods beginning after December 15, 2011 with either prospective or retrospective adoption permitted. We have elected to prospectively adopt this guidance, the impact of which is immaterial to our consolidated financial statements as this guidance has no impact on the Indemnity shareholder interest.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements. This guidance changes the description of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements and certain other changes to converge with the fair value guidance of the International Accounting Standards Board (“IASB”). The amendments in this guidance detail the requirements specific to measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity. The amendments also clarify that a reporting entity should disclose quantitative information about the observable inputs used in the fair value measurement categorized within Level 3 of the fair value hierarchy. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Comprehensive Income. This guidance eliminates the option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendments in this guidance specify an entity has the option to present the total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The disclosures required remain the same. In both options, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income – Deferral of The Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update 2011-05. The amendments in this ASU supersede changes to paragraphs in ASU 2011-05 that pertain to how, when and where reclassification adjustments are presented. We do not expect adoption of ASU 2011-05 and ASU 2011-12 to have a material impact on our consolidated financial statements.

Investments

Available-for-sale securities – Fixed maturity and preferred stock securities are classified as available-for-sale and are reported at fair value. Unrealized holding gains and losses, net of related tax effects, on fixed maturities and preferred stock are charged or credited directly to shareholders’ equity as accumulated other comprehensive income (loss).

Realized gains and losses on sales of fixed maturity and preferred stock securities are recognized in income based upon the specific identification method. Interest and dividend income are recognized as earned.

Fixed income and redeemable preferred stock (debt securities) are evaluated monthly for other-than-temporary impairment loss. For debt securities that have experienced a decline in fair value and we intend to sell or for which it is more likely than not we will be required to sell the security before recovery of its amortized cost, an other-than-temporary impairment is deemed to have occurred, and is recognized in earnings.

Debt securities that have experienced a decline in fair value and that we do not intend to sell, and that we will not be required to sell before recovery, are evaluated to determine if the decline in fair value is other-than-temporary.

Some factors considered in this evaluation include:

· the extent and duration to which fair value is less than cost;

· historical operating performance and financial condition of the issuer;

· short and long-term prospects of the issuer and its industry based upon analysts’ recommendations;

· specific events that occurred affecting the issuer, including a ratings downgrade;

· near term liquidity position of the issuer; and

· compliance with financial covenants.

If a decline is deemed to be other-than-temporary, an assessment is made to determine the amount of the total impairment related to a credit loss and that related to all other factors. Consideration is given to all available information relevant to the collectability of the security in this determination. If the entire amortized cost basis of the security will not be recovered, a credit loss exists. Currently, we have the intent to sell all of our securities that have been determined to have a credit-related impairment. As a result, the entire amount of the impairment has been recognized in earnings. If we had securities with credit impairments that we did not intend to sell, the non-credit portion of the impairment would have been recorded in other comprehensive income.

Impairment charges on non-redeemable preferred securities and hybrid securities with equity characteristics are included in earnings consistent with the treatment for equity securities.

Trading securities – Our common stock securities are trading securities which are reported at fair value. Unrealized holding gains and losses on these securities are included in net realized gains (losses) in the Consolidated Statements of Operations. Realized gains and losses on sales of common stock are recognized in income based upon the specific identification method. Dividend income is recognized as earned.

Limited partnerships – Limited partnerships include U.S. and foreign private equity, mezzanine debt, and real estate investments. The private equity limited partnerships invest primarily in small- to medium-sized companies. The general partners for our limited partnerships determine the market value of investments in the partnerships, including any other-than-temporary impairments of these individual investments. The primary basis for the valuation of limited partnership interests are financial statements prepared by the general partner. Because of the timing of the preparation and delivery of these financial statements, the use of the most recently available financial statements provided by the general partners result in a quarter delay in the inclusion of the limited partnership results in our Consolidated Statements of Operations. Due to this delay, these financial statements do not yet reflect the market conditions experienced in the fourth quarter of 2011.

Nearly all of the underlying investments in our limited partnerships are valued using a source other than quoted prices in active markets. The fair value amounts for our private equity and mezzanine debt partnerships are based upon the financial statements of the general partners, who use multiple methods to estimate fair value including the market approach, income approach or the cost approach. The market approach uses prices and other pertinent information from market-generated transactions involving identical or comparable assets or liabilities. Such valuation techniques often use market multiples derived from a set of comparables. The income approach uses valuation techniques to convert future cash flows or earnings to a single discounted present value amount. The measurement is based upon the value indicated by current market expectations on those future amounts. The cost approach is derived from the amount that is currently required to replace the service capacity of an asset. If information becomes available that would impair the cost of these partnerships, then the general partner would generally adjust to the net realizable value. For real estate limited partnerships, the general partners record these at fair value based upon an independent appraisal or internal estimates of fair value.

We perform various procedures in review of the general partners’ valuations. While we generally rely on the general partners’ financial statements as the best available information to record our share of the partnership unrealized gains and losses resulting from valuation changes, we adjust our financial statements for impairments at the fund level as necessary. As there is a limited market for these investments, they have the greatest potential for market price variability.

Unrealized gains and losses for these investments are reflected in equity in earnings (losses) of limited partnerships in our Consolidated Statements of Operations in accordance with the equity method of accounting. Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

Cash and cash equivalents – Short-term investments, consisting of cash, money market accounts and other short-term, highly liquid investments with a maturity of three months or less at the date of purchase, are considered cash and cash equivalents.

Deferred acquisition costs

Acquisition costs that vary with and relate to the production of insurance and investment-type contracts are deferred. Such costs consist principally of commissions, premium taxes and policy issuance expenses.

Property and casualty insurance – Deferred acquisition costs (“DAC”) for property and casualty insurance contracts, which is primarily composed of commissions and certain underwriting expenses, is amortized on a pro rata basis over the applicable policy term. We consider investment income in determining if a premium deficiency exists, and if so, it would first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency would be greater than unamortized acquisition costs, a liability would be accrued for the excess deficiency.

There was no reduction in costs deferred in any periods presented. The DAC profitability is analyzed annually to ensure recoverability.

Life insurance – DAC related to traditional life insurance products is amortized in proportion to premium revenues over the premium-paying period of related policies using assumptions about mortality, morbidity, lapse rates, expenses and future yield on related investments established when the policy was issued. Amortization is adjusted each period to reflect policy lapse or termination rates as compared to anticipated experience. DAC related to universal life products and deferred annuities is amortized over the estimated lives of the contracts in proportion to actual and expected future gross profits, investment, mortality and expense margins and surrender charges. Both historical and anticipated investment returns, including realized gains and losses, are considered in determining the amortization of DAC.

Estimated gross profits are adjusted monthly to reflect actual experience to date and/or for the unlocking of underlying key assumptions based upon experience studies. DAC is periodically reviewed for recoverability. For traditional life products, if the benefit reserves plus anticipated future premiums and interest earnings for a line of business are less than the current estimate of future benefits and expenses (including any unamortized DAC), a charge to income is recorded for additional DAC amortization or for increased benefit reserves. For universal life and deferred annuities, if the current present value of future expected gross profits is less than the unamortized DAC, a charge to income is recorded for additional DAC amortization.

Deferred taxes

Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using the statutory tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date under the law. Valuation allowances on deferred tax assets are estimated based upon our assessment of the realizability of such amounts.

Property and casualty unpaid losses and loss expenses

Unpaid losses and loss expenses include estimates for claims that have been reported and those that have been incurred but not reported, as well as estimates of all expenses associated with processing and settling these claims, less estimates of anticipated salvage and subrogation recoveries. Unpaid loss and loss expense reserves are set at full expected cost, except for workers compensation loss reserves, which have been discounted using an interest rate of 2.5%. Estimating the ultimate cost of future losses and loss expenses is an uncertain and complex process. This estimation process is based upon the assumption that past developments are an appropriate indicator of future events, and involves a variety of actuarial techniques that analyze experience, trends and other relevant factors. The uncertainties involved with the reserving process include internal factors, such as changes in claims handling procedures, as well as external factors, such as economic trends and changes in the concepts of legal liability and damage awards. Accordingly, final loss settlements may vary from the present estimates, particularly when those payments may not occur until well into the future.

We regularly review the adequacy of our estimated loss and loss expense reserves by line of business. Adjustments to previously established reserves are reflected in the operating results of the period in which the adjustment is determined to be necessary. Such adjustments could possibly be significant, reflecting any variety of new and adverse or favorable trends.

Life insurance reserves

The liability for future benefits of life insurance contracts is the present value of such benefits less the present value of future net premiums. Life insurance and income-paying annuity future policy benefit reserves are computed primarily by the net level premium method with assumptions as to mortality, withdrawal, lapses and investment yields. Traditional life insurance products are subject to loss recognition testing. The adequacy of the related reserves is verified as part of loss recognition testing. Loss recognition is necessary when the sum of the reserve and the present value of projected policy cash flows is less than unamortized DAC.

Deferred annuity future benefit reserves are established at accumulated account values without reduction for surrender charges. These account values are credited with varying interest rates determined at the discretion of EFL subject to certain minimums.

Agent bonus estimates

Agent bonuses are based upon an individual agency’s property and casualty underwriting profitability and also include a component for growth in agency property and casualty premiums if the agency’s underwriting profitability targets for our book of business are met. The estimate for agent bonuses, which are based upon the performance over 36 months, is modeled on a monthly basis using actual underwriting data by agency for the two prior years combined with the current year-to-date actual data. At December 31 of each year, we use actual data available and record an accrual based upon the expected payment amount. These costs are included in the policy acquisition and underwriting expenses in the Consolidated Statements of Operations.

Recognition of premium revenues and losses

Property and casualty insurance – Insurance premiums written are earned over the terms of the policies on a pro-rata basis. Unearned premiums represent that portion of premiums written which is applicable to the unexpired terms of policies in force. Losses and loss expenses are recorded as incurred.

Life insurance – Premiums on traditional life insurance products are recognized as revenue when due. Reserves for future policy benefits are established as premiums are earned. Premiums received for annuity and universal life products are reported as deposits and included in liabilities. For universal life products, revenue is recognized as amounts are assessed against the policyholder’s account for mortality coverage and contract expenses. The primary source of revenue on annuity deposits is derived from the interest earned by EFL, which is reflected in net investment income.

Reinsurance

Property and casualty insurance – Property and casualty assumed and ceded reinsurance premiums are earned over the terms of the reinsurance contracts. Premiums ceded to other companies are reported as a reduction of premium income. Reinsurance contracts do not relieve the Property and Casualty Group from its obligations to policyholders.

Life insurance – Reinsurance premiums, commissions and expense reimbursements on reinsurance ceded on life insurance policies are accounted for on a basis consistent with those used in accounting for the underlying reinsured policies. Expense reimbursements received in connection with new reinsurance ceded have been accounted for as a reduction of the related policy acquisition costs. Amounts recoverable from reinsurers for future policy benefits are estimated in a manner consistent with the assumptions used for the underlying policy benefits. Amounts recoverable for incurred claims, future policy benefits and expense reimbursements are recorded as assets. Reinsurance contracts do not relieve EFL from its obligations to policyholders.

Recognition of management fee revenue

Indemnity earns management fees from the Exchange for providing sales, underwriting and policy issuance services. Pursuant to the subscriber’s agreements with the policyholders at the Exchange, Indemnity may retain up to 25% of all premiums written or assumed by the Exchange. Management fee revenue is calculated by multiplying the management fee rate by the direct premiums written by the Exchange and the other members of the Property and Casualty Group, which are assumed by the Exchange under an intercompany pooling arrangement. The Property and Casualty Group issues policies with annual terms only. Management fees are recorded as revenue upon policy issuance or renewal, as substantially all of the services required to be performed by us have been satisfied at that time. Certain activities are performed and related costs are incurred by us subsequent to policy issuance in connection with the services provided to the Exchange; however, these activities are inconsequential and perfunctory. Management fee revenue is eliminated upon consolidation.

Recognition of service agreement revenue

Included in service agreement revenue are service charges Indemnity collects from policyholders for providing multiple payment plans on policies written by the Property and Casualty Group. Service charges, which are flat dollar charges for each installment billed beyond the first installment, are recognized as revenue when bills are rendered to the policyholder. Service agreement revenue also includes late payment and policy reinstatement fees. Service agreement revenue is included in other income in the Consolidated Statements of Operations.

Earnings Per Share

12 Months Ended

Dec. 31, 2011

Earnings Per Share

Earnings Per Share

Note 3. Earnings Per Share

Basic earnings per share are calculated under the two-class method, which 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 18, “Capital Stock.” Class A diluted earnings per share are calculated under the if-converted method, which reflects the conversion of Class B shares and the effect of potentially dilutive outstanding employee stock-based awards and awards vested and not yet vested related to the outside directors’ stock compensation plan. Vested shares related to the outside directors’ compensation plan were included in the table below for the first time in 2010. The 2009 amounts have been updated to include these shares. This had no impact on previously reported diluted earnings per share.

A reconciliation of the numerators and denominators used in the basic and diluted per-share computations is presented as follows for each class of Indemnity common stock:

	Indemnity Shareholder Interest
(dollars in millions,				For the years ended December 31,
except per share data)	2011			2010			2009
	Allocated			Allocated			Allocated
	net	Weighted	Per-	net	Weighted	Per-	net	Weighted	Per-
	income	shares	share	income	shares	share	income	shares	share
	(numerator)	(denominator)	amount	(numerator)	(denominator)	amount	(numerator)	(denominator)	amount
Class A – Basic EPS:
Income available to Class A stockholders	$168	48,875,316	$ 3.45	$161	50,705,607	$ 3.18	$107	51,250,606	$ 2.10
Dilutive effect of stock awards	0	71,721	–	0	68,887	–	0	60,793	–
Assumed conversion of Class B shares	1	6,110,400	–	1	6,110,400	–	1	6,117,600	–
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$169	55,057,437	$ 3.08	$162	56,884,894	$ 2.85	$108	57,428,999	$ 1.89
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$ 1	2,546	$522.47	$ 1	2,546	$462.83	$ 1	2,549	$312.45

Variable Interest Entity

12 Months Ended

Dec. 31, 2011

Variable Interest Entity

Variable Interest Entity

Note 4. Variable Interest Entity

Erie Insurance Exchange

The Exchange is a reciprocal insurance exchange domiciled in Pennsylvania, for which Indemnity serves as attorney-in-fact. Indemnity holds a variable interest in the Exchange due to the absence of decision-making capabilities by the equity owners (subscribers/policyholders) of the Exchange and due to the significance of the management fee the Exchange pays to Indemnity as its decision maker. As a result, Indemnity is deemed to have a controlling financial interest in the Exchange and is considered to be its primary beneficiary.

Consolidation of the Exchange’s financial results is required given the significance of the management fee to the Exchange and because Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance. The Exchange’s anticipated economic performance is the product of its underwriting results combined with its investment results. The fees paid to Indemnity under the subscriber’s agreement impact the anticipated economic performance attributable to the Exchange’s results. Indemnity earns a management fee from the Exchange for the services it provides as attorney-in-fact. Indemnity’s management fee revenues are based upon all premiums written or assumed by the Exchange. Indemnity’s Board of Directors determines the management fee rate to be paid by the Exchange to Indemnity. This rate cannot exceed 25% of the direct and affiliated assumed written premiums of the Exchange, as defined by the subscriber’s agreement signed by each policyholder. Management fee revenues and management fee expenses are eliminated upon consolidation.

The shareholders of Indemnity have no rights to the assets of the Exchange and no obligations arising from the liabilities of the Exchange. Indemnity has no obligation related to any underwriting and/or investment losses experienced by the Exchange. Indemnity would, however, be adversely impacted if the Exchange incurred significant underwriting and/or investment losses. If the surplus of the Exchange were to decline significantly from its current level, its financial strength ratings could be reduced and, as a consequence, the Exchange could find it more difficult to retain its existing business and attract new business. A decline in the business of the Exchange would have an adverse effect on the amount of the management fees Indemnity receives. In addition, a decline in the surplus of the Exchange from its current level may impact the management fee rate received by Indemnity. Indemnity also has an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for its management fee. If any of these events occurred, Indemnity’s financial position, financial performance and/or cash flows could be adversely impacted.

On December 31, 2010, Indemnity sold all of the outstanding capital stock of its wholly owned subsidiaries to the Exchange. On March 31, 2011, Indemnity sold its 21.6% ownership interest in EFL to the Exchange. Under this structure, all property and casualty and life insurance operations are owned by the Exchange, and Indemnity functions solely as the management company. There was no impact on the existing reinsurance pooling agreement between the Exchange and EIC or ENY as a result of the sales, nor was there any impact to the subscribers (policyholders) of the Exchange, the Exchange’s independent insurance agents, or Indemnity’s employees.

Indemnity has not provided financial or other support to the Exchange for any of the reporting periods presented. At December 31, 2011, there are no explicit or implicit arrangements that would require Indemnity to provide future financial support to the Exchange. Indemnity is not liable if the Exchange was to be in violation of its debt covenants or was unable to meet its obligation for unfunded commitments to limited partnerships.

- Definition

Disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

+ References + Details

Segment Information

12 Months Ended

Dec. 31, 2011

Segment Information

Segment Information

Note 5. Segment Information

Our reportable segments include management operations, property and casualty insurance operations, life insurance operations and investment operations. Accounting policies for segments are the same as those described in the summary of significant accounting policies (see Note 2, “Significant Accounting Policies”). Assets are not allocated to the segments, but rather, are reviewed in total for purposes of decision-making. No single customer or agent provides 10% or more of revenues.

Our management operations segment consists of Indemnity serving as attorney-in-fact for the Exchange. Indemnity operates in this capacity solely for the Exchange. We evaluate profitability of our management operations segment principally on the gross margin from management operations. Indemnity earns a management fee from the Exchange for providing sales, underwriting and policy issuance services. Management fee revenue, which is eliminated in consolidation, is calculated as a percentage not to exceed 25% of all the direct premiums written by the Exchange and the other members of the Property and Casualty Group, which are assumed by the Exchange under an intercompany pooling arrangement. The Property and Casualty Group issues policies with annual terms only. Management fees are recorded upon policy issuance or renewal, as substantially all of the services required to be performed by Indemnity have been satisfied at that time. Certain activities are performed and related costs are incurred by us subsequent to policy issuance in connection with the services provided to the Exchange; however, these activities are inconsequential and perfunctory. Although these management fee revenues and expenses are eliminated upon consolidation, the amount of the fee directly impacts the allocation of our consolidated net income between noncontrolling interest, which bears the management fee expense and represents the interests of the Exchange subscribers (policyholders), and Indemnity’s interest, which earns the management fee revenue and represents Indemnity shareholder interest in net income.

Our property and casualty insurance operations segment includes personal and commercial lines. Personal lines consist primarily of personal auto and homeowners and are marketed to individuals. Commercial lines consist primarily of commercial multi-peril, commercial auto and workers compensation and are marketed to small- and medium-sized businesses. Our property and casualty policies are sold by independent agents. Our property and casualty insurance underwriting operations are conducted through the Exchange and its subsidiaries and include assumed voluntary reinsurance from nonaffiliated domestic and foreign sources, assumed involuntary and ceded reinsurance business. The Exchange exited the assumed voluntary reinsurance business effective December 31, 2003, and therefore unaffiliated reinsurance includes only run-off activity of the previously assumed voluntary reinsurance business. We evaluate profitability of the property and casualty insurance operations segment principally based upon net underwriting results represented by the combined ratio.

Our life insurance operations segment includes traditional and universal life insurance products and fixed annuities marketed to individuals using the same independent agency force utilized by our property and casualty insurance operations. We evaluate profitability of the life insurance segment principally based upon segment net income, including investments, which for segment purposes are reflected in the investment operations segment. At the same time, we recognize that investment-related income is integral to the evaluation of the life insurance segment because of the long duration of life products. In 2011, investment activities on life insurance-related assets generated revenues of $109 million, resulting in EFL reporting income before income taxes of $50 million, before intercompany eliminations. In 2010, investment activities on life insurance-related assets generated revenues of $107 million, resulting in EFL reporting income before income taxes of $50 million, before intercompany eliminations. In 2009, investment activities on life insurance-related assets generated revenues of $63 million, resulting in EFL reporting income before income taxes of $10 million, before intercompany eliminations.

The investment operations segment performance is evaluated based upon appreciation of assets, rate of return and overall return. Investment-related income for the life operations is included in the investment segment results.

The following tables summarize the components of the Consolidated Statements of Operations by reportable business segment:

	Erie Insurance Group
	For the year ended December 31, 2011
(in millions)	Management operations	Property and casualty insurance operations		Life insurance operations		Investment operations		Eliminations		Consolidated
Premiums earned/life policy revenue		$4,149		$ 67				$ (2	)	$4,214
Net investment income						$444		(11	)	433
Net realized investment losses						(4	)			(4	)
Net impairment losses recognized in earnings						(2	)			(2	)
Equity in earnings of limited partnerships						149				149
Management fee revenue	$1,067							(1,067	)	–
Service agreement and other revenue	33			1						34
Total revenues	1,100	4,149		68		587		(1,080	)	4,824
Cost of management operations	892							(892	)	–
Insurance losses and loss expenses		3,349		100				(5	)	3,444
Policy acquisition and underwriting expenses		1,178		27				(183	)	1,022
Total benefits and expenses	892	4,527		127		–		(1,080	)	4,466
Income (loss) before income taxes	208	(378	)	(59	)	587		–		358
Provision for income taxes	73	(132	)	(21	)	170		–		90
Net income (loss)	$ 135	$ (246	)	$(38	)	$417		$ –		$ 268

	Erie Insurance Group
	For the year ended December 31, 2010
(in millions)	Management operations	Property and casualty insurance operations		Life insurance operations		Investment operations		Eliminations		Consolidated
Premiums earned/life policy revenue		$3,925		$ 64				$ (2	)	$3,987
Net investment income						$444		(11	)	433
Net realized investment gains						313				313
Net impairment losses recognized in earnings						(6	)			(6	)
Equity in earnings of limited partnerships						128				128
Management fee revenue	$1,009							(1,009	)	–
Service agreement and other revenue	34			1						35
Total revenues	1,043	3,925		65		879		(1,022	)	4,890
Cost of management operations	841							(841	)	–
Insurance losses and loss expenses		2,815		90				(5	)	2,900
Policy acquisition and underwriting expenses		1,113		32				(176	)	969
Goodwill impairment						22				22
Total benefits and expenses	841	3,928		122		22		(1,022	)	3,891
Income (loss) before income taxes	202	(3	)	(57	)	857		–		999
Provision for income taxes	71	(1	)	(20	)	289		–		339
Net income (loss)	$ 131	$ (2	)	$(37	)	$568		$ –		$ 660

	Erie Insurance Group
	For the year ended December 31, 2009
(in millions)	Management operations	Property and casualty insurance operations	Life insurance operations		Investment operations		Eliminations		Consolidated
Premiums earned/life policy revenue		$3,808	$ 63				$ (2	)	$3,869
Net investment income					$ 444		(11	)	433
Net realized investment gains					412				412
Net impairment losses recognized in earnings					(126	)			(126	)
Equity in losses of limited partnerships					(369	)			(369	)
Management fee revenue	$ 965						(965	)	–
Service agreement and other revenue	35		1						36
Total revenues	1,000	3,808	64		361		(978	)	4,255
Cost of management operations	813						(813	)	–
Insurance losses and loss expenses		2,644	89				(5	)	2,728
Policy acquisition and underwriting expenses		1,135	28				(160	)	1,003
Total benefits and expenses	813	3,779	117		–		(978	)	3,731
Income (loss) before income taxes	187	29	(53	)	361		–		524
Provision for income taxes	60	10	(19	)	27		–		78
Net income (loss)	$ 127	$ 19	$(34	)	$ 334		$ –		$ 446

See the “Results of the Erie Insurance Group’s Operations by Interest” table in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the composition of income attributable to Indemnity and income attributable to the noncontrolling interest (Exchange).

