|
ERIE INDEMNITY COMPANY
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|
|
(Exact name of registrant as specified in its charter)
|
|
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PENNSYLVANIA
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25-0466020
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(State or other jurisdiction of
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(I.R.S. Employer
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|
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incorporation or organization)
|
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Identification No.)
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100 Erie Insurance Place, Erie, Pennsylvania
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16530
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(Address of principal executive offices)
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(Zip Code)
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(814) 870-2000
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(Registrant’s telephone number, including area code)
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Not applicable
|
|
|
(Former name, former address and former fiscal year, if changed since last report)
|
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ITEM 1.
|
FINANCIAL STATEMENTS
|
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|
Three months ended
|
|
Nine months ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
||||||
Management fee revenue, net
|
|
$
|
411,139
|
|
|
$
|
389,168
|
|
|
$
|
1,195,262
|
|
|
$
|
1,126,626
|
|
Service agreement revenue
|
|
7,267
|
|
|
7,469
|
|
|
21,756
|
|
|
22,502
|
|
||||
Total operating revenue
|
|
418,406
|
|
|
396,637
|
|
|
1,217,018
|
|
|
1,149,128
|
|
||||
|
|
|
|
|
|
|
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|
||||||||
Operating expenses
|
|
|
|
|
|
|
|
|
||||||||
Commissions
|
|
232,455
|
|
|
223,741
|
|
|
676,963
|
|
|
641,189
|
|
||||
Salaries and employee benefits
|
|
53,265
|
|
|
58,342
|
|
|
161,579
|
|
|
170,715
|
|
||||
All other operating expenses
|
|
50,431
|
|
|
46,265
|
|
|
142,797
|
|
|
146,522
|
|
||||
Total operating expenses
|
|
336,151
|
|
|
328,348
|
|
|
981,339
|
|
|
958,426
|
|
||||
Net revenue from operations
|
|
82,255
|
|
|
68,289
|
|
|
235,679
|
|
|
190,702
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Investment income
|
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
|
5,331
|
|
|
4,346
|
|
|
14,884
|
|
|
13,322
|
|
||||
Net realized investment gains (losses)
|
|
718
|
|
|
(483
|
)
|
|
29
|
|
|
(125
|
)
|
||||
Net impairment losses recognized in earnings
|
|
0
|
|
|
(480
|
)
|
|
(345
|
)
|
|
(635
|
)
|
||||
Equity in (losses) earnings of limited partnerships
|
|
(1,723
|
)
|
|
3,837
|
|
|
(279
|
)
|
|
16,902
|
|
||||
Total investment income
|
|
4,326
|
|
|
7,220
|
|
|
14,289
|
|
|
29,464
|
|
||||
Income before income taxes
|
|
86,581
|
|
|
75,509
|
|
|
249,968
|
|
|
220,166
|
|
||||
Income tax expense
|
|
29,205
|
|
|
25,947
|
|
|
85,388
|
|
|
75,621
|
|
||||
Net income
|
|
$
|
57,376
|
|
|
$
|
49,562
|
|
|
$
|
164,580
|
|
|
$
|
144,545
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
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|
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|
||||||||
Earnings Per Share
|
|
|
|
|
|
|
|
|
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|