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

Fair Value

12 Months Ended

Dec. 31, 2011

Fair Value

Fair Value

Note 6. Fair Value

The 2010 fair value information within this note has been conformed to this current presentation.

Our available-for-sale and trading 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 trading 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. Although the majority of our prices are obtained from third party sources, we also perform an internal pricing review for securities with low trading volumes in the current market conditions. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

Level 1: Quoted prices for identical instruments in active markets not subject to adjustments or discounts.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3: Instruments whose significant value drivers are unobservable and reflect management’s estimate of fair value based upon assumptions used by market participants in an orderly transaction as of the valuation date.

The following table represents the fair value measurements on a recurring basis for our consolidated available-for-sale and trading securities by asset class and level of input at December 31, 2011:

	Erie Insurance Group
	December 31, 2011
	Fair value measurements using:
(in millions)	Total		Quoted prices in active markets for identical assets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Indemnity
Available-for-sale securities:
States & political subdivisions	$	221	$	0	$	221	$	0
Corporate debt securities	303		0		303		0
Commercial mortgage-backed securities (CMBS)	13		0		13		0
Collateralized debt obligations (CDO)	4		0		0		4
Other debt securities	7		0		7		0
Total fixed maturities	548		0		544		4
Nonredeemable preferred stock	25		10		15		0
Total available-for-sale securities	573		10		559		4
Trading securities:
Common stock	27		27		0		0
Total trading securities	27		27		0		0
Total – Indemnity	$	600	$	37	$	559	$	4
Exchange
Available-for-sale securities:
U.S. government & agencies	$	17	$	6	$	11	$	0
States & political subdivisions	1,379		0		1,375		4
Foreign government securities	15		0		15		0
Corporate debt securities	5,499		20		5,467		12
Residential mortgage-backed securities (RMBS)	189		0		189		0
Commercial mortgage-backed securities (CMBS)	66		0		66		0
Collateralized debt obligations (CDO)	65		0		36		29
Other debt securities	62		0		57		5
Total fixed maturities	7,292		26		7,216		50
Nonredeemable preferred stock	564		188		371		5
Total available-for-sale securities	7,856		214		7,587		55
Trading securities:
Common stock	2,308		2,296		0		12
Total trading securities	2,308		2,296		0		12
Total – Exchange	$	10,164	$	2,510	$	7,587	$	67
Total – Erie Insurance Group	$	10,764	$	2,547	$	8,146	$	71

Level 3 Assets – Quarterly Change:

	Erie Insurance Group

(in millions)	Beginning balance at September 30, 2011	Included in earnings (1)	Included in other comprehensive income	Purchases	Sales	Transfers in and (out) of Level 3 (2)	Ending balance at December 31, 2011
Indemnity
Available-for-sale securities:
Collateralized debt obligations (CDO)	$ 4	$ 0	$ 0	$0	$0	$0	$ 4
Total fixed maturities	4	0	0	0	0	0	4
Total available-for-sale securities	4	0	0	0	0	0	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$ 4	$ 0	$ 0	$0	$0	$0	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 4	$ 0	$ 0	$0	$0	$0	$ 4
Corporate debt securities	12	0	0	0	0	0	12
Collateralized debt obligations (CDO)	29	0	0	0	0	0	29
Other debt securities	5	0	0	0	0	0	5
Total fixed maturities	50	0	0	0	0	0	50
Nonredeemable preferred stock	6	0	(1)	0	0	0	5
Total available-for-sale securities	56	0	(1)	0	0	0	55
Trading securities:
Common stock	13	(1)	0	0	0	0	12
Total trading securities	13	(1)	0	0	0	0	12
Total Level 3 assets – Exchange	$69	$(1)	$(1)	$0	$0	$0	$67
Total Level 3 assets – Erie Insurance Group	$73	$(1)	$(1)	$0	$0	$0	$71

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the three months ended December 31, 2011 on Level 3 securities.

(2) Transfers in and out of Level 3 are attributable to changes in the availability of market observable information for individual securities within the respective categories. Transfers in and out of levels are recognized at the start of the period.

There were no transfers between Levels 1 and 2 during the three months ended December 31, 2011.

Level 3 Assets –Year-to-Date Change:

	Erie Insurance Group

(in millions)	Beginning balance at December 31, 2010	Included in earnings (1)	Included in other comprehensive income	Purchases	Sales	Transfers in and (out) of Level 3 (2)	Ending balance at December 31, 2011
Indemnity
Available-for-sale securities:
Collateralized debt obligations (CDO)	$ 4	$0	$ 0	$0	$ 0	$0	$ 4
Total fixed maturities	4	0	0	0	0	0	4
Total available-for-sale securities	4	0	0	0	0	0	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$ 4	$0	$ 0	$0	$ 0	$0	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 4	$0	$ 0	$0	$ 0	$0	$ 4
Corporate debt securities	11	0	0	1	0	0	12
Collateralized debt obligations (CDO)	30	0	(1)	0	0	0	29
Other debt securities	10	0	0	0	(5)	0	5
Total fixed maturities	55	0	(1)	1	(5)	0	50
Nonredeemable preferred stock	7	0	(2)	0	0	0	5
Total available-for-sale securities	62	0	(3)	1	(5)	0	55
Trading securities:
Common stock	12	0	0	0	0	0	12
Total trading securities	12	0	0	0	0	0	12
Total Level 3 assets – Exchange	$74	$0	$(3)	$1	$(5)	$0	$67
Total Level 3 assets – Erie Insurance Group	$78	$0	$(3)	$1	$(5)	$0	$71

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the year ended December 31, 2011 on Level 3 securities.

There were no transfers between Levels 1 and 2 during the year ended December 31, 2011.

The following table represents the fair value measurements on a recurring basis for our consolidated available-for-sale and trading securities by major category and level of input at December 31, 2010:

	Erie Insurance Group
	December 31, 2010
	Fair value measurements using:
(in millions)	Total	Quoted prices in active markets for identical assets Level 1	Significant observable inputs Level 2	Significant unobservable inputs Level 3
Indemnity
Available-for-sale securities:
U.S. government & agencies	$ 25	$ 25	$ 0	$ 0
States & political subdivisions	197	0	197	0
Corporate debt securities	38	0	38	0
Collateralized debt obligations (CDO)	4	0	0	4
Total fixed maturities	264	25	235	4
Nonredeemable preferred stock	24	11	13	0
Total available-for-sale securities	288	36	248	4
Trading securities:
Common stock	28	28	0	0
Total trading securities	28	28	0	0
Total – Indemnity	$ 316	$ 64	$ 248	$ 4
Exchange
Available-for-sale securities:
U.S. government & agencies	$ 87	$ 12	$ 75	$ 0
States & political subdivisions	1,471	0	1,467	4
Foreign government securities	21	0	21	0
Corporate debt securities	5,263	12	5,240	11
Residential mortgage-backed securities (RMBS)	224	0	224	0
Commercial mortgage-backed securities (CMBS)	86	0	86	0
Collateralized debt obligations (CDO)	70	0	40	30
Other debt securities	57	0	47	10
Total fixed maturities	7,279	24	7,200	55
Nonredeemable preferred stock	570	166	397	7
Total available-for-sale securities	7,849	190	7,597	62
Trading securities:
Common stock	2,306	2,294	0	12
Total trading securities	2,306	2,294	0	12
Total – Exchange	$10,155	$2,484	$7,597	$74
Total – Erie Insurance Group	$10,471	$2,548	$7,845	$78

Level 3 Assets – Quarterly Change:

	Erie Insurance Group

(in millions)	Beginning balance at September 30, 2010	Transfer(s) in and (out) (1)	Included in earnings (2)	Included in other comprehensive income	Purchases, sales and adjustments	Transfer(s) in and (out) of Level 3 (3)	Ending balance at December 31, 2010
Indemnity
Available-for-sale securities:
Corporate debt securities	$ 2	$(2)	$ 0	$0	$ 0	$ 0	$ 0
Collateralized debt obligations (CDO)	7	(4)	0	0	0	1	4
Total fixed maturities	9	(6)	0	0	0	1	4
Nonredeemable preferred stock	2	(1)	0	0	(1)	0	0
Total available-for-sale securities	11	(7)	0	0	(1)	1	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$11	$(7)	$ 0	$0	$ (1)	$ 1	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 0	$ 0	$ 0	$0	$ 0	$ 4	$ 4
Corporate debt securities	9	2	0	0	0	0	11
Collateralized debt obligations (CDO)	42	4	(1)	1	(16)	0	30
Other debt securities	5	0	0	0	0	5	10
Total fixed maturities	56	6	(1)	1	(16)	9	55
Nonredeemable preferred stock	5	1	0	1	0	0	7
Total available-for-sale securities	61	7	(1)	2	(16)	9	62
Trading securities:
Common stock	11	0	1	0	0	0	12
Total trading securities	11	0	1	0	0	0	12
Total Level 3 assets – Exchange	$72	$ 7	$ 0	$2	$(16)	$ 9	$74
Total Level 3 assets – Erie Insurance Group	$83	$ 0	$ 0	$2	$(17)	$10	$78

(1) Transfers in and out are attributable to the sale of Indemnity’s wholly owned property and casualty insurance subsidiaries Erie Insurance Company, Erie Insurance Company of New York and Erie Insurance Property and Casualty Company, to the Exchange. Level 3 securities previously held by the Indemnity are shown as transfer (out) while transfers to the Exchange are shown as transfer in.

(2) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the three months ended December 31, 2010 on Level 3 securities.

(3) Transfers in and out of Level 3 are attributable to changes in the availability of market observable information for individual securities within the respective categories. Transfers in and out of levels are recognized at the start of the period.

There were no significant transfers between Levels 1 and 2 during the three months ended December 31, 2010.

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group

(in millions)	Beginning balance at December 31, 2009	Transfer(s) in and (out) (1)	Included in earnings (2)	Included in other comprehensive income	Purchases, sales and adjustments	Transfer(s) in and (out) of Level 3 (3)	Ending balance at December 31, 2010
Indemnity
Available-for-sale securities:
Corporate debt securities	$ 2	$(2)	$ 0	$0	$ 0	$ 0	$ 0
Collateralized debt obligations (CDO)	8	(4)	0	0	0	0	4
Total fixed maturities	10	(6)	0	0	0	0	4
Nonredeemable preferred stock	1	(1)	0	0	0	0	0
Total available-for-sale securities	11	(7)	0	0	0	0	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$ 11	$(7)	$ 0	$0	$ 0	$ 0	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 0	$ 0	$ 0	$0	$ 0	$ 4	$ 4
Corporate debt securities	17	2	0	0	0	(8)	11
Collateralized debt obligations (CDO)	49	4	(1)	5	(19)	(8)	30
Other debt securities	5	0	0	0	0	5	10
Total fixed maturities	71	6	(1)	5	(19)	(7)	55
Nonredeemable preferred stock	4	1	0	2	0	0	7
Total available-for-sale securities	75	7	(1)	7	(19)	(7)	62
Trading securities:
Common stock	9	0	3	0	0	0	12
Total trading securities	9	0	3	0	0	0	12
Total Level 3 assets – Exchange	$84	$ 7	$ 2	$7	$(19)	$(7)	$74
Total Level 3 assets – Erie Insurance Group	$95	$ 0	$ 2	$7	$(19)	$(7)	$78

(2) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the year ended December 31, 2010 on Level 3 securities.

There were no significant transfers between Levels 1 and 2 during the year ended December 31, 2010. Estimates of fair values for our investment portfolio are obtained primarily from nationally recognized pricing services. Our Level 1 category includes those securities valued using an exchange traded price provided by the pricing services. The methodologies used by the pricing services that support a Level 2 classification of a financial instrument 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 in illiquid markets. In limited circumstances we adjust the price received from the pricing services when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions.

At December 31, 2011, we adjusted one price received from our pricing services to reflect an alternate fair market value. This alternative fair value was based upon observable market data. The price difference between the pricing service and the observable market data was less than $0.1 million.

We perform continuous reviews of the prices obtained from the pricing services. This includes evaluating the methodology and inputs used by the pricing service to ensure that we determine the proper level classification of the financial instrument. Price variances, including large periodic changes, are investigated and corroborated by market data. We have reviewed the pricing methodologies of our pricing service as well as other observable inputs, such as benchmark yields, reported trades, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and transaction volumes and believe that their prices adequately consider market activity in determining fair value. Our review process continues to evolve based upon accounting guidance and requirements.

When prices from the pricing services are not available, values are determined by obtaining non-binding broker 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. Our evaluation includes the consideration of benchmark yields, reported trades, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

For certain structured securities in an illiquid market, there may be no prices available from a pricing service and no comparable market quotes available. In these situations, we value the security using an internally-developed, risk-adjusted discounted cash flow model.

The following table sets forth the fair value of the consolidated available-for-sale and trading securities by pricing source:

	Erie Insurance Group
(in millions)	December 31, 2011
	Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services	$	542	$	0	$	542	$	0
Priced via market comparables/non-binding broker quote (1)	2		0		2		0
Priced via internal modeling (2)	4		0		0		4
Total fixed maturities	548		0		544		4
Nonredeemable preferred stock:
Priced via pricing services	23		10		13		0
Priced via market comparables/non-binding broker quote (1)	2		0		2		0
Priced via internal modeling (2)	0		0		0		0
Total nonredeemable preferred stock	25		10		15		0
Common stock:
Priced via pricing services	27		27		0		0
Priced via market comparables/non-binding broker quote (1)	0		0		0		0
Priced via internal modeling (2)	0		0		0		0
Total common stock	27		27		0		0
Total available-for-sale and trading securities – Indemnity	$	600	$	37	$	559	$	4
Exchange
Fixed maturities:
Priced via pricing services	$	7,158	$	26	$	7,132	$	0
Priced via market comparables/non-binding broker quote (1)	84		0		84		0
Priced via internal modeling (2)	50		0		0		50
Total fixed maturities	7,292		26		7,216		50
Nonredeemable preferred stock:
Priced via pricing services	528		188		340		0
Priced via market comparables/non-binding broker quote (1)	36		0		31		5
Priced via internal modeling (2)	0		0		0		0
Total nonredeemable preferred stock	564		188		371		5
Common stock:
Priced via pricing services	2,296		2,296		0		0
Priced via market comparables/non-binding broker quote (1)	0		0		0		0
Priced via internal modeling (2)	12		0		0		12
Total common stock	2,308		2,296		0		12
Total available-for-sale and trading securities – Exchange	$	10,164	$	2,510	$	7,587	$	67
Total available-for-sale and trading securities – Erie Insurance Group	$	10,764	$	2,547	$	8,146	$	71

(1) All broker quotes obtained for securities were non-binding. When a non-binding broker quote was the only price available, the security was classified as Level 3.

(2) Internal modeling using a discounted cash flow model was performed on 11 fixed maturities and 3 common equity securities representing 0.6% of the total portfolio of the Erie Insurance Group.

We have no assets that were measured at fair value on a nonrecurring basis during the year ended December 31, 2011.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 16
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

+ Details

Investments

12 Months Ended

Dec. 31, 2011

Investments

Investments

Note 7. Investments

The 2010 investment information within this note has been conformed to this current presentation.

The following tables summarize the cost and fair value of our available-for-sale securities at December 31, 2011 and 2010:

	Erie Insurance Group
	December 31, 2011
(in millions)	Amortized		Gross unrealized		Gross unrealized		Estimated
	cost		gains		losses		fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	208	$	13	$	0	$	221
Corporate debt securities	303		1		1		303
Commercial mortgage-backed securities (CMBS)	13		0		0		13
Collateralized debt obligations (CDO)	4		0		0		4
Other debt securities	7		0		0		7
Total fixed maturities	535		14		1		548
Nonredeemable preferred stock	24		1		0		25
Total available-for-sale securities – Indemnity	$	559	$	15	$	1	$	573
Exchange
Available-for-sale securities:
U.S. government & agencies	$	16	$	1	$	0	$	17
States & political subdivisions	1,289		91		1		1,379
Foreign government securities	15		0		0		15
Corporate debt securities	5,144		386		31		5,499
Residential mortgage-backed securities (RMBS)	178		11		0		189
Commercial mortgage-backed securities (CMBS)	62		4		0		66
Collateralized debt obligations (CDO)	66		4		5		65
Other debt securities	59		3		0		62
Total fixed maturities	6,829		500		37		7,292
Nonredeemable preferred stock	531		45		12		564
Total available-for-sale securities – Exchange	$	7,360	$	545	$	49	$	7,856
Total available-for-sale securities – Erie Insurance Group	$	7,919	$	560	$	50	$	8,429

	Erie Insurance Group
	December 31, 2010
(in millions)	Amortized		Gross unrealized		Gross unrealized		Estimated
	cost		gains		losses		fair value
Indemnity
Available-for-sale securities:
U.S. government & agencies	$	25	$	0	$	0	$	25
States & political subdivisions	193		6		2		197
Corporate debt securities	36		2		0		38
Collateralized debt obligations (CDO)	3		1		0		4
Total fixed maturities	257		9		2		264
Nonredeemable preferred stock	20		4		0		24
Total available-for-sale securities – Indemnity	$	277	$	13	$	2	$	288
Exchange
Available-for-sale securities:
U.S. government & agencies	$	85	$	2	$	0	$	87
States & political subdivisions	1,437		43		9		1,471
Foreign government securities	20		1		0		21
Corporate debt securities	4,900		377		14		5,263
Residential mortgage-backed securities (RMBS)	216		9		1		224
Commercial mortgage-backed securities (CMBS)	82		5		1		86
Collateralized debt obligations (CDO)	69		6		5		70
Other debt securities	54		3		0		57
Total fixed maturities	6,863		446		30		7,279
Nonredeemable preferred stock	503		74		7		570
Total available-for-sale securities – Exchange	$	7,366	$	520	$	37	$	7,849
Total available-for-sale securities – Erie Insurance Group	$	7,643	$	533	$	39	$	8,137

The amortized cost and estimated fair value of fixed maturities at December 31, 2011, are shown below by remaining contractual term to maturity. Mortgage-backed securities are allocated based upon their stated maturity dates. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Erie Insurance Group
(in millions)	Amortized	Estimated
	cost	fair value
Indemnity
Due in one year or less	$ 152	$ 152
Due after one year through five years	253	256
Due after five years through ten years	47	52
Due after ten years	83	88
Total fixed maturities – Indemnity	$ 535	$ 548
Exchange
Due in one year or less	$ 506	$ 513
Due after one year through five years	2,397	2,519
Due after five years through ten years	2,669	2,898
Due after ten years	1,257	1,362
Total fixed maturities – Exchange	$6,829	$7,292
Total fixed maturities – Erie Insurance Group	$7,364	$7,840

Available-for-sale securities in a gross unrealized loss position at December 31, 2011 are as follows. Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	December 31, 2011
(dollars in millions)	Less than 12 months		12 months or longer		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized	No. of
Indemnity	value	losses	value	losses	Value	losses	holdings
Available-for-sale securities:
Corporate debt securities	$220	$ 1	$ 0	$ 0	$220	$ 1	41
Commercial mortgage-backed securities (CMBS)	4	0	9	0	13	0	3
Other debt securities	5	0	2	0	7	0	2
Total fixed maturities – Indemnity	229	1	11	0	240	1	46
Nonredeemable preferred stock	4	0	3	0	7	0	3
Total available-for-sale securities – Indemnity	$233	$ 1	$ 14	$ 0	$247	$ 1	49

Quality breakdown of fixed maturities:
Investment grade	$229	$ 1	$ 11	$ 0	$240	$ 1	46
Non-investment grade	0	0	0	0	0	0	0
Total fixed maturities – Indemnity	$229	$ 1	$ 11	$ 0	$240	$ 1	46

Exchange
Available-for-sale securities:
States & political subdivisions	$ 7	$ 0	$ 6	$ 1	$ 13	$ 1	3
Corporate debt securities	635	27	50	4	685	31	108
Residential mortgage-backed securities (RMBS)	7	0	0	0	7	0	4
Commercial mortgage-backed securities (CMBS)	5	0	0	0	5	0	1
Collateralized debt obligations (CDO)	0	0	32	5	32	5	6
Other debt securities	9	0	0	0	9	0	2
Total fixed maturities – Exchange	663	27	88	10	751	37	124
Nonredeemable preferred stock	168	11	34	1	202	12	27
Total available-for-sale securities – Exchange	$831	$38	$122	$11	$953	$49	151

Quality breakdown of fixed maturities:
Investment grade	$625	$26	$ 79	$ 9	$704	$35	109
Non-investment grade	38	1	9	1	47	2	15
Total fixed maturities – Exchange	$663	$27	$ 88	$10	$751	$37	124

Available-for-sale securities in a gross unrealized loss position at December 31, 2010 are as follows. Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	December 31, 2010
(dollars in millions)	Less than 12 months		12 months or longer		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized	No. of
Indemnity	value	losses	value	losses	Value	losses	holdings
Available-for-sale securities:
U.S. government & agencies	$ 25	$ 0	$ 0	$ 0	$ 25	$ 0	1
States & political subdivisions	39	2	1	0	40	2	20
Corporate debt securities	31	0	0	0	31	0	3
Total fixed maturities – Indemnity	95	2	1	0	96	2	24
Nonredeemable preferred stock	3	0	0	0	3	0	1
Total available-for-sale securities – Indemnity	$ 98	$ 2	$ 1	$ 0	$ 99	$ 2	25

Quality breakdown of fixed maturities:
Investment grade	$ 95	$ 2	$ 1	$ 0	$ 96	$ 2	24
Non-investment grade	0	0	0	0	0	0	0
Total fixed maturities – Indemnity	$ 95	$ 2	$ 1	$ 0	$ 96	$ 2	24

Exchange
Available-for-sale securities:
U.S. government & agencies	$ 22	$ 0	$ 0	$ 0	$ 22	$ 0	3
States & political subdivisions	299	8	5	1	304	9	59
Foreign government securities	10	0	0	0	10	0	1
Corporate debt securities	398	8	144	6	542	14	101
Residential mortgage-backed securities (RMBS)	6	0	7	1	13	1	4
Commercial mortgage-backed securities (CMBS)	0	0	12	1	12	1	2
Collateralized debt obligations (CDO)	1	0	33	5	34	5	6
Total fixed maturities – Exchange	736	16	201	14	937	30	176
Nonredeemable preferred stock	45	2	59	5	104	7	15
Total available-for-sale securities – Exchange	$781	$18	$260	$19	$1,041	$37	191

Quality breakdown of fixed maturities:
Investment grade	$703	$16	$155	$11	$ 858	$27	154
Non-investment grade	33	0	46	3	79	3	22
Total fixed maturities – Exchange	$736	$16	$201	$14	$ 937	$30	176

The above securities for Indemnity and the Exchange have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest. The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost. Any debt securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.

Investment income, net of expenses, was generated from the following portfolios:

	Erie Insurance Group
(in millions)	Years ended December 31,
	2011	2010	2009
Indemnity
Fixed maturities	$ 14	$ 33	$ 36
Equity securities	2	4	5
Cash equivalents and other	1	1	1
Total investment income	17	38	42
Less: investment expenses	1	1	0
Investment income, net of expenses – Indemnity	$ 16	$ 37	$ 42
Exchange
Fixed maturities	$364	$350	$343
Equity securities	86	72	68
Cash equivalents and other	0	2	4
Total investment income	450	424	415
Less: investment expenses	33	28	24
Investment income, net of expenses – Exchange	$417	$396	$391
Investment income, net of expenses – Erie Insurance Group	$433	$433	$433

Interest and dividend income are recognized as earned and recorded to net investment income.

Indemnity net investment income decreased by $21 million in 2011 compared to 2010. The Exchange’s net investment income increased by $21 million in 2011 compared to 2010. These changes were primarily caused by the sale of the EIC, ENY and EPC from Indemnity to the Exchange on December 31, 2010.

In 2010, Indemnity sold its interest in nine limited partnerships and the Exchange sold its interest in eleven limited partnerships, which generated net realized losses. There were no sales of limited partnerships in 2011 or 2009.

Realized gains (losses) on investments were as follows:

(in millions)	Erie Insurance Group
	Years ended December 31,
Indemnity	2011		2010		2009
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	2	$	6	$	5
Gross realized losses	0		(1)		(4)
Net realized gains	2		5		1
Equity securities:
Gross realized gains	3		1		8
Gross realized losses	0		0		(7)
Net realized gains	3		1		1
Trading securities:
Common stock:
Gross realized gains	2		6		2
Gross realized losses	(1)		(1)		(5)
Valuation adjustments	(3)		0		11
Net realized (losses) gains	(2)		5		8
Limited partnerships:
Gross realized gains	0		0		0
Gross realized losses	0		(12)		0
Net realized gains (losses)	0		(12)		0
Net realized investment gains (losses) – Indemnity	$	3	$	(1)	$	10
Exchange
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	77	$	49	$	22
Gross realized losses	(29)		(24)		(37)
Net realized gains (losses)	48		25		(15)
Equity securities:
Gross realized gains	28		14		39
Gross realized losses	(1)		(3)		(26)
Net realized gains	27		11		13
Trading securities:
Common stock:
Gross realized gains	271		205		143
Gross realized losses	(106)		(135)		(203)
Valuation adjustments	(247)		254		464
Net realized (losses) gains	(82)		324		404
Limited partnerships:
Gross realized gains	0		0		0
Gross realized losses	0		(46)		0
Net realized losses	0		(46)		0
Net realized investment (losses) gains – Exchange	$	(7)	$	314	$	402
Net realized investment (losses) gains – Erie Insurance Group	$	(4)	$	313	$	412

The components of other-than-temporary impairments on investments are included below:

(in millions)	Erie Insurance Group
	Years ended December 31
	2011	2010	2009
Indemnity
Fixed maturities	$ 0	$(1)	$ (7)
Equity securities	0	0	(5)
Total other-than-temporary impairments	0	(1)	(12)
Portion recognized in other comprehensive income	0	0	0
Net impairment losses recognized in earnings – Indemnity	$ 0	$(1)	$ (12)

Exchange
Fixed maturities	$ 0	$(4)	$ (54)
Equity securities	(2)	(1)	(60)
Total other-than-temporary impairments	(2)	(5)	(114)
Portion recognized in other comprehensive income	0	0	0
Net impairment losses recognized in earnings – Exchange	$(2)	$(5)	$(114)
Net impairment losses recognized in earnings – Erie Insurance Group	$(2)	$(6)	$(126)

In considering if fixed maturity securities were credit-impaired, some of the factors considered include: potential for the default of interest and/or principal, level of subordination, collateral of the issue, compliance with financial covenants, credit ratings and industry conditions. We have the intent to sell all credit-impaired fixed maturity securities, therefore the entire amount of the impairment charges were included in earnings and no non-credit impairments were recognized in other comprehensive income. Prior to the second quarter of 2009, when new impairment guidance was issued for debt securities, the impairment policy for fixed maturities was consistent with that of equity securities. See also Note 2, “Significant Accounting Policies.”

Limited partnerships

Our limited partnership investments are recorded using the equity method of accounting. As these investments are generally reported on a one-quarter lag, our limited partnership results through December 31, 2011 are comprised of partnership financial results for the fourth quarter of 2010 and the first, second, and third quarters of 2011. Given the lag in reporting, our limited partnership results do not reflect the market conditions of the fourth quarter of 2011. Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

We have provided summarized financial information in the following table for the years ended December 31, 2011 and 2010. Amounts provided in the table are presented using the latest available financial statements received from the partnerships. Limited partnership financial information has been presented based upon the investment percentage in the partnerships for the Erie Insurance Group consistent with how management evaluates the investments.

As these investments are generally reported on a one-quarter lag, our limited partnership results through December 31, 2011 include partnership financial results for the fourth quarter of 2010 and the first three quarters of 2011.

	Erie Insurance Group
	As of and for the year ended December 31, 2011
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded	Income (loss) recognized due to valuation adjustments by the partnerships	Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$ 73	$ 2	$ 5
Greater than or equal to 10% but less than 50%	3	9	0	3
Greater than 50%	0	0	0	0
Total private equity	29	82	2	8
Mezzanine debt:
Less than 10%	11	22	0	6
Greater than or equal to 10% but less than 50%	3	12	1	1
Greater than 50%	1	1	(1)	0
Total mezzanine debt	15	35	0	7
Real estate:
Less than 10%	12	62	5	(1	)
Greater than or equal to 10% but less than 50%	3	18	1	0
Greater than 50%	3	11	3	1
Total real estate	18	91	9	0
Total limited partnerships – Indemnity	62	$ 208	$11	$15
Exchange
Private equity:
Less than 10%	41	$ 452	$13	$30
Greater than or equal to 10% but less than 50%	3	43	(1)	12
Greater than 50%	0	0	0	0
Total private equity	44	495	12	42
Mezzanine debt:
Less than 10%	17	133	(9)	26
Greater than or equal to 10% but less than 50%	3	33	3	3
Greater than 50%	3	35	(2)	3
Total mezzanine debt	23	201	(8)	32
Real estate:
Less than 10%	25	284	31	(1	)
Greater than or equal to 10% but less than 50%	5	59	3	0
Greater than 50%	3	43	2	10
Total real estate	33	386	36	9
Total limited partnerships – Exchange	100	$1,082	$40	$83
Total limited partnerships – Erie Insurance Group		$1,290	$51	$98

Per the limited partner financial statements, total partnership assets were $54 billion and total partnership liabilities were $6 billion at December 31, 2011 (as recorded in the September 30, 2011 limited partnership financial statements). For the twelve month period comparable to that presented in the preceding table (fourth quarter of 2010 and first three quarters of 2011), total partnership valuation adjustment gains were $2 billion and total partnership net income was $3 billion.

As these investments are generally reported on a one-quarter lag, our limited partnership results through December 31, 2010 include partnership financial results for the fourth quarter of 2009 and the first three quarters of 2010.

	Erie Insurance Group
	As of and for the year ended December 31, 2010
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded	Income (loss) recognized due to valuation adjustments by the partnerships	Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$ 78	$ 4	$ 7
Greater than or equal to 10% but less than 50%	3	8	3	0
Greater than 50%	0	0	0	0
Total private equity	29	86	7	7
Mezzanine debt:
Less than 10%	11	30	4	3
Greater than or equal to 10% but less than 50%	3	15	2	(2	)
Greater than 50%	1	2	0	0
Total mezzanine debt	15	47	6	1
Real estate:
Less than 10%	12	59	30	(31	)
Greater than or equal to 10% but less than 50%	4	14	10	(10	)
Greater than 50%	4	10	4	(3	)
Total real estate	20	83	44	(44	)
Total limited partnerships – Indemnity	64	$ 216	$ 57	$(36	)
Exchange
Private equity:
Less than 10%	41	$ 517	$ 28	$ 40
Greater than or equal to 10% but less than 50%	3	38	10	0
Greater than 50%	0	0	0	(1	)
Total private equity	44	555	38	39
Mezzanine debt:
Less than 10%	14	142	12	13
Greater than or equal to 10% but less than 50%	3	41	2	(2	)
Greater than 50%	3	31	0	2
Total mezzanine debt	20	214	14	13
Real estate:
Less than 10%	25	250	(11)	10
Greater than or equal to 10% but less than 50%	6	52	7	(7	)
Greater than 50%	4	37	15	(11	)
Total real estate	35	339	11	(8	)
Total limited partnerships – Exchange	99	$1,108	$ 63	$ 44
Total limited partnerships – Erie Insurance Group		$1,324	$120	$ 8

Per the limited partner financial statements, total partnership assets were $58 billion and total partnership liabilities were $10 billion at December 31, 2010 (as recorded in the September 30, 2010 limited partnership financial statements). For the twelve month period comparable to that presented in the preceding table (fourth quarter of 2009 and first three quarters of 2010), total partnership valuation adjustment gains were $4 billion and total partnership net income was $3 billion.

See also Note 20, “Commitments and Contingencies,” for investment commitments related to limited partnerships.

Securities lending program

We previously participated in a program whereby marketable securities from our investment portfolio were lent to independent brokers or dealers based upon, among other things, their creditworthiness, in exchange for collateral initially equal to 102% of the value of the securities on loan and are thereafter maintained at a minimum of 100% of the fair value of the securities loaned. The program was terminated in 2009.

Goodwill Impairment

12 Months Ended

Dec. 31, 2011

Goodwill Impairment

Goodwill Impairment

Note 8. Goodwill Impairment

Goodwill is reviewed for impairment at least annually or more frequently if events occur or circumstances change that would indicate that a triggering event has occurred. Goodwill impairment testing follows a two step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the carrying value of a reporting unit exceeds its fair value, the second step of the impairment test is performed for purposes of measuring the impairment.

Prior to December 31, 2010, the Exchange had $22 million of goodwill attributable to its purchase of EFL stock in 2006. In the fourth quarter of 2010, the Exchange entered into an agreement to purchase Indemnity’s 21.6% ownership interest in EFL and a valuation of EFL was performed by an external independent third party in preparation for the sale, which occurred on March 31, 2011. The valuation resulted in a purchase price determination of 95% of book value. In response to the valuation and sale price, management concluded that the possibility for impairment existed and step two of the goodwill impairment test was completed to determine the impairment amount. Step two of the impairment test compared the value of new business for EFL to the current goodwill balance. The analysis determined that the value of EFL’s new business did not support the $22 million goodwill, and an impairment entry was made to write down the entire balance at December 31, 2010. The charge of $22 million decreased the net income attributable to the Exchange in 2010.

Capitalized Software Development Costs

12 Months Ended

Dec. 31, 2011

Capitalized Software Development Costs

Capitalized Software Development Costs

Note 9. Capitalized Software Development Costs

We capitalize computer software costs developed or obtained for internal use. Capitalized costs include internal and external labor and overhead, all of which are attributable to Indemnity. Capitalization ceases and amortization begins no later than the point at which a computer software project is complete and ready for its intended use. Capitalized software costs are amortized over the estimated useful life of the software.

The following table outlines the total capitalized software development costs subject to amortization and the related amortization expense:

	Indemnity Shareholder Interest
(in millions)	Years ended December 31,
	2011		2010		2009
Gross carrying amount	$43		$32		$10
Accumulated amortization	(5	)	(1	)	0
Net carrying amount	$38		$31		$10

Amortization expense	$ 4		$ 1		$ 0

The following table outlines the estimated future amortization expense related to capitalized software development costs as of December 31, 2011:

(in millions)
		Indemnity Shareholder Interest
Year ending December 31,		Estimated amortization expense
2012		$6
2013		6
2014		6
2015		6
2016		6

We anticipate incurring additional costs related to our software development initiatives. These costs are unknown at this time and therefore are not considered in the table above.

Bank Line of Credit

12 Months Ended

Dec. 31, 2011

Bank Line of Credit

Bank Line of Credit

Note 10. Bank Line of Credit

As of December 31, 2011, Indemnity has available a $100 million bank revolving line of credit that expires on November 3, 2016. There were no borrowings outstanding on the line of credit as of December 31, 2011. Bonds with a fair value of $112 million were pledged as collateral on the line at December 31, 2011.

As of December 31, 2011, the Exchange has available a $300 million bank revolving line of credit that expires on October 28, 2016. There were no borrowings outstanding on the line of credit as of December 31, 2011. Bonds with a fair value of $333 million were pledged as collateral on the line at December 31, 2011.

Securities pledged as collateral on both lines have no trading restrictions and are reported as available-for-sale fixed maturities in the Consolidated Statements of Financial Position as of December 31, 2011. The banks require compliance with certain covenants, which include minimum net worth and leverage ratios for Indemnity’s line of credit and statutory surplus and risk based capital ratios for Exchange’s line of credit. We are in compliance with all covenants at December 31, 2011.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References + Details

Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Note 11. Income Taxes

The provision for income taxes consists of the following for the years ended December 31:

(in millions)	Erie Insurance Group
	2011		2010		2009
Indemnity
Current income tax expense	$ 85		$ 37		$56
Deferred income tax expense (benefit)	0		67		(7	)
Total provision for income taxes – Indemnity	85		104		49
Exchange
Current income tax expense (benefit)	110		(43	)	7
Deferred income tax (benefit) expense	(105	)	278		22
Total provision for income taxes – Exchange	5		235		29
Total provision for income taxes – Erie Insurance Group	$ 90		$339		$78

The deferred income tax benefit in 2011 was primarily driven by unrealized losses on common stock. The deferred income tax expense in 2010 was primarily driven by the sale of previously impaired investments and unrealized gains on common stock and limited partnerships. In addition, the deferred tax liability recorded for Indemnity’s investment in EFL increased by $18 million in 2010 as a result of a change in the tax rate used to calculate the liability. This deferred tax charge was required due to Indemnity’s decision to sell its 21.6% ownership interest in EFL, rather than receiving its share of EFL’s earnings in the form of future dividends which would have been eligible for an 80% dividends received deduction.

A reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rates to pre-tax income, is as follows for the years ended December 31:

(in millions)	Erie Insurance Group
	2011		2010		2009
Indemnity
Income tax at statutory rates	$89		$ 93		$ 53
Tax-exempt interest	(3	)	(3	)	(3	)
Dividends received deduction	(1	)	(1	)	(1	)
Deferred tax valuation allowance	0		(2	)	0
Erie Family Life (losses) earnings (1)	(1	)	15		0
Other, net	1		2		0
Provision for income taxes – Indemnity	85		104		49
Exchange
Income tax at statutory rates	37		259		130
Tax-exempt interest	(15	)	(16	)	(17	)
Dividends received deduction	(13	)	(11	)	(11	)
Deferred tax valuation allowance	0		(4	)	(71	)
Goodwill impairments	0		8		0
Prior year adjustments	(5	)	0		0
Other, net	1		(1	)	(2	)
Provision for income taxes – Exchange	5		235		29
Provision for income taxes – Erie Insurance Group	$90		$339		$ 78

(1) In 2010 Indemnity’s tax rate on its share of EFL earnings was adjusted from 7% to 35% due to Indemnity’s decision to sell its 21.6% ownership interest in EFL to the Exchange, which closed on March 31, 2011, rather than receiving its share of EFL’s earnings in the form of future dividends, which would have been eligible for an 80% dividends received deduction.

Temporary differences and carry-forwards, which give rise to consolidated deferred tax assets and liabilities, are as follows for the years ended December 31:

(in millions)	Erie Insurance Group
	2011	2010
Indemnity
Deferred tax assets:
Net allowance for service fees and premium cancellations	$ 3	$ 3
Other employee benefits	9	8
Pension and other postretirement benefits	45	21
Write-downs of impaired securities	1	2
Capital loss carryover	0	7
Other	0	1
Total deferred tax assets	58	42
Deferred tax liabilities:
Unrealized gains on investments	6	7
Equity interest in EFL	0	22
Limited partnerships	10	20
Depreciation	13	7
Prepaid expenses	7	5
Capitalized internally developed software	1	5
Other	2	2
Total deferred tax liabilities	39	68
Net deferred income tax asset (liability) – Indemnity	$19	$(26	)

(in millions)	Erie Insurance Group (continued)
	2011		2010
Exchange
Deferred tax assets:
Loss reserve discount	$ 81		$ 83
Liability for future life and annuity policy benefits	12		13
Unearned premiums	165		156
Write-downs of impaired securities	29		42
Wash sales	6		8
Capital loss carryover	7		9
Other	14		8
Total deferred tax assets	314		319
Deferred tax liabilities:
Deferred policy acquisition costs	159		153
Unrealized gains on investments	272		356
Limited partnerships	12		49
Net allowance for service fees and premium cancellations	3		3
Other	15		15
Total deferred tax liabilities	461		576
Net deferred tax liability – Exchange	$(147	)	$(257	)
Net deferred tax liability – Erie Insurance Group	$(128	)	$(283	)

Neither the Indemnity nor the Exchange had a valuation allowance recorded at December 31, 2011 or December 31, 2010.

In 2010, Indemnity generated taxable losses of $38 million and the Exchange generated taxable losses of $175 million on the sale of limited partnerships. These partnerships were sold to recapture tax paid on prior period capital gains that were due to expire. The unrealized losses on these partnerships were previously recorded as a deferred tax asset. Indemnity and the Exchange received $13 million and $61 million, respectively, in tax on these transactions in 2011.

We have one uncertain income tax position for which a current liability was recorded. As a related temporary tax difference was also recognized, there was no impact on our results of operations or financial position. We recognized interest related to our remaining uncertain tax position in income tax expense. Accrued estimated interest on our unrecognized tax benefit was $0.3 million and $0.2 million at December 31, 2011 and 2010, respectively. The IRS has examined tax filings through 2007 and is currently examining our federal income tax returns for 2008 and 2009. We currently estimate that our unrecognized tax benefits will not change significantly in the next 12 months.

Indemnity is the attorney-in-fact for the subscribers (policyholders) at the Exchange, a reciprocal insurance exchange. In that capacity, Indemnity provides all services and facilities necessary to conduct the Exchange’s insurance business. Indemnity and the Exchange together constitute one insurance business. Indemnity is not subject to state corporation income or franchise taxes in states where the Exchange conducts its business, as a result of the Exchange’s remittance of premium taxes in those states.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details

Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2011

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs

Note 12. Deferred Policy Acquisition Costs

The following table summarizes the components of the Property and Casualty Group’s and EFL’s deferred policy acquisition costs assets for the years ended December 31:

(in millions)	Erie Insurance Group
	2011		2010
Property and Casualty Group
Deferred policy acquisition costs asset at beginning of year	$ 327		$ 313
Capitalized deferred policy acquisition costs	684		649
Amortized deferred policy acquisition costs	(668	)	(635	)
Deferred policy acquisition costs asset at end of year – Property and Casualty Group	$ 343		$ 327
Erie Family Life Insurance Company
Deferred policy acquisition costs asset at beginning of year	$ 140		$ 154
Capitalized deferred policy acquisition costs	18		17
Amortized deferred policy acquisition costs	(12	)	(16	)
Amortized shadow deferred policy acquisition costs	(2	)	(15	)
Deferred policy acquisition costs asset at end of year – EFL	$ 144		$ 140
Deferred policy acquisition costs asset at end of year – Erie Insurance Group	$ 487		$ 467

- Definition

Disclosure of accounting policy for capitalizing costs incurred to write or acquire insurance contracts, the basis for and methodology for capitalizing such costs, the accounting for such deferred acquisition costs (DAC) when modifications or internal replacements of related insurance contracts occur and the effect on results of operations, and the methodology and amount of amortization. This disclosure addresses the nature, type, and amount of capitalized costs incurred to write or acquire insurance contracts.

+ References + Details

Property and Casualty Unpaid Losses and Loss Expenses

12 Months Ended

Dec. 31, 2011

Property and Casualty Unpaid Losses and Loss Expenses

Property and Casualty Unpaid Losses and Loss Expenses

Note 13. Property and Casualty Unpaid Losses and Loss Expenses

The following table provides a reconciliation of our property and casualty beginning and ending loss and loss expense reserve balances for the years ended December 31:

	Property and Casualty Group
(in millions)	2011		2010		2009

Losses and loss expense reserves at January 1, – Gross	$3,584		$3,598		$3,586
Less: reinsurance recoverable	188		200		187
Losses and loss expense reserves at January 1, – Net	3,396		3,398		3,399

Incurred losses and loss expenses related to:
Current accident year	3,616		3,053		2,732
Prior accident years	(272	)	(244	)	(93	)
Total incurred losses and loss expenses	3,344		2,809		2,639

Paid losses and loss expenses related to:
Current accident year	2,360		1,855		1,608
Prior accident years	1,032		956		1,032
Total paid losses and loss expenses	3,392		2,811		2,640

Losses and loss expense reserves at December 31, – Net	3,348		3,396		3,398
Add: reinsurance recoverable	151		188		200
Losses and loss expense reserves at December 31, – Gross	$3,499		$3,584		$3,598

Loss reserves are set at full expected cost, except for workers compensation loss reserves which have been discounted using an interest rate of 2.5% for all periods presented. This discounting reduced unpaid losses and loss expenses by $84 million, $127 million and $136 million at December 31, 2011, 2010 and 2009, respectively. The reserves for losses and loss expenses are reported net of receivables for salvage and subrogation which totaled $145 million, $141 million and $133 million at December 31, 2011, 2010 and 2009, respectively.