||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock – basic
|
|
$
|
1.23
|
|
|
$
|
1.06
|
|
|
$
|
3.53
|
|
|
$
|
3.10
|
|
Class A common stock – diluted
|
|
$
|
1.09
|
|
|
$
|
0.94
|
|
|
$
|
3.14
|
|
|
$
|
2.75
|
|
Class B common stock – basic
|
|
$
|
185
|
|
|
$
|
160
|
|
|
$
|
530
|
|
|
$
|
466
|
|
Class B common stock – diluted
|
|
$
|
185
|
|
|
$
|
159
|
|
|
$
|
529
|
|
|
$
|
465
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – Basic
|
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
|
46,188,980
|
|
|
46,189,068
|
|
|
46,188,971
|
|
|
46,189,068
|
|
||||
Class B common stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
|
52,411,303
|
|
|
52,602,083
|
|
|
52,442,697
|
|
|
52,599,783
|
|
||||
Class B common stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Dividends declared per share
|
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
|
$
|
0.730
|
|
|
$
|
0.681
|
|
|
$
|
2.190
|
|
|
$
|
2.043
|
|
Class B common stock
|
|
$
|
109.500
|
|
|
$
|
102.150
|
|
|
$
|
328.500
|
|
|
$
|
306.450
|
|
|
|
Three months ended
|
Nine months ended
|
||||||||||||
|
|
September 30,
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
2016
|
|
2015
|
||||||||
Net income
|
|
$
|
57,376
|
|
|
$
|
49,562
|
|
$
|
164,580
|
|
|
$
|
144,545
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrealized holding gains (losses) on available-for-sale securities
|
|
355
|
|
|
(521
|
)
|
6,846
|
|
|
(3,004
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
|
$
|
57,731
|
|
|
$
|
49,041
|
|
$
|
171,426
|
|
|
$
|
141,541
|
|
|
|
September 30,
|
|
December 31,
|
||||
|
|
2016
|
|
2015
|
||||
Assets
|
|
(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
139,813
|
|
|
$
|
182,889
|
|
Available-for-sale securities
|
|
52,108
|
|
|
62,067
|
|
||
Receivables from Erie Insurance Exchange and affiliates
|
|
399,975
|
|
|
348,055
|
|
||
Prepaid expenses and other current assets
|
|
29,593
|
|
|
24,697
|
|
||
Federal income taxes recoverable
|
|
0
|
|
|
11,947
|
|
||
Accrued investment income
|
|
6,261
|
|
|
5,491
|
|
||
Total current assets
|
|
627,750
|
|
|
635,146
|
|
||
|
|
|
|
|
||||
Available-for-sale securities
|
|
652,267
|
|
|
537,874
|
|
||
Limited partnership investments
|
|
65,949
|
|
|
88,535
|
|
||
Fixed assets, net
|
|
58,311
|
|
|
59,087
|
|
||
Deferred income taxes, net
|
|
36,161
|
|
|
40,686
|
|
||
Note receivable from Erie Family Life Insurance Company
|
|
25,000
|
|
|
25,000
|
|
||
Other assets
|
|
19,577
|
|
|
20,968
|
|
||
Total assets
|
|
$
|
1,485,015
|
|
|
$
|
1,407,296
|
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Commissions payable
|
|
$
|
218,267
|
|
|
$
|
195,542
|
|
Agent bonuses
|
|
84,805
|
|
|
106,752
|
|
||
Accounts payable and accrued liabilities
|
|
94,504
|
|
|
88,532
|
|
||
Dividends payable
|
|
33,996
|
|
|
33,996
|
|
||
Deferred executive compensation
|
|
16,873
|
|
|
20,877
|
|
||
Federal income taxes payable
|
|
4,813
|
|
|
0
|
|
||
Total current liabilities
|
|
453,258
|
|
|
445,699
|
|
||
|
|
|
|
|
||||
Defined benefit pension plans
|
|
178,257
|
|
|
172,700
|
|
||
Employee benefit obligations
|
|
751
|
|
|
1,234
|
|
||
Deferred executive compensation
|
|
12,057
|
|
|
16,580
|
|
||
Other long-term liabilities
|
|
1,763
|
|
|
1,580
|
|
||
Total liabilities
|
|
646,086
|
|
|
637,793
|
|
||
|
|
|
|
|
||||
Shareholders’ equity
|
|
|
|
|
||||
Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 shares outstanding