Favorable development on prior accident year direct loss reserves in 2011 was primarily the result of improvements in severity trends in our personal auto, workers compensation, commercial multi-peril and homeowners lines of business combined with the closing of several large claims. In 2010, the favorable development on prior accident year direct loss reserves was primarily the result of improvements in severity trends in the commercial multi-peril, personal auto and workers compensation lines of business, combined with the closing of several large claims. In 2009, the favorable development was primarily the result of the closing of several large claims, changes in our mortality assumptions, and a change in the payout patterns used in the calculation to discount reserves in our workers compensation line of business. The 2009 favorable development was offset somewhat by adverse development in our personal auto line of business as a result of the use of gender specific tables in our mortality rate assumption and the outcome of certain court decisions related to our commercial multi-peril line of business.

Life Policy and Deposit Contract Reserves

12 Months Ended

Dec. 31, 2011

Life Policy and Deposit Contract Reserves

Life Policy and Deposit Contract Reserves

Note 14. Life Policy and Deposit Contract Reserves

The following table provides the components of our life policy and deposit contract liability balances for the years ended December 31:

(in millions)	Erie Family Life Insurance Company
	2011	2010	2009
Deferred annuities	$1,144	$1,117	$1,076
Ordinary/traditional life	282	254	229
Universal life	228	214	211
Other	17	18	24
Life policy and deposit contract reserves	$1,671	$1,603	$1,540

The reinsurance credit related to life policy and deposit contract reserves was $108 million, $95 million and $82 million at December 31, 2011, 2010, and 2009 respectively, and is presented in other assets in the Consolidated Statements of Financial Position.

Reinsurance

12 Months Ended

Dec. 31, 2011

Reinsurance

Reinsurance

Note 15. Reinsurance

Members of the Property and Casualty Group participate in an intercompany reinsurance pooling agreement. Under the pooling agreement, all insurance business of the Property and Casualty Group is pooled in the Exchange. EIC and ENY share in the underwriting results of the reinsurance pool through retrocession. Since 1995, the Board of Directors has set the allocation of the pooled underwriting results at 5.0% participation for EIC, 0.5% participation for ENY and 94.5% participation for the Exchange. The purpose of the pooling agreement is to spread the risks of the members of the Property and Casualty Group collectively across the different lines of business they underwrite and geographic regions in which each operates. This agreement may be terminated by any party as of the end of any calendar year by providing not less than 90 days advance written notice. Intercompany pooling accounts are settled in cash within 30 days after the end of each quarterly accounting period. On December 31, 2010, Indemnity sold all of the outstanding capital stock of its wholly owned subsidiaries, EIC and ENY, to the Exchange. Under this structure, all property and casualty insurance operations are owned by the Exchange, and Indemnity functions solely as the management company. There was no impact on the existing reinsurance pooling agreement between the Exchange and EIC or ENY as a result of the sale.

Reinsurance contracts do not relieve the Property and Casualty Group or EFL from their primary obligations to policyholders. A contingent liability exists with respect to reinsurance recoverables in the event reinsurers are unable to meet their obligations under the reinsurance agreements.

The Property and Casualty Group maintains several property catastrophe reinsurance treaties with nonaffiliated reinsurers to mitigate future potential catastrophe loss exposures. During 2011, a first treaty provided coverage of up to 90% of a loss of $500 million in excess of the Property and Casualty Group’s loss retention of $350 million per occurrence, and a second treaty provided coverage of up to 90% of a loss of $25 million in excess of $850 million. These treaties were renewed for 2012, with the first property catastrophe reinsurance treaty providing coverage of up to 90% of a loss of $500 million in excess of the Property and Casualty Group’s loss retention of $350 million per occurrence, and the second treaty providing coverage of up to 70% of a loss of $275 million in excess of $850 million. In addition, a third property catastrophe reinsurance treaty was entered into with a nonaffiliated reinsurer providing coverage of up to 70% of a loss of $25 million in excess of $1.125 billion. The treaties exclude losses from acts of terrorism. There have been no losses subject to these treaties.

EFL maintains several reinsurance treaties with nonaffiliated life reinsurance companies in order to reduce claims volatility. EFL had direct life insurance in force totaling $42 billion and $40 billion at December 31, 2011 and 2010, respectively. Of these amounts, EFL ceded $23 billion and $22 billion of life insurance in force at December 31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the largest amount of in force life insurance ceded to one reinsurer totaled $11 billion.

The following tables summarize the direct insurance and reinsurance for our property and casualty and life insurance activities, respectively, for the years ended December 31:

(in millions)
	Erie Insurance Group
Property and casualty insurance:	2011		2010		2009
Premiums written:
Direct	$4,271		$4,035		$3,861
Assumed	21		19		30
Ceded	(37	)	(35	)	(30	)
Premiums written, net	4,255		4,019		3,861
Premiums earned:
Direct	4,164		3,939		3,806
Assumed	21		20		42
Ceded	(36	)	(34	)	(40	)
Premiums earned, net	4,149		3,925		3,808
Insurance losses and loss expenses:
Direct	3,311		2,834		2,655
Assumed	11		(15	)	12
Ceded	22		(9	)	(28	)
Insurance losses and loss expenses, net	$3,344		$2,810		$2,639

Life insurance:
Premiums earned:
Direct	$ 108		$ 104		$ 100
Ceded	(43	)	(42	)	(39	)
Premiums earned, net	65		62		61
Insurance losses and loss expenses:
Direct	120		102		114
Ceded	(20	)	(12	)	(25	)
Insurance losses and loss expenses, net	$ 100		$ 90		$ 89

Total:
Premiums earned:
Property and casualty	$4,149		$3,925		$3,808
Life	65		62		61
Premiums earned, net	4,214		3,987		3,869
Insurance losses and loss expenses:
Property and casualty	3,344		2,810		2,639
Life	100		90		89
Insurance losses and loss expenses, net	$3,444		$2,900		$2,728

- Definition

The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 113
-Paragraph 27
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Article 7
-Section 03
-Paragraph 13

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 92-5
-Paragraph 19
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Article 7
-Section 03
-Paragraph 6

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 20
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 20
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 605
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 605
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 605
-Section 55
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27703-158548

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 310
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 605
-Section 55
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27795-158548

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 210
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-03.6,13)
-URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 113
-Paragraph 120
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

Postretirement Benefits

12 Months Ended

Dec. 31, 2011

Postretirement Benefits

Postretirement Benefits

Note 16. Postretirement Benefits

Pension and retiree health benefit plans

Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan (“SERP”) for certain members of executive and senior management of the Erie Insurance Group. The pension plans provide benefits to covered individuals satisfying certain age and service requirements. The defined benefit pension plan and SERP each provide benefits through a final average earnings formula.

We previously provided retiree health benefits in the form of medical and pharmacy health plans for eligible retired employees and eligible dependents. In 2006, the retiree health benefit plan was curtailed by an amendment that restricted eligibility to those who attained age 60 and 15 years of service on or before July 1, 2010.

The liabilities for the plans described in this note are presented in total for all employees of the Erie Insurance Group. The gross liability for postretirement benefits is presented in the Consolidated Statements of Financial Position as part of other liabilities. Approximately 57% of postretirement benefit expenses are reimbursed to Indemnity from the Exchange and EFL.

Our affiliated entities are charged an allocated portion of net periodic benefit costs under the benefit plans. For our funded pension plan, amounts are settled in cash throughout the year for affiliated entities’ share of net periodic benefit costs. For our unfunded plans, we pay the obligations when due. Amounts are settled in cash between affiliates when there is a payout under the unfunded plans.

The following tables set forth the assumptions used to determine benefit obligations and net periodic benefit cost at the periods ended December 31:

	Erie Insurance Group
Assumptions used to determine benefit obligations:	2011		2010		2009
Employee pension plan:
Discount rate	4.99	%	5.69	%	6.11	%
Expected return on plan assets	8.00		8.00		8.2	5
Rate of compensation increase (1)	4.15		4.15		4.1	5
SERP:
Discount rate (2)	4.99/4.	49	5.69/5.	19	6.11/5.	00
Rate of compensation increase	6.00		6.00		6.0	0
Assumptions used to determine net periodic benefit cost:
Employee pension plan:
Discount rate	5.69	%	6.11	%	6.06	%
Expected return on plan assets	8.00		8.00		8.2	5
Rate of compensation increase (1)	4.15		4.15		4.1	5
SERP:
Discount rate (2)	5.69/5.	19	6.11/5.	00	6.06/5.	00
Rate of compensation increase	6.00		6.00		6.0	0

(1) Rate of compensation increase is age-graded. An equivalent single compensation increase rate of 4.15% in 2011, 2010 and 2009 would produce similar results.

(2) Pre-retirement/post-retirement.

The two economic assumptions that have the most impact on the postretirement benefit expense are the discount rate and the long-term rate of return on plan assets. The discount rate assumption used to determine the benefit obligation for 2011 was 4.99% and was based upon a yield curve developed from corporate bond yield information. The construction of these yield curves is based upon yields of corporate bonds rated Aa quality. Target yields are developed from bonds at various maturity points and a curve is fitted to those targets. Spot rates (zero coupon bond yields) are developed from the yield curve and used to discount benefit payment amounts associated with each future year. The present value of plan benefits is calculated by applying the spot/discount rates to projected benefit cash flows. A single discount rate is then developed to produce the same present value. This represents the suggested discount rate. The same methodology was employed to develop the 5.69% discount rate used to determine the benefit obligation for 2010. For 2009, the discount rate assumption used to determine the benefit obligation was based upon a bond-matching study that compared projected pension plan benefit flows to the cash flows from a comparable portfolio of fixed maturity instruments rated AA- or better with a duration similar to plan liabilities. The approach used to determine the long-term rate of return assumption is derived from expected future returns for each asset category based upon applicable indices and their historical relationships under various market conditions. These expected future returns were then weighted based upon our target asset allocation percentages for each asset category to produce a best estimate of range of asset return results within which our long-term rate of return assumption falls.

Defined benefit pension plan and SERP

The following tables set forth: the change in our projected benefit obligation, the change in plan assets, the funded status of the pension plans, the amounts recognized in the Consolidated Statements of Financial Position, the accumulated benefit obligation, the amounts included in accumulated other comprehensive income, before tax, that are not yet recognized as components of net periodic benefit cost and the components of net periodic benefit cost for the years ended December 31:


(in millions)	Erie Insurance Group
	2011		2010		2009
Change in projected benefit obligation:
Benefit obligation at beginning of period	$ 400		$344		$326
Service cost	17		15		15
Interest cost	23		21		19
Amendments	1		1		3
Actuarial loss (gain)	54		25		(12	)
Benefits paid	(7	)	(6	)	(4	)
Impact due to settlement	0		0		(3	) (1)
Benefit obligation at end of period	$ 488		$400		$344

Change in plan assets:
Fair value of plan assets at beginning of period	$ 328		$279		$218
Actual return (loss) on plan assets	12		41		51
Employer contributions	15		13		14
Benefits paid	(7	)	(5	)	(4	)
Fair value of plan assets at end of period	$ 348		$328		$279
Funded status at end of period	$(140	)	$ (72	)	$ (65	)
Amounts recognized in the Consolidated Statement of Financial Position
Current liabilities	$ (1	)	$ 0		$ 0
Noncurrent liabilities	(139	)	(72	)	(65	)
Amounts recognized	$ (140	)	$ (72	)	$ (65	)
Accumulated benefit obligation, December 31,	$ 363		$297		$252

Amounts included in accumulated other comprehensive income, before tax, not yet recognized as components of net periodic benefit cost:
Net actuarial loss	$ 173		$110		$104
Prior service cost	6		5		5
Net amount not yet recognized	$ 179		$115		$109
Components of net periodic benefit cost:
Service cost	$ 17		$ 15		$ 15
Interest cost	23		21		19
Expected return on plan assets (2)	(27	)	(25	)	(24	)
Amortization of prior service cost	1		1		0
Recognized net actuarial loss	6		3		3
Settlement gain	0		0		(1	) (1)
Net periodic benefit expense before allocation to affiliates	$ 20		$ 15		$ 12

(1)	In December 2007, employment agreements for certain members of executive management were signed which incorporated a payment in full of accrued SERP benefits as of December 2008 in a lump sum payment, after which time no additional SERP benefits would accrue. This resulted in a settlement gain in 2009.

(2)	The market-related value of plan assets is used to determine the expected return component of pension benefit cost. We use a four year averaging method to determine the market-related value, under which asset gains or losses that result from returns that differ from our long-term rate of return assumption are recognized in the market-related value of assets on a level basis over a four year period. Once factored into the market-related asset value, these experience losses will be amortized over a period of 15 years, which is the average remaining service period of the employee group in the plan.

The 2011 net actuarial loss was primarily due to the change in the discount rate assumption used to measure the future benefit obligations to 4.99% in 2011 from 5.69% in 2010. The 2010 net actuarial loss was primarily due to the change in the discount rate assumption used to measure the future benefit obligations to 5.69% in 2010 from 6.11% in 2009. The cumulative net actuarial loss was offset in 2009 by an actuarial gain resulting from actual investment returns that were greater than expected. Also contributing to this gain were assumption changes made based upon actual experience, such as the decrease in the assumed rate of compensation increase. Recognition of this loss is being deferred over the subsequent four year period.

Amounts recognized in other comprehensive income for our pension plans were as follows for the years ended December 31:

(in millions)
	Erie Insurance Group
Amounts recognized in other comprehensive income for pension plans:	2011		2010
Amortization of net actuarial loss	$ (6	)	$(4	)
Amortization of prior service cost	(1	)	0
Net actuarial loss arising during the year	69		9
Amendments	1	(1)	1	(2)
Total recognized in other comprehensive income	$63		$ 6

(1) The charges recognized as amendments were the result of factoring in the prior service cost for seven new plan participants in 2011.

(2) The charges recognized as amendments were the result of factoring in the prior service cost for four new plan participants in 2010.

The estimated net actuarial loss and prior service cost for the pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2012 are $11 million and $1 million, respectively.

The following table sets forth amounts of benefits expected to be paid over the next 10 years from our pension and other postretirement plans as of December 31:

(in millions)
		Erie Insurance Group
Year ending December 31,		Expected future cash flows
2012		$ 9
2013		10
2014		11
2015		13
2016		15
2017 - 2021		110

The following table provides information for the defined benefit pension plans with an accumulated benefit obligation in excess of plan assets as of December 31:

(in millions)
	Erie Insurance Group
Information for pension plans with an accumulated benefit obligation in excess of plan assets:	2011	2010
Projected benefit obligation	$488	$10
Accumulated benefit obligation	363	5
Fair value of plan assets	348	0

At December 31, 2011 the defined benefit pension plan and the SERP had an accumulated benefit obligation in excess of plan assets. At December 31, 2010 only the SERP had an accumulated benefit obligation in excess of plan assets.

Our current policy is generally to contribute an amount equal to the greater of the IRS minimum required contribution or the target normal cost for the year plus interest to the date the contribution is made. A $16 million contribution was made to the plan in January of 2012.

The employee pension plan utilizes a return seeking and a liability asset matching allocation strategy. It is based upon the understanding that 1) equity investments are expected to outperform debt investments over the long-term, 2) the potential volatility of short-term returns from equities is acceptable in exchange for the larger expected long-term returns, and 3) a portfolio structured across investment styles and markets (both domestic and foreign) reduces volatility. As a result, the employee pension plan’s investment portfolio utilizes a broadly diversified asset allocation across domestic and foreign equity and debt markets. The investment portfolio is composed of commingled pools that are dedicated exclusively to the management of employee benefit plan assets.

Our target asset allocation percentage was 60% equity securities and 40% fixed income securities for 2011, 2010 and 2009.

The target and actual asset allocation for the portfolio is as follows for the years ended December 31:

	Erie Insurance Group
	Target asset allocation		Actual asset allocation		Actual asset allocation
	2010-2011		2011		2010
Return seeking assets:
U.S. equity index (1)	17	%	17	%	17	%
U.S. large capitalization core equity (2)	16		16		16
International risk-controlled equity (3)	15		15		15
U.S. small capitalization core equity (4)	8		8		8
International small capitalization risk-controlled equity (5)	2		2		2
Emerging markets equity (6)	2		2		2
Total return seeking assets	60	%	60	%	60	%
Liability matching assets:
Long duration fixed income (7)	16	%	16	%	16	%
Broad market fixed income (8)	15		15		15
Long duration corporate fixed income (9)	8		8		8
Institutional money market fund	1		1		1
Total liability matching assets	40	%	40	%	40	%
Total plan assets	100	%	100	%	100	%

(1)	Comprises equity index funds not actively managed that track the S&P 500.
(2)	Includes equity securities that seek to achieve excess returns relative to the S&P 500 while maintaining portfolio risk characteristics similar to the index.
(3)	Seeks long-term capital growth with an emphasis on controlling return volatility relative to an international market index.
(4)	Includes equity securities that seek to achieve excess returns relative to the Russell 2000 Index while maintaining portfolio risk characteristics similar to the index.
(5)	Seeks to provide excess returns relative to an international small cap index, while maintaining regional weights similar to the index.
(6)	Seeks long-term capital growth in securities of companies that have their principal business activities in countries in the Morgan Stanley Capital International Emerging Markets Free Index.
(7)	Seeks to generate returns that exceed the Barclays Capital U.S. Long Government/Credit Bond Index through investment-grade fixed income securities.
(8)	Seeks to generate returns that exceed the Barclays Capital U.S. Aggregate Bond Index through investment-grade fixed income securities.
(9)	Seeks to generate returns that exceed the Barclays Capital U.S. Long Corporate A or Better Index investing in U.S. corporate bonds with an emphasis on long duration bonds rated A or better.

The following tables represent the fair value measurements for the pension plan assets by major category and level of input:

	Erie Insurance Group
	At December 31, 2011
	Fair value measurements of plan assets using:
(in millions)	Total	Quoted prices in active markets for identical assets Level 1	Significant observable inputs Level 2	Significant unobservable inputs Level 3
Return seeking assets:
U.S. equity index (1)	$ 58	$0	$ 58	$0
U.S. large capitalization core equity (2)	54	0	54	0
International risk-controlled equity (3)	53	0	53	0
U.S. small capitalization core equity (4)	28	0	28	0
International small capitalization risk-controlled equity (5)	8	0	8	0
Emerging markets equity (6)	7	0	7	0
Liability matching assets:
Long duration fixed income (7)	55	0	55	0
Broad market fixed income (8)	53	0	53	0
Long duration corporate fixed income (9)	30	0	30	0
Institutional money market fund	2	2	0	0
Total	$348	$2	$346	$0

	Erie Insurance Group
	At December 31, 2010
	Fair value measurements of plan assets using:
(in millions)	Total	Quoted prices in active markets for identical assets Level 1	Significant observable inputs Level 2	Significant unobservable inputs Level 3
Return seeking assets:
U.S. equity index (1)	$ 55	$0	$ 55	$0
U.S. large capitalization core equity (2)	51	0	51	0
International risk-controlled equity (3)	50	0	50	0
U.S. small capitalization core equity (4)	26	0	26	0
International small capitalization risk-controlled equity (5)	8	0	8	0
Emerging markets equity (6)	7	0	7	0
Liability matching assets:
Long duration fixed income (7)	51	0	51	0
Broad market fixed income (8)	49	0	49	0
Long duration corporate fixed income (9)	28	0	28	0
Institutional money market fund	3	3	0	0
Total	$328	$3	$325	$0

(1) Comprises equity index funds not actively managed that track the S&P 500.

(2) Includes equity securities that seek to achieve excess returns relative to the S&P 500 while maintaining portfolio risk characteristics similar to the index.

(3) Seeks long-term capital growth with an emphasis on controlling return volatility relative to an international market index.

(4) Includes equity securities that seek to achieve excess returns relative to the Russell 2000 Index while maintaining portfolio risk characteristics similar to the index.

(5) Seeks to provide excess returns relative to an international small cap index, while maintaining regional weights similar to the index.

(6) Seeks long-term capital growth in securities of companies that have their principal business activities in countries in the Morgan Stanley Capital International Emerging Markets Free Index.

(7) Seeks to generate returns that exceed the Barclays Capital U.S. Long Government/Credit Bond Index through investment-grade fixed income securities.

(8) Seeks to generate returns that exceed the Barclays Capital U.S. Aggregate Bond Index through investment-grade fixed income securities.

(9) Seeks to generate returns that exceed the Barclays Capital U.S. Long Corporate A or Better Index investing in U.S. corporate bonds with an emphasis on long duration bonds rated A or better.

Estimates of fair values of the pension plan assets are obtained primarily from our trustee and custodian of our pension plan. Our Level 1 category includes a money market fund that is a mutual fund for which the fair value is determined using an exchange traded price provided by the trustee and custodian. Our Level 2 category includes commingled pools. Estimates of fair values for securities held by our commingled pools are obtained primarily from the trustee and custodian. The methodologies used by the trustee and custodian that support a financial instrument Level 2 classification include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuers spreads, two-sided markets, benchmark securities, bids, offers and reference data. There were no Level 3 investments during 2011 or 2010.

Retiree health benefit plan

The retiree health benefit plan was terminated in 2006. We continue to provide retiree health benefits only to employees who met certain age and service requirements on or before July 1, 2010. The accumulated benefit obligation and net periodic benefit cost of this plan were not material to our consolidated financial statements. At December 31, 2011 and 2010, the projected benefit obligation associated with these benefits was $6 million and $7 million, respectively. This plan is funded only as claims are incurred. Periodic benefit costs for the Erie Insurance Group were $0.2 million in 2011 and $0.3 million in both 2010 and 2009.

Employee savings plan

All full-time and regular part-time employees are eligible to participate in a traditional qualified 401(k) or a Roth 401(k) savings plan. We match 100% of the participant contributions up to 3% of compensation and 50% of participant contributions over 3% and up to 5% of compensation. Matching contributions paid to the plan were $9 million in 2011 and 2010, and $8 million in 2009. Employees are permitted to invest the employer-matching contributions in our Class A common stock. Employees, other than executive and senior officers, may sell the shares at any time without restriction; sales by executive and senior officers are subject to restrictions imposed by our insider trading policies and the federal securities laws. The plan acquires shares in the open market necessary to meet the obligations of the plan. Plan participants held 0.2 million of our Class A shares at December 31, 2011 and 2010. Liabilities for the 401(k) plan are presented in the Consolidated Statements of Financial Position with other liabilities.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph a
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph h
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph q
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 8
-Subparagraph m
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 106
-Paragraph 518
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 87
-Paragraph 264
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 03-2
-Paragraph 8
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 30
-Paragraph 26
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 10: http://www.xbrl.org/2003/role/presentationRef
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-Name FASB Staff Position (FSP)
-Number FAS106-2
-Paragraph 20, 21, 22
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 158
-Paragraph 7, 21, 22
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5, 6, 7, 8
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Implementation Guide (Q and A)
-Number FAS88
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-URI http://asc.fasb.org/topic&trid=2235017

+ Details

Incentive Plans and Deferred Compensation

12 Months Ended

Dec. 31, 2011

Incentive Plans and Deferred Compensation

Incentive Plans and Deferred Compensation

Note 17. Incentive Plans and Deferred Compensation

We have separate annual and long-term incentive plans for our executive and senior vice presidents. We also make available deferred compensation plans for executive and senior management and outside directors.

Annual incentive plan

Our annual incentive plan is a bonus plan that pays cash to our executive and senior vice presidents annually.

The awards under the annual incentive plan are based on attainment of corporate and individual performance measures established at the beginning of each year. These measures, which can include various financial measures, are established by the Executive Compensation and Development Committee of our Board of Directors, and are then approved by the Board of Directors. A funding qualifier was introduced into the plan in 2009. The Executive Compensation and Development Committee of our Board of Directors determined that the plan should first consider the Indemnity’s financial results before a payout could be made to participants of the plan. The funding qualifier is based upon Indemnity’s operating income. If the funding qualifier is met, each member of executive and senior management becomes eligible for incentive compensation based upon specific performance measures. The corporate performance measures considered in the plan primarily included the Property and Casualty Group’s direct written premium and statutory combined ratio in 2010 and also included the reported policy retention ratio in 2011.

The cost of the plan is charged to operations as the compensation is earned over the performance period of one year. The after-tax compensation cost charged to operations related to the annual incentive plan bonus for the Erie Insurance Group was $2 million, $3 million and $2 million for 2011, 2010 and 2009 respectively.

Long-term incentive plan

Our long-term incentive plan (“LTIP”) is a performance based incentive plan designed to reward executive and senior vice presidents who can have a significant impact on our long-term performance.

The LTIP award is based upon the level of achievement of objective measures of performance over a three-year period as compared to a peer group of property and casualty companies selected by our Executive Compensation and Development Committee of our Board of Directors. The 2011, 2010 and 2009 awards were based upon the reported combined ratio, growth in direct written premiums and total return on invested assets as defined by the Erie Insurance Group. These performance measures are compared to the same performance measures of a peer group of companies. Because the award is based upon a comparison to results of a peer group over a three-year period, the award accrual is based upon estimates of probable results for the remaining performance period. This estimate is subject to variability if our results or the results of the peer group are substantially different than the results we project.

The Executive Compensation and Development Committee determines the form of the distribution to be granted at the beginning of each performance period. The 2009-2011 performance period is closed and distributions will be made in the form of cash later in 2012 once peer group financial information becomes available. The Executive Compensation and Development Committee agreed to also distribute awards under the 2010-2012 performance period in cash, while the 2011-2013 performance period will be paid in shares of Indemnity’s Class A common stock. If the Executive Compensation and Development Committee determines that awards will be paid in restricted performance shares, then shares of our Class A common stock will be purchased on the open market and distributed to the plan participants when the award is paid. We do not issue new shares of common stock to plan participants. Accordingly, the disclosure requirements of Item 201(d) of Regulation S-K are not applicable. The performance shares awarded through the LTIP are considered vested at the end of each applicable performance period.

The maximum number of shares which may be earned under the plan by any single participant during any one performance period is limited to 250,000 shares. The aggregate number of Class A common stock that may be issued pursuant to awards granted under the LTIP is 1.0 million shares. With respect to an award of performance units, the maximum dollar amount which may be earned under the plan by any single participant during any one performance period is $3 million. A liability is recorded and compensation expense is recognized ratably over the performance period.

At December 31, 2011, the plan awards for the 2009-2011 performance period were fully earned in accordance with the LTIP. The awards for this performance period will be calculated upon receipt of the final financial information for the peer group. The estimated plan award based upon the peer group information as of September 30, 2011 is $5 million.

At December 31, 2010, the awards for the 2008-2010 performance period were fully vested in accordance with the LTIP. The average share price on the date the shares were paid to participants for the 2008-2010 performance period was $73.97. The plan award of $5 million was paid in July 2011. At December 31, 2009, the awards for the 2007-2009 performance period were fully vested in accordance with the LTIP. The average share price on the date the shares were paid to participants for the 2007-2009 performance period was $44.48. The plan award of $2 million was paid in July 2010.

Earned amounts are allocated to related entities and settled in cash once the payout is made. The after-tax compensation cost charged to operations related to these restricted stock awards for the Erie Insurance Group was $6 million in 2011, $4 million in 2010, and $2 million in 2009.

Deferred compensation plans

Our deferred compensation plans are arrangements for our executive and senior vice presidents and outside directors. The deferred compensation plan for our executive and senior vice presidents allows participants to elect to defer receipt of a portion of their base salary and/or annual incentive plan award until a later date. Employer matching contributions that cannot be credited to our tax-qualified 401(k) plan, because they exceed the annual contribution or compensation limits of that plan, are also credited to the accounts of participants who elected to participate in the deferred compensation plan for the year by deferring receipt of some portion of their base salary. The deferred compensation plan for our outside directors allows participants to defer receipt of a portion of their director and meeting fees until a later date. Employees or outside directors participating in the respective plans select hypothetical investment funds for their deferrals which are credited with the hypothetical returns generated.

The awards, payments, deferrals and liabilities under the annual incentive plan, long-term incentive plan and deferred compensation plans for officers and outside directors were as follows for the years ended December 31:

(in millions)	Erie Insurance Group
	2011			2010		2009
Awards, employer match and hypothetical earnings by plan:
Long-term incentive plan awards	$	9		$ 7		$ 4
Annual incentive plan awards		3		4		3
Deferred compensation plans, employer match and hypothetical earnings		1		2		1
Total plan awards and earnings		13		13		8
Total plan awards paid		(10	)	(6	)	(8	)
Compensation deferred under the plans		0		1		1
Distributions from the deferred compensation plans		(1	)	(1	)	(1	)
Gross incentive plan and deferred compensation liabilities at end of period	$	24		$22		$15

Stock compensation plan for outside directors

We have a stock compensation plan for our outside directors to further align the interests of directors with shareholders by providing for a portion of annual compensation for the directors’ services in shares of our Class A common stock. Each director vests in the grant 25% every three months over the course of a year. Dividends paid by us are reinvested into each director’s account as additional share credits which vest immediately. Upon leaving board service, directors are paid shares of our Class A common stock equal to the number of share credits in their deferred stock account. Our practice is to purchase the shares that will be paid to the directors on the open market. We do not issue new shares of common stock to directors. Accordingly, the disclosure requirements of Item 201(d) of Regulation S-K are not applicable. The annual charge related to the stock compensation plan for our directors totaled $1 million in 2011, $2 million in 2010, and $0.4 million in 2009.

- Definition

The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability.

+ References + Details

Capital Stock

12 Months Ended

Dec. 31, 2011

Capital Stock

Capital Stock

Note 18. Capital Stock

Class A and B common stock

We have two classes of common stock: Class A which has a dividend preference and Class B which has voting power and a conversion right. Each share of Class A common stock outstanding at the time of the declaration of any dividend upon shares of Class B common stock shall be entitled to a dividend payable at the same time, at the same record date, and in an amount at least equal to 2/3 of 1.0% of any dividend declared on each share of Class B common stock. We may declare and pay a dividend in respect to Class A common stock without any requirement that any dividend be declared and paid in respect to Class B common stock. Sole shareholder voting power is vested in Class B common stock except insofar as any applicable law shall permit Class A common shareholders to vote as a class in regards to any changes in the rights, preferences and privileges attaching to Class A common stock. Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of 2,400 Class A shares per Class B share. In 2009, five shares of Class B common stock were converted into 12,000 shares of Class A common stock. There were no conversions of Class B shares to Class A shares in 2011 or 2010. There is no provision for conversion of Class A shares to Class B shares, and, Class B shares surrendered for conversion cannot be reissued.

Stock repurchases

A stock repurchase program was authorized for our outstanding Class A nonvoting common stock beginning January 1, 2004. Treasury shares are recorded in the Consolidated Statements of Financial Position at total cost based upon trade date. Shares repurchased under this program totaled 2.2 million at a total cost of $155 million during 2011, and 1.1 million shares at a total cost of $57 million during 2010. In October 2011, our Board of Directors approved a continuation of the current stock repurchase program for a total of $150 million, with no time limitation. We had approximately $138 million of repurchase authority remaining under this program at December 31, 2011.

In July 2011, we also repurchased 64,095 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $4.8 million. Of this amount, 57,695 shares were purchased for $4.3 million, or $73.72 per share, in conjunction with our long-term incentive plan, and 6,400 shares were purchased for $0.5 million, or $73.74 per share, for the vesting of stock-based awards for executive management. These shares were delivered to plan participants and executive management, respectively, in July 2011.

In 2010, we repurchased 44,206 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $2 million. Of this amount, 39,406 shares were purchased in June 2010 for $1.8 million, or $45.92 per share, in conjunction with our long-term incentive plan, and 4,800 shares were purchased in July 2010 for $0.2 million, or $48.75 per share, for the vesting of stock-based awards for executive management. These shares were delivered to plan participants and executive management, respectively, in July 2010.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 12
-Paragraph 10
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 04
-Article 3

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Name Regulation S-X (SX)
-Number 210
-Article 4
-Section 08
-Paragraph d

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Research Bulletin (ARB)
-Number 43
-Chapter 1
-Section B
-Paragraph 7, 11A
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
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-Topic 310
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB TOPIC 4.E)
-URI http://asc.fasb.org/extlink&oid=6228006&loc=d3e74512-122707

Reference 21: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Preferred Stock
-URI http://asc.fasb.org/extlink&oid=6521494

Reference 22: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
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-Paragraph 1
-Subparagraph (SX 210.5-02.29-31)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 23: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 4
-Subparagraph (SAB TOPIC 4.C)
-URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187143-122770

+ Details

Comprehensive Income

12 Months Ended

Dec. 31, 2011

Comprehensive Income

Comprehensive Income

Note 19. Comprehensive Income

The components of the change in comprehensive (loss) income are as follows for the periods ended December 31:

(in millions)	Erie Insurance Group
Change in other comprehensive (loss) income:	2011		2010		2009
Indemnity:
Cumulative effect of accounting changes, net of tax	$ -		$ -		$ (6	)
Unrealized (loss) gain on securities:
Gross unrealized holding (losses) gains on investments arising during period	(11	)	18		105
Unrealized gains transferred to the noncontrolling interest (1)	-		(23	)	-
Reclassification adjustment for gross (gains) losses included in net income	(5	)	(5	)	10
Unrealized holding (losses) gains on investments	(16	)	(10	)	115
Income tax benefit (expense) related to unrealized (losses) gains	5		4		(40	)
Net unrealized holding (losses) gains on investments arising during year	(11	)	(6	)	75
Postretirement plans:
Amortization of prior service cost	1		0		0
Amortization of actuarial loss	6		4		3
Net actuarial (loss) gain during year	(69	)	(9	)	38
Losses due to plan changes during year	(1	)	(1	)	(3	)
Curtailment/settlement loss arising during year	0		0		(1	)
Postretirement benefits, gross	(63	)	(6	)	37
Income tax benefit (expense) related to postretirement benefits	22		2		(13	)
Postretirement plans, net	(41	)	(4	)	24
Change in other comprehensive (loss) income, net of tax – Indemnity	(52	)	(10	)	93
Change in other comprehensive (loss) income, net of tax – Exchange	(9	)	101		423
Change in other comprehensive (loss) income, net of tax – Erie Insurance Group	$(61	)	$ 91		$516

(1) This represents unrealized gains moved from Indemnity shareholder interest to the noncontrolling interest as a result of the December 31, 2010 sale of the P&C subsidiaries.

The components of accumulated other comprehensive (loss) income, net of tax, are as follows for the periods ended December 31:

(in millions)	Erie Insurance Group
Accumulated other comprehensive (loss) income:	2011		2010		2009
Indemnity:
Accumulated net appreciation of investments	$ 11		$ 22		$ 28
Accumulated net losses associated with post-retirement benefits	(116	)	(75	)	(71	)
Accumulated other comprehensive loss – Indemnity	(105	)	(53	)	(43	)
Exchange:
Accumulated other comprehensive income – Exchange	$ 287		$277		$176

The components of comprehensive income, net of tax, are as follows for the periods ended December 31:

(in millions)	Erie Insurance Group
Comprehensive income:	2011		2010		2009
Net income – Erie Insurance Group	$268		$660		$ 446
Change in other comprehensive (loss) income, net of tax – Erie Insurance Group	(61	)	91		516
Less: Cumulative effect of accounting changes, net of tax	–		–		(101	)
Less: Unrealized gains transferred to the noncontrolling interest, net of tax (1)	–		(15	)	–
Total comprehensive income – Erie Insurance Group	207		766		1,063
Less: Noncontrolling interest in consolidated entity – Exchange	90		599		856
Total comprehensive income – Indemnity	$117		$167		$ 207

(1) This represents unrealized gains moved from Indemnity shareholder interest to the noncontrolling interest as a result of the December 31, 2010 sale of the P&C subsidiaries.

- Definition

The entire disclosure for comprehensive income. Includes, but is not limited to, the following: 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income. Components of comprehensive income include: (1) foreign currency translation adjustments; (2) gains (losses) on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity; (3) gains (losses) on intercompany foreign currency transactions that are of a long-term-investment nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements; (4) change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value; (5) unrealized holding gains (losses) on available-for-sale securities and that resulting from transfers of debt securities from the held-to-maturity category to the available-for-sale category; (6) a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost; and (7) the net gain (loss) and net prior service cost or credit for pension plans and other postretirement benefit plans.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 130
-Paragraph 14-26
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
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-Section 45
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e637-108580

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Reclassification Adjustments
-URI http://asc.fasb.org/extlink&oid=6522872

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 11: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
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-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e689-108580

+ Details

Commitments and Contingencies

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies

Commitments and Contingencies

Note 20. Commitments and Contingencies

Indemnity has contractual commitments to invest up to $40 million related to its limited partnership investments at December 31, 2011. These commitments are split between private equity securities of $17 million, mezzanine debt securities of $11 million, and real estate activities of $12 million. These commitments will be funded as required by the partnership agreements.

The Exchange, including EFL, has contractual commitments to invest up to $384 million related to its limited partnership investments at December 31, 2011. These commitments are split between private equity securities of $162 million, mezzanine debt securities of $118 million, and real estate activities of $104 million. These commitments will be funded as required by the partnership agreements.

We are involved in litigation arising in the ordinary course of conducting business. In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated. When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss. To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, operations or cash flows. We believe that our accruals for legal proceedings are appropriate and, individually and in the aggregate, are not expected to be material to our consolidated financial condition, operations or cash flows.

For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages. Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated. If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable. The outcome of this pending litigation is uncertain, but in our opinion the outcome of each case, individually and in the aggregate, is not expected to be material to our consolidated financial condition, operations or cash flows. We review all litigation on an ongoing basis when making accrual and disclosure decisions.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 9, 10, 11, 12
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.25)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 450
-SubTopic 20
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6952336&loc=d3e14435-108349

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=6398077&loc=d3e12565-110249

Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-URI http://asc.fasb.org/extlink&oid=6394976&loc=d3e25287-109308

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6449706&loc=d3e16207-108621

+ Details

Supplementary Data on Cash Flows

12 Months Ended

Dec. 31, 2011

Supplementary Data on Cash Flows

Supplementary Data on Cash Flows

Note 21. Supplementary Data on Cash Flows

Indirect method of cash flows

A reconciliation of net income to net cash provided by operating activities as presented in the Consolidated Statements of Cash Flows is as follows for the years ended December 31:

(in millions)	Erie Insurance Group
	2011		2010		2009
Cash flows from operating activities:
Net income	$ 268		$ 660		$ 446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	4		12		9
Amortization of deferred policy acquisition costs	680		652		624
Impairment of goodwill	–		22		–
Deferred income tax (benefit) expense	(105	)	342		15
Realized losses (gains) and impairments on investments	6		(307	)	(285	)
Equity in (earnings) losses of limited partnerships	(149	)	(128	)	369
Net amortization of bond premium (discount)	26		9		(12	)
Increase in deferred compensation	4		7		0
Limited partnership distributions	166		122		81
Decrease (increase) in receivables, reinsurance recoverables and reserve credits	91		(158	)	209
(Increase) decrease in prepaid expenses	(56	)	10		(9	)
Increase in deferred policy acquisition costs	(701	)	(667	)	(642	)
Increase (decrease) in accounts payable and accrued expenses	83		18		(1	)
Increase (decrease) in accrued commissions and agent bonuses	4		1		(15	)
(Decrease) increase in loss reserves	(85	)	(11	)	12
Increase in future life policy benefits and claims reserves	28		21		37
Increase in unearned premiums	96		116		51
Net cash provided by operating activities	$ 360		$ 721		$ 889

Statutory Information

12 Months Ended

Dec. 31, 2011

Statutory Information

Statutory Information

Note 22. Statutory Information

Accounting principles used to prepare statutory financial statements differ from those used to prepare financial statements under GAAP. Prescribed statutory accounting practices (“SAP”) include state laws, regulations, and general administration rules, as well as a variety of publications from the National Association of Insurance Commissioners (“NAIC”). The statutory financial statements of the Exchange and its subsidiaries, EIC, EPC, Flagship and EFL, are prepared in accordance with accounting practices prescribed and permitted by the Pennsylvania Insurance Department. ENY prepares its statutory financial statements in accordance with accounting practices prescribed by the New York Insurance Department.

Financial statements prepared under statutory accounting principles focus on the solvency of the insurer and generally provide a more conservative approach than under GAAP. Differences between SAP and GAAP include the valuation of investments, deferred policy acquisition cost assets, the actuarial assumptions used in life reserves, deferred tax assets, and unearned subscriber fees.

Statutory net income and capital and surplus as determined in accordance with SAP prescribed or permitted by insurance regulatory authorities are as follows:

	SAP Net income (loss)					SAP Capital and surplus
(in millions)	Years ended December 31,					At December 31,
	2011		2010	2009		2011	2010
Erie Insurance Exchange	$182		$531	$(56	)	$5,166	$5,070
Erie Insurance Company	9		21	16		260	251
Erie Insurance Company of New York	(1	)	2	2		20	20
Erie Insurance Property & Casualty Company	0		0	0		11	10
Flagship City Insurance Company	0		0	0		11	11
Erie Family Life Insurance Company	34		38	3		245	208

The minimum statutory capital and surplus requirements under Pennsylvania and New York law for the Exchange’s property and casualty insurance subsidiaries amounts to $12 million. The Exchange’s subsidiaries’ total statutory capital and surplus significantly exceed these minimum requirements, totaling $302 million at December 31, 2011. The risk-based capital levels of all members of the Property and Casualty Group and EFL significantly exceed the minimum requirements. Cash and securities with a carrying value of $14 million were deposited by the property and casualty and life entities with regulatory authorities under statutory requirements at December 31, 2011.

As prescribed by the Insurance Department of the Commonwealth of Pennsylvania, the Exchange records unearned subscriber fees (fees to the attorney-in-fact) as deductions from unearned premium reserve and charges current operations on a pro-rata basis over the periods covered by the policies. The Pennsylvania-domiciled members of the Property and Casualty Group discount workers compensation loss reserves on a non-tabular basis as prescribed by the Insurance Department of the Commonwealth of Pennsylvania. The Exchange’s NAIC prepared statutory surplus, excluding the impact of the Pennsylvania prescribed practices, would have been $4.7 billion at December 31, 2011. EIC’s NAIC prepared statutory surplus, excluding the impact of the Pennsylvania prescribed practices, would have been $256 million at December 31, 2011. EPC and Flagship record the discounting of workers compensation loss reserves on a direct basis, however, after application of the intercompany pooling arrangement, there is no impact on their financial statements.

The amount of dividends that can be paid to the Exchange without the prior approval of the Pennsylvania Insurance Commissioner by EIC, EPC and Flagship, the Exchange’s Pennsylvania-domiciled property and casualty insurance subsidiaries, is limited to not more than the greater of: (a) 10% of statutory surplus as reported in the last annual statement, or (b) net income as reported in the last annual statement. The amount of dividends that EIC’s New York-domiciled property and casualty subsidiary, ENY, can pay without the prior approval of the New York Superintendent of Insurance is limited to the lesser of: (a) 10% of statutory surplus as reported in the last annual statement, or (b) 100% of adjusted net investment income during such period. In 2012, the maximum dividend payout that the Exchange could receive from its property and casualty insurance subsidiaries would be $30 million. No dividends were paid by these property and casualty insurance subsidiaries in 2011, 2010 or 2009.

The amount of dividends that can be paid to the Exchange without the prior approval of the Pennsylvania Insurance Commissioner by EFL, a Pennsylvania-domiciled life insurer, is limited by statute to the greater of: (a) 10% of statutory surplus as shown in the last annual statement on file with the commissioner, or (b) net income as reported in the last annual statement, but shall not include pro-rata distribution of any class of the insurer’s own securities. Accordingly, the maximum dividend payout that the Exchange could receive in 2012 without prior Pennsylvania Commissioner approval is $34 million. There were no dividends paid to either the Exchange or Indemnity in 2011, 2010 or 2009.