|
|
1,992
|
|
|
1,992
|
|
||
Class B common stock, convertible at a rate of 2,400 Class A shares for one Class B share, stated value $70 per share; 3,070 shares authorized; 2,542 shares issued and outstanding
|
|
178
|
|
|
178
|
|
||
Additional paid-in-capital
|
|
16,300
|
|
|
16,311
|
|
||
Accumulated other comprehensive loss
|
|
(90,018
|
)
|
|
(96,864
|
)
|
||
Retained earnings
|
|
2,056,567
|
|
|
1,993,976
|
|
||
Total contributed capital and retained earnings
|
|
1,985,019
|
|
|
1,915,593
|
|
||
Treasury stock, at cost; 22,110,132 shares held
|
|
(1,155,571
|
)
|
|
(1,155,108
|
)
|
||
Deferred compensation
|
|
9,481
|
|
|
9,018
|
|
||
Total shareholders’ equity
|
|
838,929
|
|
|
769,503
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
1,485,015
|
|
|
$
|
1,407,296
|
|
|
|
Nine months ended
|
||||||
|
|
September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Cash flows from operating activities
|
|
|
|
|
||||
Management fee received
|
|
$
|
1,155,234
|
|
|
$
|
1,094,122
|
|
Service agreement fee received
|
|
21,756
|
|
|
22,501
|
|
||
Net investment income received
|
|
19,643
|
|
|
18,972
|
|
||
Limited partnership distributions
|
|
7,222
|
|
|
12,077
|
|
||
Decrease in reimbursements collected from affiliates
|
|
(11,893
|
)
|
|
(16,716
|
)
|
||
Commissions paid to agents
|
|
(565,490
|
)
|
|
(539,227
|
)
|
||
Agents bonuses paid
|
|
(110,503
|
)
|
|
(93,495
|
)
|
||
Salaries and wages paid
|
|
(119,991
|
)
|
|
(115,126
|
)
|
||
Pension contribution and employee benefits paid
|
|
(37,341
|
)
|
|
(34,125
|
)
|
||
General operating expenses paid
|
|
(133,729
|
)
|
|
(143,955
|
)
|
||
Income taxes paid
|
|
(69,357
|
)
|
|
(74,033
|
)
|
||
Net cash provided by operating activities
|
|
155,551
|
|
|
130,995
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
||||
Purchase of investments:
|
|
|
|
|
||||
Available-for-sale securities
|
|
(269,237
|
)
|
|
(173,330
|
)
|
||
Limited partnerships
|
|
(449
|
)
|
|
(693
|
)
|
||
Proceeds from investments:
|
|
|
|
|
||||
Available-for-sale securities
|
|
164,266
|
|
|
153,265
|
|
||
Trading securities
|
|
5,171
|
|
|
—
|
|
||
Limited partnerships
|
|
12,404
|
|
|
21,777
|
|
||
Net purchase of fixed assets
|
|
(10,415
|
)
|
|
(7,176
|
)
|
||
Net collections on agent loans
|
|
1,622
|
|
|
696
|
|
||
Net cash used in investing activities
|
|
(96,638
|
)
|
|
(5,461
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
||||
Dividends paid to shareholders
|
|
(101,989
|
)
|
|
(95,143
|
)
|
||
Net cash used in financing activities
|
|
(101,989
|
)
|
|
(95,143
|
)
|
||
|
|
|
|
|
||||
Net (decrease) increase in cash and cash equivalents
|
|
(43,076
|
)
|
|
30,391
|
|
||
Cash and cash equivalents, beginning of period
|
|
182,889
|
|
|
91,747
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
139,813
|
|
|
$
|
122,138
|
|
(dollars in thousands, except per share data)
|
|
Three months ended September 30,
|
||||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||||
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
||||||||||
Class A – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class A stockholders
|
|
$
|
56,906
|
|
|
46,188,980
|
|
|
$
|
1.23
|
|
|
$
|
49,156
|
|
|
46,189,068
|
|
|
$
|
1.06
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
121,523
|
|
|
—
|
|
|
0
|
|
|
312,215
|
|
|
—
|
|
||||
Assumed conversion of Class B shares
|
|
470
|
|
|
6,100,800
|
|
|