Indemnity Supplemental Information

12 Months Ended

Dec. 31, 2011

Indemnity Supplemental Information

Indemnity Supplemental Information

Note 23. Indemnity Supplemental Information

	Erie Insurance Group
	Consolidating Statement of Financial Position
	December 31, 2011
(in millions)	Indemnity	Exchange	Reclassifications	Erie
	shareholder	noncontrolling	and	Insurance
Assets	interest	interest	eliminations	Group
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$ 548	$ 7,292	$ –	$ 7,840
Equity securities	25	564	–	589
Trading securities, at fair value	27	2,308	–	2,335
Limited partnerships	208	1,082	–	1,290
Other invested assets	1	19	–	20
Total investments	809	11,265	–	12,074
Cash and cash equivalents	11	174	–	185
Premiums receivable from policyholders	–	976	–	976
Reinsurance recoverable	–	166	–	166
Deferred income taxes	19	–		19
Deferred acquisition costs	–	487	–	487
Other assets	119	322	–	441
Receivables from the Exchange and other affiliates	254	–	(254)	–
Note receivable from EFL	25	–	(25)	–
Total assets	$1,237	$13,390	$(279)	$14,348
Liabilities
Losses and loss expense reserves	$ –	$ 3,499	$ –	$ 3,499
Life policy and deposit contract reserves	–	1,671	–	1,671
Unearned premiums	–	2,178	–	2,178
Deferred income taxes	–	147	–	147
Other liabilities	456	383	(279)	560
Total liabilities	456	7,878	(279)	8,055
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	781	–	–	781
Noncontrolling interest in consolidated entity – Exchange	–	5,512	–	5,512
Total equity	781	5,512	–	6,293
Total liabilities, shareholders’ equity and noncontrolling interest	$1,237	$13,390	$(279)	$14,348

	Erie Insurance Group
	Consolidating Statement of Financial Position
	December 31, 2010
(in millions)	Indemnity	Exchange	Reclassifications	Erie
	shareholder	noncontrolling	and	Insurance
Assets	interest	interest	eliminations	Group
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$ 264	$ 7,279	$ –	$ 7,543
Equity securities	24	570	–	594
Trading securities, at fair value	28	2,306	–	2,334
Limited partnerships	216	1,108	–	1,324
Other invested assets	1	19	–	20
Total investments	533	11,282	–	11,815
Cash and cash equivalents	310	120	–	430
Premiums receivable from policyholders	–	942	–	942
Reinsurance recoverable	–	201	–	201
Deferred acquisition costs	–	467	–	467
Other assets	132	357	–	489
Receivables from the Exchange and other affiliates	232	–	(232)	–
Note receivable from EFL	25	–	(25)	–
Equity in EFL (1)	80	–	(80)	–
Total assets	$1,312	$13,369	$(337)	$14,344
Liabilities
Losses and loss expense reserves	$ –	$ 3,584	$ –	$ 3,584
Life policy and deposit contract reserves	–	1,603	–	1,603
Unearned premiums	–	2,082	–	2,082
Deferred income taxes	26	257	–	283
Other liabilities	374	341	(257)	458
Total liabilities	400	7,867	(257)	8,010
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	912	–	–	912
Noncontrolling interest in consolidated entity – Exchange	–	5,502	(80)	5,422
Total equity	912	5,502	(80)	6,334
Total liabilities, shareholders’ equity and noncontrolling interest	$1,312	$13,369	$(337)	$14,344

(1) On March 31, 2011, Indemnity sold its 21.6% ownership interest in EFL to the Exchange.

Receivables from the Exchange and EFL and concentrations of credit risk

Financial instruments could potentially expose Indemnity to concentrations of credit risk, including unsecured receivables from the Exchange. A majority of Indemnity’s revenue and receivables are from the Exchange and affiliates. See also Note 4, “Variable Interest Entity.”

Management fees and expense allocation amounts due from the Exchange were $251 million and $229 million at December 31, 2011 and 2010, respectively. The receivable from EFL for expense allocations totaled $3 million at December 31, 2011 and 2010.

Indemnity is due $25 million from EFL in the form of a surplus note that was issued in 2003. The note may be repaid only out of unassigned surplus of EFL. Both principal and interest payments are subject to prior approval by the Pennsylvania Insurance Commissioner. The note bears an annual interest rate of 6.7% and will be payable on demand on or after December 31, 2018, with interest scheduled to be paid semi-annually, subject to prior approval by the Pennsylvania Insurance Commissioner. EFL paid annual interest to Indemnity of $2 million in both 2011 and 2010.

			Indemnity Shareholder Interest
			Income attributable to
			Indemnity shareholder interest
(in millions)			Years ended December 31,
	Percent		2011		2010			2009
Management operations:
Management fee revenue, net	100.0%		$	1,067	$	1,009		$	965
Service agreement revenue	100.0%		33		34			35
Total revenue from management operations			1,100		1,043			1,000
Cost of management operations	100.0%		892		841			813
*Income from management operations before taxes*			208		202			187
Property and casualty insurance operations: (2)
Net premiums earned	5.5%	(2)	–		216			209
Losses and loss expenses	5.5%	(2)	–		155			145
Policy acquisition and underwriting expenses	5.5%	(2)	–		61			63
*Income from property and casualty insurance operations before taxes*			–		0			1
Life insurance operations: (1)
Total revenue	21.6%	(3)	10		37			27
Total benefits and expenses	21.6%	(3)	7		26			25
*Income from life insurance operations before taxes*			3		11			2
Investment operations:
Net investment income (2)			16		37			42
Net realized gains (losses) on investments (2)			3		(1		)	10
Net impairment losses recognized in earnings (2)			0		(1		)	(12		)
Equity in earnings (losses) of limited partnerships			26		21			(76		)
*Income (loss) from investment operations before taxes* (2)			45		56			(36		)
Income from operations before income taxes			256		269			154
Provision for income taxes			87		107			46
Net income			$	169	$	162		$	108

(1)	Earnings on life insurance related invested assets are integral to the evaluation of the life insurance operations because of the long duration of life products. On that basis, for presentation purposes, the life insurance operations in the table above include life insurance related investment results. However, the life insurance investment results are included in the investment operations segment discussion in Note 5, “Segment Information”.

(2)	Prior to and through December 31, 2010, the underwriting results retained by EIC and ENY and the investment results of EIC, ENY and EPC accrued to the Indemnity shareholder interest. Due to the sale of Indemnity’s property and casualty insurance subsidiaries to the Exchange on December 31, 2010, all property and casualty underwriting results and all investment results for these companies accrue to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest, after December 31, 2010.

(3)	Prior to and through March 31, 2011, Indemnity retained a 21.6% ownership interest in EFL, which accrued to the Indemnity shareholder interest, and the Exchange retained a 78.4% ownership interest in EFL, which accrued to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest. Due to the sale of Indemnity’s 21.6% ownership interest in EFL to the Exchange on March 31, 2011, 100% of EFL’s life insurance results accrue to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest, after March 31, 2011.

Expense allocations

All claims handling services for the Exchange are performed by Indemnity employees who are entirely dedicated to claims related activities. All costs associated with these employees are reimbursed to Indemnity from the Exchange’s revenues in accordance with the subscriber’s agreement. Indemnity is reimbursed by EFL from its revenues for all costs associated with employees who perform life insurance related operating activities for EFL in accordance with its service agreement with Indemnity. Cash settlements for payments on the account of the Exchange totaled $325 million, $293 million and $282 million in 2011, 2010 and 2009, respectively, and $28 million, $27 million and $32 million in 2011, 2010 and 2009, respectively, for EFL. These reimbursements have generally been settled quarterly; however, beginning in the fourth quarter of 2011, the reimbursements are settled on a monthly basis.

Common overhead expenses included in the expenses paid by Indemnity are allocated based upon appropriate utilization statistics (employee count, square footage, vehicle count, project hours, etc.) specifically measured to accomplish proportional allocations. Executive compensation is allocated based upon each executive’s primary responsibilities (management services, property and casualty claims operations, EFL operations and investment operations). We believe the methods used to allocate common overhead expenses among the affiliated entities are reasonable.

Office leases

Indemnity leases certain office space from the Exchange, including the home office and three field office facilities. Rent expenses under these leases totaled $6 million in 2011, 2010 and 2009. Indemnity also has a lease commitment with EFL for a branch office until 2018. Annual rentals paid to EFL under this lease totaled $0.4 million in 2011 and 2010 and $0.3 million in 2009.

Direct method of cash flows

Indemnity’s components of direct cash flows as included in the Consolidated Statements of Cash Flows are as follows for the years ended December 31:


(in millions)		Indemnity Shareholder Interest
		Direct method of cash flows
		2011			2010			2009
Management fee received		$	1,053		$	947		$	912
Service agreement fee received		33			34			35
Premiums collected (1)		–			220			214
Net investment income received (1)		22			45			45
Limited partnership distributions		22			21			13
(Decrease) increase in reimbursements collected from affiliates		(9		)	(15		)	3
Commissions and bonuses paid to agents		(583		)	(532		)	(535		)
Salaries and wages paid		(124		)	(106		)	(110		)
Pension contribution and employee benefits paid		(36		)	(33		)	(32		)
Losses paid (1)		–			(132		)	(123		)
Loss expenses paid (1)		–			(23		)	(22		)
Other underwriting and acquisition costs paid (1)		–			(53		)	(54		)
General operating expenses paid		(127		)	(119		)	(104		)
Income taxes paid		(82		)	(61		)	(62		)
Net cash provided by operating activities		169			193			180
Net cash (used in) provided by investing activities		(211		)	196			(69		)
Net cash used in financing activities		(257		)	(155		)	(96		)
Net (decrease) increase in cash and cash equivalents		(299		)	234			15
Cash and cash equivalents at beginning of year		310			76			61
Cash and cash equivalents at end of year		$	11		$	310		$	76

(1)	Prior to and through December 31, 2010, the underwriting results retained by EIC and ENY and the investment results of EIC, ENY and EPC accrued to the Indemnity shareholder interest. Due to the sale of Indemnity’s property and casualty insurance subsidiaries to the Exchange on December 31, 2010, all property and casualty underwriting results and all investment results for these companies accrue to the interest of the subscribers (policyholders) of the Exchange, or noncontrolling interest, after December 31, 2010.

- Definition

The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

+ References + Details

Quarterly Results of Operations (unaudited)

12 Months Ended

Dec. 31, 2011

Quarterly Results of Operations (unaudited)

Quarterly Results of Operations (unaudited)

Note 24. Quarterly Results of Operations (unaudited)

	Erie Insurance Group
	Year ended December 31, 2011
(in millions, except per share data)	First quarter		Second quarter			Third quarter			Fourth quarter		Year

Revenues	$	1,365	$	1,245		$	796		$	1,418	$4,824
Benefits and expenses	953		1,419			1,101			993		4,466
Income (loss) from operations before income taxes and noncontrolling interest	412		(174		)	(305		)	425		358
Net income (loss)	274		(107		)	(180		)	281		268
Less: Net income (loss) attributable to noncontrolling interest in consolidated entity – Exchange	230		(159		)	(227		)	255		99
Net income attributable to Indemnity	$	44	$	52		$	47		$	26	$	169

Earnings per share (1)
Net income attributable to Indemnity per share
Class A common stock – basic	$	0.88	$	1.05		$	0.97		$	0.55	$	3.45
Class A common stock – diluted	$	0.78	$	0.94		$	0.87		$	0.49	$	3.08
Class B common stock – basic and diluted	$	126.48	$	158.33		$	146.67		$	81.76	$	522.47

(1) The cumulative sum of quarterly basic and diluted net income per share amounts may not equal total basic and diluted net income per share for the year due to differences in weighted average shares and equivalent shares outstanding for each of the periods presented.

	Erie Insurance Group
	Year ended December 31, 2010
(in millions, except per share data)	First quarter		Second quarter			Third quarter		Fourth quarter		Year

Revenues	$	1,216	$	916		$	1,357	$	1,401	$	4,890
Benefits and expenses	988		967			952		984		3,891
Income (loss) from operations before income taxes and noncontrolling interest	228		(51		)	405		417		999
Net income (loss)	162		(31		)	275		254		660
Less: Net income (loss) attributable to noncontrolling interest in consolidated entity – Exchange	115		(80		)	221		242		498
Net income attributable to Indemnity	$	47	$	49		$	54	$	12	$	162

Earnings per share (1)
Net income attributable to Indemnity per share
Class A common stock – basic	$	0.92	$	0.96		$	1.05	$	0.25	$	3.18
Class A common stock – diluted	$	0.82	$	0.86		$	0.94	$	0.22	$	2.85
Class B common stock – basic and diluted	$	132.83	$	138.21		$	150.87	$	40.93	$	462.83

- Definition

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

+ References + Details

Subsequent Events

12 Months Ended

Dec. 31, 2011

Subsequent Events

Subsequent Events

Note 25. Subsequent Events

We have evaluated for recognized and nonrecognized subsequent events through the date of financial statement issuance. No items were identified in this period subsequent to the financial statement date that required adjustment or disclosure.

SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

12 Months Ended

Dec. 31, 2011

SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

SCHEDULE I

SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES

	Erie Insurance Group
	December 31, 2011

(in millions)	Amortized	Estimated	Amount at which
	cost	fair value	shown in the balance sheet
Indemnity
Available-for-sale securities:
States & political subdivisions	$ 208	$ 221	$ 221
Corporate debt securities	303	303	303
Commercial mortgage-backed securities (CMBS)	13	13	13
Collateralized debt obligations (CDO)	4	4	4
Other debt securities	7	7	7
Total fixed maturities – Indemnity	535	548	548
Nonredeemable preferred stock	24	25	25
Total available-for-sale securities	559	573	573
Trading securities	23	27	27
Limited partnerships	185	208	208
Real estate mortgage loans	1	1	1
Total Investments – Indemnity	$ 768	$ 809	$ 809

Exchange
Available-for-sale securities:
U.S. government & agencies	$ 16	$ 17	$ 17
States & political subdivisions	1,289	1,379	1,379
Foreign government securities	15	15	15
Corporate debt securities	5,144	5,499	5,499
Residential mortgage-backed securities (RMBS)	178	189	189
Commercial mortgage-backed securities (CMBS)	62	66	66
Collateralized debt obligations (CDO)	66	65	65
Other debt securities	59	62	62
Total fixed maturities – Exchange	6,829	7,292	7,292
Nonredeemable preferred stock	531	564	564
Total available-for-sale securities	7,360	7,856	7,856
Trading securities	2,021	2,308	2,308
Limited partnerships	1,003	1,082	1,082
Life policy loans	15	15	15
Real estate mortgage loans	4	4	4
Total Investments – Exchange	$10,403	$11,265	$11,265

Total Investments – Erie Insurance Group	$11,171	$12,074	$12,074

SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

12 Months Ended

Dec. 31, 2011

SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

SCHEDULE III

SUPPLEMENTARY INSURANCE INFORMATION

	Erie Insurance Group
(in millions)	Deferred policy acquisition costs	Reserves for losses, loss expenses, life policy deposit contracts	Unearned premiums	Premiums earned	Net investment income*	Benefits, claims, losses, and settlement expenses	Amortization of deferred policy acquisition costs	Other operating expenses*	Net premiums written (excluding life)

December 31, 2011:
Property and casualty insurance operations	$343	$3,499	$2,178	$4,149	$324	$3,344	$668	$327	$4,255
Life insurance operations	144	1,671	0	65	93	100	12	15	0
Management operations	0	0	0	0	16	0	0	0	0
Total	$487	$5,170	$2,178	$4,214	$433	$3,444	$680	$342	$4,255

December 31, 2010:
Property and casualty insurance operations	$327	$3,584	$2,082	$3,925	$325	$2,810	$635	$303	$4,019
Life insurance operations	140	1,603	0	62	96	90	16	15	0
Management operations	0	0	0	0	12	0	0	0	0
Total	$467	$5,187	$2,082	$3,987	$433	$2,900	$651	$318	$4,019

December 31, 2009:
Property and casualty insurance operations	$313	$3,598	$1,981	$3,808	$326	$2,639	$611	$364	$3,861
Life insurance operations	154	1,540	0	61	93	89	13	15	0
Management operations	0	0	0	0	14	0	0	0	0
Total	$467	$5,138	$1,981	$3,869	$433	$2,728	$624	$379	$3,861

* Net investment income and other operating expenses are charged directly to the respective entities, therefore an allocation basis is not required.

SCHEDULE IV - REINSURANCE

12 Months Ended

Dec. 31, 2011

SCHEDULE IV - REINSURANCE

SCHEDULE IV - REINSURANCE

SCHEDULE IV

REINSURANCE

	Erie Insurance Group
	Gross amount (direct)	Ceded to other companies	Assumed from other companies	Net amount	Percentage of amount assumed to net
(in millions)
December 31, 2011:
Life insurance in force	$42,086	$22,753	$ 0	$19,333	0.0%
Premiums for the year:
Life insurance	$ 108	$ 43	$ 0	$ 65	0.0%
Property and liability insurance	4,164	36	21	4,149	0.5%
Total premiums	$ 4,272	$ 79	$21	$ 4,214	0.5%

December 31, 2010:
Life insurance in force	$40,431	$22,303	$ 0	$18,128	0.0%
Premiums for the year:
Life insurance	$ 104	$ 42	$ 0	$ 62	0.0%
Property and liability insurance	3,939	34	20	3,925	0.5%
Total premiums	$ 4,043	$ 76	$20	$ 3,987	0.5%

December 31, 2009:
Life insurance in force	$38,961	$20,858	$ 0	$18,103	0.0%
Premiums for the year:
Life insurance	$ 100	$ 39	$ 0	$ 61	0.0%
Property and liability insurance	3,806	40	42	3,808	1.1%
Total premiums	$ 3,906	$ 79	$42	$ 3,869	1.1%

SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS

12 Months Ended

Dec. 31, 2011

SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS

SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS

SCHEDULE VI

SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS

	Erie Insurance Group
	Deferred policy acquisition costs	Reserve for unpaid losses and loss expenses	Discount, if any, deducted from reserves*	Unearned premiums	Earned premiums	Net investment income	Losses and loss expenses incurred related to:			Amortization of deferred policy acquisition costs	Net losses and loss expenses paid	Net premiums written
(in millions)							(1) Current year	(2) Prior years
December 31, 2011:
Consolidated P&C Entities	$343	$3,499	$84	$2,178	$4,149	$324	$3,616	$(272	)	$668	$3,392	$4,255
Unconsolidated P&C Entities	0	0	0	0	0	0	0	0		0	0	0
Proportionate share of
registrant & subsidiaries	0	0	0	0	0	0	0	0		0	0	0
Total	$343	$3,499	$84	$2,178	$4,149	$324	$3,616	$(272	)	$668	$3,392	$4,255

December 31, 2010:
Consolidated P&C Entities	$327	$3,584	$127	$2,082	$3,925	$325	$3,053	$(244	)	$635	$2,811	$4,019
Unconsolidated P&C Entities	0	0	0	0	0	0	0	0		0	0	0
Proportionate share of
registrant & subsidiaries	0	0	0	0	0	0	0	0		0	0	0
Total	$327	$3,584	$127	$2,082	$3,925	$325	$3,053	$(244	)	$635	$2,811	$4,019

December 31, 2009:
Consolidated P&C Entities	$313	$3,598	$136	$1,981	$3,808	$326	$2,732	$ (93	)	$611	$2,640	$3,861
Unconsolidated P&C Entities	0	0	0	0	0	0	0	0		0	0	0
Proportionate share of
registrant & subsidiaries	0	0	0	0	0	0	0	0		0	0	0
Total	$313	$3,598	$136	$1,981	$3,808	$326	$2,732	$ (93	)	$611	$2,640	$3,861

* Workers compensation case and incurred but not reported loss reserves were discounted at 2.5% for all years presented.

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2011

Significant Accounting Policies

Basis of presentation

Reclassifications

Principles of consolidation

All intercompany assets, liabilities, revenues and expenses between Indemnity and the Exchange have been eliminated in the Consolidated Statements of Financial Position and Operations.

Investments

Some factors considered in this evaluation include:

· the extent and duration to which fair value is less than cost;

· historical operating performance and financial condition of the issuer;

· short and long-term prospects of the issuer and its industry based upon analysts’ recommendations;

· specific events that occurred affecting the issuer, including a ratings downgrade;

· near term liquidity position of the issuer; and

· compliance with financial covenants.

Impairment charges on non-redeemable preferred securities and hybrid securities with equity characteristics are included in earnings consistent with the treatment for equity securities.

Deferred acquisition costs

There was no reduction in costs deferred in any periods presented. The DAC profitability is analyzed annually to ensure recoverability.

Deferred taxes

Property and casualty unpaid losses and loss expenses

Life insurance reserves

Agent bonus estimates

Recognition of premium revenues and losses

Reinsurance

Recognition of management fee revenue

Recognition of service agreement revenue

Earnings per share

Consolidation of variable interest entity

Fair value of financial instruments

Level 1: Quoted prices for identical instruments in active markets not subject to adjustments or discounts.

Equity method investments

Capitalized software development costs

Commitments and contingencies

Subsequent events

Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2011

Earnings Per Share

Schedule of reconciliation of the numerators and denominators used in the basic and diluted per-share computations

	Indemnity Shareholder Interest
(dollars in millions,				For the years ended December 31,
except per share data)	2011			2010			2009
	Allocated			Allocated			Allocated
	net	Weighted	Per-	net	Weighted	Per-	net	Weighted	Per-
	income	shares	share	income	shares	share	income	shares	share
	(numerator)	(denominator)	amount	(numerator)	(denominator)	amount	(numerator)	(denominator)	amount
Class A – Basic EPS:
Income available to Class A stockholders	$168	48,875,316	$ 3.45	$161	50,705,607	$ 3.18	$107	51,250,606	$ 2.10
Dilutive effect of stock awards	0	71,721	–	0	68,887	–	0	60,793	–
Assumed conversion of Class B shares	1	6,110,400	–	1	6,110,400	–	1	6,117,600	–
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$169	55,057,437	$ 3.08	$162	56,884,894	$ 2.85	$108	57,428,999	$ 1.89
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$ 1	2,546	$522.47	$ 1	2,546	$462.83	$ 1	2,549	$312.45

Segment Information (Tables)

12 Months Ended

Dec. 31, 2011

Segment Information

Schedule of components of the Consolidated Statements of Operations by reportable business segment

	Erie Insurance Group
	For the year ended December 31, 2011
(in millions)	Management operations	Property and casualty insurance operations		Life insurance operations		Investment operations		Eliminations		Consolidated
Premiums earned/life policy revenue		$4,149		$ 67				$ (2	)	$4,214
Net investment income						$444		(11	)	433
Net realized investment losses						(4	)			(4	)
Net impairment losses recognized in earnings						(2	)			(2	)
Equity in earnings of limited partnerships						149				149
Management fee revenue	$1,067							(1,067	)	–
Service agreement and other revenue	33			1						34
Total revenues	1,100	4,149		68		587		(1,080	)	4,824
Cost of management operations	892							(892	)	–
Insurance losses and loss expenses		3,349		100				(5	)	3,444
Policy acquisition and underwriting expenses		1,178		27				(183	)	1,022
Total benefits and expenses	892	4,527		127		–		(1,080	)	4,466
Income (loss) before income taxes	208	(378	)	(59	)	587		–		358
Provision for income taxes	73	(132	)	(21	)	170		–		90
Net income (loss)	$ 135	$ (246	)	$(38	)	$417		$ –		$ 268

	Erie Insurance Group
	For the year ended December 31, 2010
(in millions)	Management operations	Property and casualty insurance operations		Life insurance operations		Investment operations		Eliminations		Consolidated
Premiums earned/life policy revenue		$3,925		$ 64				$ (2	)	$3,987
Net investment income						$444		(11	)	433
Net realized investment gains						313				313
Net impairment losses recognized in earnings						(6	)			(6	)
Equity in earnings of limited partnerships						128				128
Management fee revenue	$1,009							(1,009	)	–
Service agreement and other revenue	34			1						35
Total revenues	1,043	3,925		65		879		(1,022	)	4,890
Cost of management operations	841							(841	)	–
Insurance losses and loss expenses		2,815		90				(5	)	2,900
Policy acquisition and underwriting expenses		1,113		32				(176	)	969
Goodwill impairment						22				22
Total benefits and expenses	841	3,928		122		22		(1,022	)	3,891
Income (loss) before income taxes	202	(3	)	(57	)	857		–		999
Provision for income taxes	71	(1	)	(20	)	289		–		339
Net income (loss)	$ 131	$ (2	)	$(37	)	$568		$ –		$ 660

	Erie Insurance Group
	For the year ended December 31, 2009
(in millions)	Management operations	Property and casualty insurance operations	Life insurance operations		Investment operations		Eliminations		Consolidated
Premiums earned/life policy revenue		$3,808	$ 63				$ (2	)	$3,869
Net investment income					$ 444		(11	)	433
Net realized investment gains					412				412
Net impairment losses recognized in earnings					(126	)			(126	)
Equity in losses of limited partnerships					(369	)			(369	)
Management fee revenue	$ 965						(965	)	–
Service agreement and other revenue	35		1						36
Total revenues	1,000	3,808	64		361		(978	)	4,255
Cost of management operations	813						(813	)	–
Insurance losses and loss expenses		2,644	89				(5	)	2,728
Policy acquisition and underwriting expenses		1,135	28				(160	)	1,003
Total benefits and expenses	813	3,779	117		–		(978	)	3,731
Income (loss) before income taxes	187	29	(53	)	361		–		524
Provision for income taxes	60	10	(19	)	27		–		78
Net income (loss)	$ 127	$ 19	$(34	)	$ 334		$ –		$ 446

- Definition

Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.

+ References + Details

Fair Value (Tables)

12 Months Ended

Dec. 31, 2011

Fair Value

Schedule of fair value measurements on a recurring basis for consolidated available-for-sale and trading securities by asset class and level of input

	Erie Insurance Group
	December 31, 2011
	Fair value measurements using:
(in millions)	Total		Quoted prices in active markets for identical assets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Indemnity
Available-for-sale securities:
States & political subdivisions	$	221	$	0	$	221	$	0
Corporate debt securities	303		0		303		0
Commercial mortgage-backed securities (CMBS)	13		0		13		0
Collateralized debt obligations (CDO)	4		0		0		4
Other debt securities	7		0		7		0
Total fixed maturities	548		0		544		4
Nonredeemable preferred stock	25		10		15		0
Total available-for-sale securities	573		10		559		4
Trading securities:
Common stock	27		27		0		0
Total trading securities	27		27		0		0
Total – Indemnity	$	600	$	37	$	559	$	4
Exchange
Available-for-sale securities:
U.S. government & agencies	$	17	$	6	$	11	$	0
States & political subdivisions	1,379		0		1,375		4
Foreign government securities	15		0		15		0
Corporate debt securities	5,499		20		5,467		12
Residential mortgage-backed securities (RMBS)	189		0		189		0
Commercial mortgage-backed securities (CMBS)	66		0		66		0
Collateralized debt obligations (CDO)	65		0		36		29
Other debt securities	62		0		57		5
Total fixed maturities	7,292		26		7,216		50
Nonredeemable preferred stock	564		188		371		5
Total available-for-sale securities	7,856		214		7,587		55
Trading securities:
Common stock	2,308		2,296		0		12
Total trading securities	2,308		2,296		0		12
Total – Exchange	$	10,164	$	2,510	$	7,587	$	67
Total – Erie Insurance Group	$	10,764	$	2,547	$	8,146	$	71

	Erie Insurance Group
	December 31, 2010
	Fair value measurements using:
(in millions)	Total	Quoted prices in active markets for identical assets Level 1	Significant observable inputs Level 2	Significant unobservable inputs Level 3
Indemnity
Available-for-sale securities:
U.S. government & agencies	$ 25	$ 25	$ 0	$ 0
States & political subdivisions	197	0	197	0
Corporate debt securities	38	0	38	0
Collateralized debt obligations (CDO)	4	0	0	4
Total fixed maturities	264	25	235	4
Nonredeemable preferred stock	24	11	13	0
Total available-for-sale securities	288	36	248	4
Trading securities:
Common stock	28	28	0	0
Total trading securities	28	28	0	0
Total – Indemnity	$ 316	$ 64	$ 248	$ 4
Exchange
Available-for-sale securities:
U.S. government & agencies	$ 87	$ 12	$ 75	$ 0
States & political subdivisions	1,471	0	1,467	4
Foreign government securities	21	0	21	0
Corporate debt securities	5,263	12	5,240	11
Residential mortgage-backed securities (RMBS)	224	0	224	0
Commercial mortgage-backed securities (CMBS)	86	0	86	0
Collateralized debt obligations (CDO)	70	0	40	30
Other debt securities	57	0	47	10
Total fixed maturities	7,279	24	7,200	55
Nonredeemable preferred stock	570	166	397	7
Total available-for-sale securities	7,849	190	7,597	62
Trading securities:
Common stock	2,306	2,294	0	12
Total trading securities	2,306	2,294	0	12
Total – Exchange	$10,155	$2,484	$7,597	$74
Total – Erie Insurance Group	$10,471	$2,548	$7,845	$78

Schedule of roll forward of Level 3 fair value measurements on a recurring basis for consolidated available-for-sale and trading securities

	Erie Insurance Group

(in millions)	Beginning balance at September 30, 2011	Included in earnings (1)	Included in other comprehensive income	Purchases	Sales	Transfers in and (out) of Level 3 (2)	Ending balance at December 31, 2011
Indemnity
Available-for-sale securities:
Collateralized debt obligations (CDO)	$ 4	$ 0	$ 0	$0	$0	$0	$ 4
Total fixed maturities	4	0	0	0	0	0	4
Total available-for-sale securities	4	0	0	0	0	0	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$ 4	$ 0	$ 0	$0	$0	$0	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 4	$ 0	$ 0	$0	$0	$0	$ 4
Corporate debt securities	12	0	0	0	0	0	12
Collateralized debt obligations (CDO)	29	0	0	0	0	0	29
Other debt securities	5	0	0	0	0	0	5
Total fixed maturities	50	0	0	0	0	0	50
Nonredeemable preferred stock	6	0	(1)	0	0	0	5
Total available-for-sale securities	56	0	(1)	0	0	0	55
Trading securities:
Common stock	13	(1)	0	0	0	0	12
Total trading securities	13	(1)	0	0	0	0	12
Total Level 3 assets – Exchange	$69	$(1)	$(1)	$0	$0	$0	$67
Total Level 3 assets – Erie Insurance Group	$73	$(1)	$(1)	$0	$0	$0	$71

	Erie Insurance Group

(in millions)	Beginning balance at December 31, 2010	Included in earnings (1)	Included in other comprehensive income	Purchases	Sales	Transfers in and (out) of Level 3 (2)	Ending balance at December 31, 2011
Indemnity
Available-for-sale securities:
Collateralized debt obligations (CDO)	$ 4	$0	$ 0	$0	$ 0	$0	$ 4
Total fixed maturities	4	0	0	0	0	0	4
Total available-for-sale securities	4	0	0	0	0	0	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$ 4	$0	$ 0	$0	$ 0	$0	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 4	$0	$ 0	$0	$ 0	$0	$ 4
Corporate debt securities	11	0	0	1	0	0	12
Collateralized debt obligations (CDO)	30	0	(1)	0	0	0	29
Other debt securities	10	0	0	0	(5)	0	5
Total fixed maturities	55	0	(1)	1	(5)	0	50
Nonredeemable preferred stock	7	0	(2)	0	0	0	5
Total available-for-sale securities	62	0	(3)	1	(5)	0	55
Trading securities:
Common stock	12	0	0	0	0	0	12
Total trading securities	12	0	0	0	0	0	12
Total Level 3 assets – Exchange	$74	$0	$(3)	$1	$(5)	$0	$67
Total Level 3 assets – Erie Insurance Group	$78	$0	$(3)	$1	$(5)	$0	$71

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the year ended December 31, 2011 on Level 3 securities.

	Erie Insurance Group

(in millions)	Beginning balance at September 30, 2010	Transfer(s) in and (out) (1)	Included in earnings (2)	Included in other comprehensive income	Purchases, sales and adjustments	Transfer(s) in and (out) of Level 3 (3)	Ending balance at December 31, 2010
Indemnity
Available-for-sale securities:
Corporate debt securities	$ 2	$(2)	$ 0	$0	$ 0	$ 0	$ 0
Collateralized debt obligations (CDO)	7	(4)	0	0	0	1	4
Total fixed maturities	9	(6)	0	0	0	1	4
Nonredeemable preferred stock	2	(1)	0	0	(1)	0	0
Total available-for-sale securities	11	(7)	0	0	(1)	1	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$11	$(7)	$ 0	$0	$ (1)	$ 1	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 0	$ 0	$ 0	$0	$ 0	$ 4	$ 4
Corporate debt securities	9	2	0	0	0	0	11
Collateralized debt obligations (CDO)	42	4	(1)	1	(16)	0	30
Other debt securities	5	0	0	0	0	5	10
Total fixed maturities	56	6	(1)	1	(16)	9	55
Nonredeemable preferred stock	5	1	0	1	0	0	7
Total available-for-sale securities	61	7	(1)	2	(16)	9	62
Trading securities:
Common stock	11	0	1	0	0	0	12
Total trading securities	11	0	1	0	0	0	12
Total Level 3 assets – Exchange	$72	$ 7	$ 0	$2	$(16)	$ 9	$74
Total Level 3 assets – Erie Insurance Group	$83	$ 0	$ 0	$2	$(17)	$10	$78

	Erie Insurance Group

(in millions)	Beginning balance at December 31, 2009	Transfer(s) in and (out) (1)	Included in earnings (2)	Included in other comprehensive income	Purchases, sales and adjustments	Transfer(s) in and (out) of Level 3 (3)	Ending balance at December 31, 2010
Indemnity
Available-for-sale securities:
Corporate debt securities	$ 2	$(2)	$ 0	$0	$ 0	$ 0	$ 0
Collateralized debt obligations (CDO)	8	(4)	0	0	0	0	4
Total fixed maturities	10	(6)	0	0	0	0	4
Nonredeemable preferred stock	1	(1)	0	0	0	0	0
Total available-for-sale securities	11	(7)	0	0	0	0	4
Trading securities:
Common stock	0	0	0	0	0	0	0
Total trading securities	0	0	0	0	0	0	0
Total Level 3 assets – Indemnity	$ 11	$(7)	$ 0	$0	$ 0	$ 0	$ 4
Exchange
Available-for-sale securities:
States & political subdivisions	$ 0	$ 0	$ 0	$0	$ 0	$ 4	$ 4
Corporate debt securities	17	2	0	0	0	(8)	11
Collateralized debt obligations (CDO)	49	4	(1)	5	(19)	(8)	30
Other debt securities	5	0	0	0	0	5	10
Total fixed maturities	71	6	(1)	5	(19)	(7)	55
Nonredeemable preferred stock	4	1	0	2	0	0	7
Total available-for-sale securities	75	7	(1)	7	(19)	(7)	62
Trading securities:
Common stock	9	0	3	0	0	0	12
Total trading securities	9	0	3	0	0	0	12
Total Level 3 assets – Exchange	$84	$ 7	$ 2	$7	$(19)	$(7)	$74
Total Level 3 assets – Erie Insurance Group	$95	$ 0	$ 2	$7	$(19)	$(7)	$78

(2) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the year ended December 31, 2010 on Level 3 securities.

Schedule of fair value of the consolidated available-for-sale and trading securities by pricing source

	Erie Insurance Group
(in millions)	December 31, 2011
	Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services	$	542	$	0	$	542	$	0
Priced via market comparables/non-binding broker quote (1)	2		0		2		0
Priced via internal modeling (2)	4		0		0		4
Total fixed maturities	548		0		544		4
Nonredeemable preferred stock:
Priced via pricing services	23		10		13		0
Priced via market comparables/non-binding broker quote (1)	2		0		2		0
Priced via internal modeling (2)	0		0		0		0
Total nonredeemable preferred stock	25		10		15		0
Common stock:
Priced via pricing services	27		27		0		0
Priced via market comparables/non-binding broker quote (1)	0		0		0		0
Priced via internal modeling (2)	0		0		0		0
Total common stock	27		27		0		0
Total available-for-sale and trading securities – Indemnity	$	600	$	37	$	559	$	4
Exchange
Fixed maturities:
Priced via pricing services	$	7,158	$	26	$	7,132	$	0
Priced via market comparables/non-binding broker quote (1)	84		0		84		0
Priced via internal modeling (2)	50		0		0		50
Total fixed maturities	7,292		26		7,216		50
Nonredeemable preferred stock:
Priced via pricing services	528		188		340		0
Priced via market comparables/non-binding broker quote (1)	36		0		31		5
Priced via internal modeling (2)	0		0		0		0
Total nonredeemable preferred stock	564		188		371		5
Common stock:
Priced via pricing services	2,296		2,296		0		0
Priced via market comparables/non-binding broker quote (1)	0		0		0		0
Priced via internal modeling (2)	12		0		0		12
Total common stock	2,308		2,296		0		12
Total available-for-sale and trading securities – Exchange	$	10,164	$	2,510	$	7,587	$	67
Total available-for-sale and trading securities – Erie Insurance Group	$	10,764	$	2,547	$	8,146	$	71

(1) All broker quotes obtained for securities were non-binding. When a non-binding broker quote was the only price available, the security was classified as Level 3.

(2) Internal modeling using a discounted cash flow model was performed on 11 fixed maturities and 3 common equity securities representing 0.6% of the total portfolio of the Erie Insurance Group.

- Definition

Tabular disclosure of assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References + Details

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References + Details

Investments (Tables)

12 Months Ended

Dec. 31, 2011

Investments

Schedule of reconciliation of cost to fair value of available-for-sale securities

	Erie Insurance Group
	December 31, 2011
(in millions)	Amortized		Gross unrealized		Gross unrealized		Estimated
	cost		gains		losses		fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	208	$	13	$	0	$	221
Corporate debt securities	303		1		1		303
Commercial mortgage-backed securities (CMBS)	13		0		0		13
Collateralized debt obligations (CDO)	4		0		0		4
Other debt securities	7		0		0		7
Total fixed maturities	535		14		1		548
Nonredeemable preferred stock	24		1		0		25
Total available-for-sale securities – Indemnity	$	559	$	15	$	1	$	573
Exchange
Available-for-sale securities:
U.S. government & agencies	$	16	$	1	$	0	$	17
States & political subdivisions	1,289		91		1		1,379
Foreign government securities	15		0		0		15
Corporate debt securities	5,144		386		31		5,499
Residential mortgage-backed securities (RMBS)	178		11		0		189
Commercial mortgage-backed securities (CMBS)	62		4		0		66
Collateralized debt obligations (CDO)	66		4		5		65
Other debt securities	59		3		0		62
Total fixed maturities	6,829		500		37		7,292
Nonredeemable preferred stock	531		45		12		564
Total available-for-sale securities – Exchange	$	7,360	$	545	$	49	$	7,856
Total available-for-sale securities – Erie Insurance Group	$	7,919	$	560	$	50	$	8,429

	Erie Insurance Group
	December 31, 2010
(in millions)	Amortized		Gross unrealized		Gross unrealized		Estimated
	cost		gains		losses		fair value
Indemnity
Available-for-sale securities:
U.S. government & agencies	$	25	$	0	$	0	$	25
States & political subdivisions	193		6		2		197
Corporate debt securities	36		2		0		38
Collateralized debt obligations (CDO)	3		1		0		4
Total fixed maturities	257		9		2		264
Nonredeemable preferred stock	20		4		0		24
Total available-for-sale securities – Indemnity	$	277	$	13	$	2	$	288
Exchange
Available-for-sale securities:
U.S. government & agencies	$	85	$	2	$	0	$	87
States & political subdivisions	1,437		43		9		1,471
Foreign government securities	20		1		0		21
Corporate debt securities	4,900		377		14		5,263
Residential mortgage-backed securities (RMBS)	216		9		1		224
Commercial mortgage-backed securities (CMBS)	82		5		1		86
Collateralized debt obligations (CDO)	69		6		5		70
Other debt securities	54		3		0		57
Total fixed maturities	6,863		446		30		7,279
Nonredeemable preferred stock	503		74		7		570
Total available-for-sale securities – Exchange	$	7,366	$	520	$	37	$	7,849
Total available-for-sale securities – Erie Insurance Group	$	7,643	$	533	$	39	$	8,137

Schedule of amortized cost and estimated fair value of fixed maturities by remaining contractual term to maturity

	Erie Insurance Group
(in millions)	Amortized	Estimated
	cost	fair value
Indemnity
Due in one year or less	$ 152	$ 152
Due after one year through five years	253	256
Due after five years through ten years	47	52
Due after ten years	83	88
Total fixed maturities – Indemnity	$ 535	$ 548
Exchange
Due in one year or less	$ 506	$ 513
Due after one year through five years	2,397	2,519
Due after five years through ten years	2,669	2,898
Due after ten years	1,257	1,362
Total fixed maturities – Exchange	$6,829	$7,292
Total fixed maturities – Erie Insurance Group	$7,364	$7,840

Schedule of available-for-sale securities in a gross unrealized loss position by length of time securities were in a gross unrealized loss position

	Erie Insurance Group
	December 31, 2011
(dollars in millions)	Less than 12 months		12 months or longer		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized	No. of
Indemnity	value	losses	value	losses	Value	losses	holdings
Available-for-sale securities:
Corporate debt securities	$220	$ 1	$ 0	$ 0	$220	$ 1	41
Commercial mortgage-backed securities (CMBS)	4	0	9	0	13	0	3
Other debt securities	5	0	2	0	7	0	2
Total fixed maturities – Indemnity	229	1	11	0	240	1	46
Nonredeemable preferred stock	4	0	3	0	7	0	3
Total available-for-sale securities – Indemnity	$233	$ 1	$ 14	$ 0	$247	$ 1	49

Quality breakdown of fixed maturities:
Investment grade	$229	$ 1	$ 11	$ 0	$240	$ 1	46
Non-investment grade	0	0	0	0	0	0	0
Total fixed maturities – Indemnity	$229	$ 1	$ 11	$ 0	$240	$ 1	46

Exchange
Available-for-sale securities:
States & political subdivisions	$ 7	$ 0	$ 6	$ 1	$ 13	$ 1	3
Corporate debt securities	635	27	50	4	685	31	108
Residential mortgage-backed securities (RMBS)	7	0	0	0	7	0	4
Commercial mortgage-backed securities (CMBS)	5	0	0	0	5	0	1
Collateralized debt obligations (CDO)	0	0	32	5	32	5	6
Other debt securities	9	0	0	0	9	0	2
Total fixed maturities – Exchange	663	27	88	10	751	37	124
Nonredeemable preferred stock	168	11	34	1	202	12	27
Total available-for-sale securities – Exchange	$831	$38	$122	$11	$953	$49	151

Quality breakdown of fixed maturities:
Investment grade	$625	$26	$ 79	$ 9	$704	$35	109
Non-investment grade	38	1	9	1	47	2	15
Total fixed maturities – Exchange	$663	$27	$ 88	$10	$751	$37	124

	Erie Insurance Group
	December 31, 2010
(dollars in millions)	Less than 12 months		12 months or longer		Total
	Fair	Unrealized	Fair	Unrealized	Fair	Unrealized	No. of
Indemnity	value	losses	value	losses	Value	losses	holdings
Available-for-sale securities:
U.S. government & agencies	$ 25	$ 0	$ 0	$ 0	$ 25	$ 0	1
States & political subdivisions	39	2	1	0	40	2	20
Corporate debt securities	31	0	0	0	31	0	3
Total fixed maturities – Indemnity	95	2	1	0	96	2	24
Nonredeemable preferred stock	3	0	0	0	3	0	1
Total available-for-sale securities – Indemnity	$ 98	$ 2	$ 1	$ 0	$ 99	$ 2	25

Quality breakdown of fixed maturities:
Investment grade	$ 95	$ 2	$ 1	$ 0	$ 96	$ 2	24
Non-investment grade	0	0	0	0	0	0	0
Total fixed maturities – Indemnity	$ 95	$ 2	$ 1	$ 0	$ 96	$ 2	24

Exchange
Available-for-sale securities:
U.S. government & agencies	$ 22	$ 0	$ 0	$ 0	$ 22	$ 0	3
States & political subdivisions	299	8	5	1	304	9	59
Foreign government securities	10	0	0	0	10	0	1
Corporate debt securities	398	8	144	6	542	14	101
Residential mortgage-backed securities (RMBS)	6	0	7	1	13	1	4
Commercial mortgage-backed securities (CMBS)	0	0	12	1	12	1	2
Collateralized debt obligations (CDO)	1	0	33	5	34	5	6
Total fixed maturities – Exchange	736	16	201	14	937	30	176
Nonredeemable preferred stock	45	2	59	5	104	7	15
Total available-for-sale securities – Exchange	$781	$18	$260	$19	$1,041	$37	191

Quality breakdown of fixed maturities:
Investment grade	$703	$16	$155	$11	$ 858	$27	154
Non-investment grade	33	0	46	3	79	3	22
Total fixed maturities – Exchange	$736	$16	$201	$14	$ 937	$30	176

Schedule of investment income, net of expenses, from portfolios

	Erie Insurance Group
(in millions)	Years ended December 31,
	2011	2010	2009
Indemnity
Fixed maturities	$ 14	$ 33	$ 36
Equity securities	2	4	5
Cash equivalents and other	1	1	1
Total investment income	17	38	42
Less: investment expenses	1	1	0
Investment income, net of expenses – Indemnity	$ 16	$ 37	$ 42
Exchange
Fixed maturities	$364	$350	$343
Equity securities	86	72	68
Cash equivalents and other	0	2	4
Total investment income	450	424	415
Less: investment expenses	33	28	24
Investment income, net of expenses – Exchange	$417	$396	$391
Investment income, net of expenses – Erie Insurance Group	$433	$433	$433

Schedule of realized gains (losses) on investments

(in millions)	Erie Insurance Group
	Years ended December 31,
Indemnity	2011		2010		2009
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	2	$	6	$	5
Gross realized losses	0		(1)		(4)
Net realized gains	2		5		1
Equity securities:
Gross realized gains	3		1		8
Gross realized losses	0		0		(7)
Net realized gains	3		1		1
Trading securities:
Common stock:
Gross realized gains	2		6		2
Gross realized losses	(1)		(1)		(5)
Valuation adjustments	(3)		0		11
Net realized (losses) gains	(2)		5		8
Limited partnerships:
Gross realized gains	0		0		0
Gross realized losses	0		(12)		0
Net realized gains (losses)	0		(12)		0
Net realized investment gains (losses) – Indemnity	$	3	$	(1)	$	10
Exchange
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	77	$	49	$	22
Gross realized losses	(29)		(24)		(37)
Net realized gains (losses)	48		25		(15)
Equity securities:
Gross realized gains	28		14		39
Gross realized losses	(1)		(3)		(26)
Net realized gains	27		11		13
Trading securities:
Common stock:
Gross realized gains	271		205		143
Gross realized losses	(106)		(135)		(203)
Valuation adjustments	(247)		254		464
Net realized (losses) gains	(82)		324		404
Limited partnerships:
Gross realized gains	0		0		0
Gross realized losses	0		(46)		0
Net realized losses	0		(46)		0
Net realized investment (losses) gains – Exchange	$	(7)	$	314	$	402
Net realized investment (losses) gains – Erie Insurance Group	$	(4)	$	313	$	412

Schedule of components of other-than-temporary impairments on investments

(in millions)	Erie Insurance Group
	Years ended December 31
	2011	2010	2009
Indemnity
Fixed maturities	$ 0	$(1)	$ (7)
Equity securities	0	0	(5)
Total other-than-temporary impairments	0	(1)	(12)
Portion recognized in other comprehensive income	0	0	0
Net impairment losses recognized in earnings – Indemnity	$ 0	$(1)	$ (12)

Exchange
Fixed maturities	$ 0	$(4)	$ (54)
Equity securities	(2)	(1)	(60)
Total other-than-temporary impairments	(2)	(5)	(114)
Portion recognized in other comprehensive income	0	0	0
Net impairment losses recognized in earnings – Exchange	$(2)	$(5)	$(114)
Net impairment losses recognized in earnings – Erie Insurance Group	$(2)	$(6)	$(126)

Schedule of limited partnership results, generally reported on a one-quarter lag

	Erie Insurance Group
	As of and for the year ended December 31, 2011
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded	Income (loss) recognized due to valuation adjustments by the partnerships	Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$ 73	$ 2	$ 5
Greater than or equal to 10% but less than 50%	3	9	0	3
Greater than 50%	0	0	0	0
Total private equity	29	82	2	8
Mezzanine debt:
Less than 10%	11	22	0	6
Greater than or equal to 10% but less than 50%	3	12	1	1
Greater than 50%	1	1	(1)	0
Total mezzanine debt	15	35	0	7
Real estate:
Less than 10%	12	62	5	(1	)
Greater than or equal to 10% but less than 50%	3	18	1	0
Greater than 50%	3	11	3	1
Total real estate	18	91	9	0
Total limited partnerships – Indemnity	62	$ 208	$11	$15
Exchange
Private equity:
Less than 10%	41	$ 452	$13	$30
Greater than or equal to 10% but less than 50%	3	43	(1)	12
Greater than 50%	0	0	0	0
Total private equity	44	495	12	42
Mezzanine debt:
Less than 10%	17	133	(9)	26
Greater than or equal to 10% but less than 50%	3	33	3	3
Greater than 50%	3	35	(2)	3
Total mezzanine debt	23	201	(8)	32
Real estate:
Less than 10%	25	284	31	(1	)
Greater than or equal to 10% but less than 50%	5	59	3	0
Greater than 50%	3	43	2	10
Total real estate	33	386	36	9
Total limited partnerships – Exchange	100	$1,082	$40	$83
Total limited partnerships – Erie Insurance Group		$1,290	$51	$98

	Erie Insurance Group
	As of and for the year ended December 31, 2010
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded	Income (loss) recognized due to valuation adjustments by the partnerships	Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$ 78	$ 4	$ 7
Greater than or equal to 10% but less than 50%	3	8	3	0
Greater than 50%	0	0	0	0
Total private equity	29	86	7	7
Mezzanine debt:
Less than 10%	11	30	4	3
Greater than or equal to 10% but less than 50%	3	15	2	(2	)
Greater than 50%	1	2	0	0
Total mezzanine debt	15	47	6	1
Real estate:
Less than 10%	12	59	30	(31	)
Greater than or equal to 10% but less than 50%	4	14	10	(10	)
Greater than 50%	4	10	4	(3	)
Total real estate	20	83	44	(44	)
Total limited partnerships – Indemnity	64	$ 216	$ 57	$(36	)
Exchange
Private equity:
Less than 10%	41	$ 517	$ 28	$ 40
Greater than or equal to 10% but less than 50%	3	38	10	0
Greater than 50%	0	0	0	(1	)
Total private equity	44	555	38	39
Mezzanine debt:
Less than 10%	14	142	12	13
Greater than or equal to 10% but less than 50%	3	41	2	(2	)
Greater than 50%	3	31	0	2
Total mezzanine debt	20	214	14	13
Real estate:
Less than 10%	25	250	(11)	10
Greater than or equal to 10% but less than 50%	6	52	7	(7	)
Greater than 50%	4	37	15	(11	)
Total real estate	35	339	11	(8	)
Total limited partnerships – Exchange	99	$1,108	$ 63	$ 44
Total limited partnerships – Erie Insurance Group		$1,324	$120	$ 8

- Definition

Tabular disclosure of investment income derived from investments in debt and equity securities consisting of interest income earned from investments in debt securities and on cash and cash equivalents, dividend income from investments in equity securities, and income or expense derived from the amortization of investment related discounts or premiums, respectively. This item does not include realized or unrealized gains or losses on the sale or holding of investments in debt and equity securities required to be included in earnings for the period or for other than temporary losses related to investments in debt and equity securities which are included in realized losses in the period recognized.

+ References + Details

Capitalized Software Development Costs (Tables)

12 Months Ended

Dec. 31, 2011

Capitalized Software Development Costs

Schedule of total capitalized software development costs subject to amortization and related amortization expense

	Indemnity Shareholder Interest
(in millions)	Years ended December 31,
	2011		2010		2009
Gross carrying amount	$43		$32		$10
Accumulated amortization	(5	)	(1	)	0
Net carrying amount	$38		$31		$10

Amortization expense	$ 4		$ 1		$ 0

Schedule of estimated future amortization expense related to capitalized software development costs

(in millions)
		Indemnity Shareholder Interest
Year ending December 31,		Estimated amortization expense
2012		$6
2013		6
2014		6
2015		6
2016		6

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Taxes

Schedule of provision for income taxes

(in millions)	Erie Insurance Group
	2011		2010		2009
Indemnity
Current income tax expense	$ 85		$ 37		$56
Deferred income tax expense (benefit)	0		67		(7	)
Total provision for income taxes – Indemnity	85		104		49
Exchange
Current income tax expense (benefit)	110		(43	)	7
Deferred income tax (benefit) expense	(105	)	278		22
Total provision for income taxes – Exchange	5		235		29
Total provision for income taxes – Erie Insurance Group	$ 90		$339		$78

Schedule of reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rates to pre-tax income

(in millions)	Erie Insurance Group
	2011		2010		2009
Indemnity
Income tax at statutory rates	$89		$ 93		$ 53
Tax-exempt interest	(3	)	(3	)	(3	)
Dividends received deduction	(1	)	(1	)	(1	)
Deferred tax valuation allowance	0		(2	)	0
Erie Family Life (losses) earnings (1)	(1	)	15		0
Other, net	1		2		0
Provision for income taxes – Indemnity	85		104		49
Exchange
Income tax at statutory rates	37		259		130
Tax-exempt interest	(15	)	(16	)	(17	)
Dividends received deduction	(13	)	(11	)	(11	)
Deferred tax valuation allowance	0		(4	)	(71	)
Goodwill impairments	0		8		0
Prior year adjustments	(5	)	0		0
Other, net	1		(1	)	(2	)
Provision for income taxes – Exchange	5		235		29
Provision for income taxes – Erie Insurance Group	$90		$339		$ 78

Schedule of temporary differences and carry-forwards, which give rise to consolidated deferred tax assets and liabilities

(in millions)	Erie Insurance Group
	2011	2010
Indemnity
Deferred tax assets:
Net allowance for service fees and premium cancellations	$ 3	$ 3
Other employee benefits	9	8
Pension and other postretirement benefits	45	21
Write-downs of impaired securities	1	2
Capital loss carryover	0	7
Other	0	1
Total deferred tax assets	58	42
Deferred tax liabilities:
Unrealized gains on investments	6	7
Equity interest in EFL	0	22
Limited partnerships	10	20
Depreciation	13	7
Prepaid expenses	7	5
Capitalized internally developed software	1	5
Other	2	2
Total deferred tax liabilities	39	68
Net deferred income tax asset (liability) – Indemnity	$19	$(26	)

(in millions)	Erie Insurance Group (continued)
	2011		2010
Exchange
Deferred tax assets:
Loss reserve discount	$ 81		$ 83
Liability for future life and annuity policy benefits	12		13
Unearned premiums	165		156
Write-downs of impaired securities	29		42
Wash sales	6		8
Capital loss carryover	7		9
Other	14		8
Total deferred tax assets	314		319
Deferred tax liabilities:
Deferred policy acquisition costs	159		153
Unrealized gains on investments	272		356
Limited partnerships	12		49
Net allowance for service fees and premium cancellations	3		3
Other	15		15
Total deferred tax liabilities	461		576
Net deferred tax liability – Exchange	$(147	)	$(257	)
Net deferred tax liability – Erie Insurance Group	$(128	)	$(283	)

Deferred Policy Acquisition Costs (Tables)

12 Months Ended

Dec. 31, 2011

Deferred Policy Acquisition Costs

Schedule of components of the Property and Casualty Group's and EFL's deferred policy acquisition costs assets

(in millions)	Erie Insurance Group
	2011		2010
Property and Casualty Group
Deferred policy acquisition costs asset at beginning of year	$ 327		$ 313
Capitalized deferred policy acquisition costs	684		649
Amortized deferred policy acquisition costs	(668	)	(635	)
Deferred policy acquisition costs asset at end of year – Property and Casualty Group	$ 343		$ 327
Erie Family Life Insurance Company
Deferred policy acquisition costs asset at beginning of year	$ 140		$ 154
Capitalized deferred policy acquisition costs	18		17
Amortized deferred policy acquisition costs	(12	)	(16	)
Amortized shadow deferred policy acquisition costs	(2	)	(15	)
Deferred policy acquisition costs asset at end of year – EFL	$ 144		$ 140
Deferred policy acquisition costs asset at end of year – Erie Insurance Group	$ 487		$ 467

Property and Casualty Unpaid Losses and Loss Expenses (Tables)

12 Months Ended

Dec. 31, 2011

Property and Casualty Unpaid Losses and Loss Expenses

Schedule of reconciliation of property and casualty beginning and ending loss and loss expense reserve balances

	Property and Casualty Group
(in millions)	2011		2010		2009

Losses and loss expense reserves at January 1, – Gross	$3,584		$3,598		$3,586
Less: reinsurance recoverable	188		200		187
Losses and loss expense reserves at January 1, – Net	3,396		3,398		3,399

Incurred losses and loss expenses related to:
Current accident year	3,616		3,053		2,732
Prior accident years	(272	)	(244	)	(93	)
Total incurred losses and loss expenses	3,344		2,809		2,639

Paid losses and loss expenses related to:
Current accident year	2,360		1,855		1,608
Prior accident years	1,032		956		1,032
Total paid losses and loss expenses	3,392		2,811		2,640

Losses and loss expense reserves at December 31, – Net	3,348		3,396		3,398
Add: reinsurance recoverable	151		188		200
Losses and loss expense reserves at December 31, – Gross	$3,499		$3,584		$3,598

Life Policy and Deposit Contract Reserves (Tables)

12 Months Ended

Dec. 31, 2011

Life Policy and Deposit Contract Reserves

Schedule of components of life policy and deposit contract liability balances

(in millions)	Erie Family Life Insurance Company
	2011	2010	2009
Deferred annuities	$1,144	$1,117	$1,076
Ordinary/traditional life	282	254	229
Universal life	228	214	211
Other	17	18	24
Life policy and deposit contract reserves	$1,671	$1,603	$1,540

Reinsurance (Tables)

12 Months Ended

Dec. 31, 2011

Reinsurance

Schedule of summary of direct insurance and reinsurance for property and casualty and life insurance activities

(in millions)
	Erie Insurance Group
Property and casualty insurance:	2011		2010		2009
Premiums written:
Direct	$4,271		$4,035		$3,861
Assumed	21		19		30
Ceded	(37	)	(35	)	(30	)
Premiums written, net	4,255		4,019		3,861
Premiums earned:
Direct	4,164		3,939		3,806
Assumed	21		20		42
Ceded	(36	)	(34	)	(40	)
Premiums earned, net	4,149		3,925		3,808
Insurance losses and loss expenses:
Direct	3,311		2,834		2,655
Assumed	11		(15	)	12
Ceded	22		(9	)	(28	)
Insurance losses and loss expenses, net	$3,344		$2,810		$2,639

Life insurance:
Premiums earned:
Direct	$ 108		$ 104		$ 100
Ceded	(43	)	(42	)	(39	)
Premiums earned, net	65		62		61
Insurance losses and loss expenses:
Direct	120		102		114
Ceded	(20	)	(12	)	(25	)
Insurance losses and loss expenses, net	$ 100		$ 90		$ 89

Total:
Premiums earned:
Property and casualty	$4,149		$3,925		$3,808
Life	65		62		61
Premiums earned, net	4,214		3,987		3,869
Insurance losses and loss expenses:
Property and casualty	3,344		2,810		2,639
Life	100		90		89
Insurance losses and loss expenses, net	$3,444		$2,900		$2,728

Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2011

Postretirement Benefits

Schedule of assumptions used to determine benefit obligations and net periodic benefit cost

	Erie Insurance Group
Assumptions used to determine benefit obligations:	2011		2010		2009
Employee pension plan:
Discount rate	4.99	%	5.69	%	6.11	%
Expected return on plan assets	8.00		8.00		8.2	5
Rate of compensation increase (1)	4.15		4.15		4.1	5
SERP:
Discount rate (2)	4.99/4.	49	5.69/5.	19	6.11/5.	00
Rate of compensation increase	6.00		6.00		6.0	0
Assumptions used to determine net periodic benefit cost:
Employee pension plan:
Discount rate	5.69	%	6.11	%	6.06	%
Expected return on plan assets	8.00		8.00		8.2	5
Rate of compensation increase (1)	4.15		4.15		4.1	5
SERP:
Discount rate (2)	5.69/5.	19	6.11/5.	00	6.06/5.	00
Rate of compensation increase	6.00		6.00		6.0	0

(1) Rate of compensation increase is age-graded. An equivalent single compensation increase rate of 4.15% in 2011, 2010 and 2009 would produce similar results.

(2) Pre-retirement/post-retirement.

Schedule of change in projected benefit obligation, change in plan assets, funded status of pension plans and net periodic benefit cost


(in millions)	Erie Insurance Group
	2011		2010		2009
Change in projected benefit obligation:
Benefit obligation at beginning of period	$ 400		$344		$326
Service cost	17		15		15
Interest cost	23		21		19
Amendments	1		1		3
Actuarial loss (gain)	54		25		(12	)
Benefits paid	(7	)	(6	)	(4	)
Impact due to settlement	0		0		(3	) (1)
Benefit obligation at end of period	$ 488		$400		$344

Change in plan assets:
Fair value of plan assets at beginning of period	$ 328		$279		$218
Actual return (loss) on plan assets	12		41		51
Employer contributions	15		13		14
Benefits paid	(7	)	(5	)	(4	)
Fair value of plan assets at end of period	$ 348		$328		$279
Funded status at end of period	$(140	)	$ (72	)	$ (65	)
Amounts recognized in the Consolidated Statement of Financial Position
Current liabilities	$ (1	)	$ 0		$ 0
Noncurrent liabilities	(139	)	(72	)	(65	)
Amounts recognized	$ (140	)	$ (72	)	$ (65	)
Accumulated benefit obligation, December 31,	$ 363		$297		$252

Amounts included in accumulated other comprehensive income, before tax, not yet recognized as components of net periodic benefit cost:
Net actuarial loss	$ 173		$110		$104
Prior service cost	6		5		5
Net amount not yet recognized	$ 179		$115		$109
Components of net periodic benefit cost:
Service cost	$ 17		$ 15		$ 15
Interest cost	23		21		19
Expected return on plan assets (2)	(27	)	(25	)	(24	)
Amortization of prior service cost	1		1		0
Recognized net actuarial loss	6		3		3
Settlement gain	0		0		(1	) (1)
Net periodic benefit expense before allocation to affiliates	$ 20		$ 15		$ 12

(1)	In December 2007, employment agreements for certain members of executive management were signed which incorporated a payment in full of accrued SERP benefits as of December 2008 in a lump sum payment, after which time no additional SERP benefits would accrue. This resulted in a settlement gain in 2009.

(2)	The market-related value of plan assets is used to determine the expected return component of pension benefit cost. We use a four year averaging method to determine the market-related value, under which asset gains or losses that result from returns that differ from our long-term rate of return assumption are recognized in the market-related value of assets on a level basis over a four year period. Once factored into the market-related asset value, these experience losses will be amortized over a period of 15 years, which is the average remaining service period of the employee group in the plan.

Schedule of amounts recognized in other comprehensive income for pension plans

(in millions)
	Erie Insurance Group
Amounts recognized in other comprehensive income for pension plans:	2011		2010
Amortization of net actuarial loss	$ (6	)	$(4	)
Amortization of prior service cost	(1	)	0
Net actuarial loss arising during the year	69		9
Amendments	1	(1)	1	(2)
Total recognized in other comprehensive income	$63		$ 6

(1) The charges recognized as amendments were the result of factoring in the prior service cost for seven new plan participants in 2011.

(2) The charges recognized as amendments were the result of factoring in the prior service cost for four new plan participants in 2010.

Schedule of benefits expected to be paid over the next 10 years from pension and other postretirement plans

(in millions)
		Erie Insurance Group
Year ending December 31,		Expected future cash flows
2012		$ 9
2013		10
2014		11
2015		13
2016		15
2017 - 2021		110

Schedule of information for pension plans with an accumulated benefit obligation in excess of plan assets

(in millions)
	Erie Insurance Group
Information for pension plans with an accumulated benefit obligation in excess of plan assets:	2011	2010
Projected benefit obligation	$488	$10
Accumulated benefit obligation	363	5
Fair value of plan assets	348	0

Schedule of target and actual asset allocations for the portfolio

	Erie Insurance Group
	Target asset allocation		Actual asset allocation		Actual asset allocation
	2010-2011		2011		2010
Return seeking assets:
U.S. equity index (1)	17	%	17	%	17	%
U.S. large capitalization core equity (2)	16		16		16
International risk-controlled equity (3)	15		15		15
U.S. small capitalization core equity (4)	8		8		8
International small capitalization risk-controlled equity (5)	2		2		2
Emerging markets equity (6)	2		2		2
Total return seeking assets	60	%	60	%	60	%
Liability matching assets:
Long duration fixed income (7)	16	%	16	%	16	%
Broad market fixed income (8)	15		15		15
Long duration corporate fixed income (9)	8		8		8
Institutional money market fund	1		1		1
Total liability matching assets	40	%	40	%	40	%
Total plan assets	100	%	100	%	100	%

(1)	Comprises equity index funds not actively managed that track the S&P 500.
(2)	Includes equity securities that seek to achieve excess returns relative to the S&P 500 while maintaining portfolio risk characteristics similar to the index.
(3)	Seeks long-term capital growth with an emphasis on controlling return volatility relative to an international market index.
(4)	Includes equity securities that seek to achieve excess returns relative to the Russell 2000 Index while maintaining portfolio risk characteristics similar to the index.
(5)	Seeks to provide excess returns relative to an international small cap index, while maintaining regional weights similar to the index.
(6)	Seeks long-term capital growth in securities of companies that have their principal business activities in countries in the Morgan Stanley Capital International Emerging Markets Free Index.
(7)	Seeks to generate returns that exceed the Barclays Capital U.S. Long Government/Credit Bond Index through investment-grade fixed income securities.
(8)	Seeks to generate returns that exceed the Barclays Capital U.S. Aggregate Bond Index through investment-grade fixed income securities.
(9)	Seeks to generate returns that exceed the Barclays Capital U.S. Long Corporate A or Better Index investing in U.S. corporate bonds with an emphasis on long duration bonds rated A or better.

Schedule of fair value measurements of pension plan assets by major category and level of input

	Erie Insurance Group
	At December 31, 2011
	Fair value measurements of plan assets using:
(in millions)	Total	Quoted prices in active markets for identical assets Level 1	Significant observable inputs Level 2	Significant unobservable inputs Level 3
Return seeking assets:
U.S. equity index (1)	$ 58	$0	$ 58	$0
U.S. large capitalization core equity (2)	54	0	54	0
International risk-controlled equity (3)	53	0	53	0
U.S. small capitalization core equity (4)	28	0	28	0
International small capitalization risk-controlled equity (5)	8	0	8	0
Emerging markets equity (6)	7	0	7	0
Liability matching assets:
Long duration fixed income (7)	55	0	55	0
Broad market fixed income (8)	53	0	53	0
Long duration corporate fixed income (9)	30	0	30	0
Institutional money market fund	2	2	0	0
Total	$348	$2	$346	$0

	Erie Insurance Group
	At December 31, 2010
	Fair value measurements of plan assets using:
(in millions)	Total	Quoted prices in active markets for identical assets Level 1	Significant observable inputs Level 2	Significant unobservable inputs Level 3
Return seeking assets:
U.S. equity index (1)	$ 55	$0	$ 55	$0
U.S. large capitalization core equity (2)	51	0	51	0
International risk-controlled equity (3)	50	0	50	0
U.S. small capitalization core equity (4)	26	0	26	0
International small capitalization risk-controlled equity (5)	8	0	8	0
Emerging markets equity (6)	7	0	7	0
Liability matching assets:
Long duration fixed income (7)	51	0	51	0
Broad market fixed income (8)	49	0	49	0
Long duration corporate fixed income (9)	28	0	28	0
Institutional money market fund	3	3	0	0
Total	$328	$3	$325	$0