—
|
|
|
406
|
|
|
6,100,800
|
|
|
—
|
|
||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
57,376
|
|
|
52,411,303
|
|
|
$
|
1.09
|
|
|
$
|
49,562
|
|
|
52,602,083
|
|
|
$
|
0.94
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
470
|
|
|
2,542
|
|
|
$
|
185
|
|
|
$
|
406
|
|
|
2,542
|
|
|
$
|
160
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
469
|
|
|
2,542
|
|
|
$
|
185
|
|
|
$
|
405
|
|
|
2,542
|
|
|
$
|
159
|
|
(dollars in thousands, except per share data)
|
|
Nine months ended September 30,
|
||||||||||||||||||||
|
|
2016
|
|
2015
|
||||||||||||||||||
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
||||||||||
Class A – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class A stockholders
|
|
$
|
163,233
|
|
|
46,188,971
|
|
|
$
|
3.53
|
|
|
$
|
143,361
|
|
|
46,189,068
|
|
|
$
|
3.10
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
152,926
|
|
|
—
|
|
|
0
|
|
|
309,915
|
|
|
—
|
|
||||
Assumed conversion of Class B shares
|
|
1,347
|
|
|
6,100,800
|
|
|
—
|
|
|
1,184
|
|
|
6,100,800
|
|
|
—
|
|
||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
164,580
|
|
|
52,442,697
|
|
|
$
|
3.14
|
|
|
$
|
144,545
|
|
|
52,599,783
|
|
|
$
|
2.75
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class B stockholders
|
|
$
|
1,347
|
|
|
2,542
|
|
|
$
|
530
|
|
|
$
|
1,184
|
|
|
2,542
|
|
|
$
|
466
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
1,346
|
|
|
2,542
|
|
|
$
|
529
|
|
|
$
|
1,181
|
|
|
2,542
|
|
|
$
|
465
|
|
•
|
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
|
•
|
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
|
•
|
Level 3 – Unobservable inputs for the asset or liability.
|
|
|
At September 30, 2016
|
||||||||||||||
|
|
Fair value measurements using:
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Quoted prices in
active markets for identical assets
Level 1
|
|
Observable inputs
Level 2
|
|
Unobservable inputs
Level 3
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government & agencies
|
|
$
|
2,048
|
|
|
$
|
0
|
|
|
$
|
2,048
|
|
|
$
|
0
|
|
States & political subdivisions
|
|
246,259
|
|
|
0
|
|
|
246,259
|
|
|
0
|
|
||||
Corporate debt securities
|
|
320,268
|
|
|
0
|
|
|
310,079
|
|
|
10,189
|
|
||||
Residential mortgage-backed securities
|
|
17,145
|
|
|
0
|
|
|
17,145
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
40,985
|
|
|
0
|
|
|
40,985
|
|
|
0
|
|
||||
Collateralized debt obligations
|
|
66,647
|
|
|
0
|
|
|
61,526
|
|
|
5,121
|
|
||||
Other debt securities
|
|
2,003
|
|
|
0
|
|
|
2,003
|
|
|
0
|
|
||||
Total fixed maturities
|
|
695,355
|
|
|
0
|
|
|
680,045
|
|
|
15,310
|
|
||||
Common stock
|
|
9,020
|
|
|
9,020
|
|
|
0
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
704,375
|
|
|
9,020
|
|
|
680,045
|
|
|
15,310
|
|
||||
Other investments
(1)
|
|
3,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
708,339
|
|
|
$
|
9,020
|
|
|
$
|
680,045
|
|
|
$
|
15,310
|
|
|
|
At December 31, 2015
|
||||||||||||||
|
|
Fair value measurements using:
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Quoted prices in
active markets for identical assets Level 1 |
|
Observable inputs
Level 2 |
|
Unobservable inputs
Level 3 |
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
States & political subdivisions
|
|
$
|
231,847
|
|
|
$
|
0
|
|
|
$
|
231,847
|
|
|
$
|
0
|
|
Corporate debt securities
|
|
250,333
|
|
|
0
|
|
|
250,264
|
|
|
69
|
|
||||
Residential mortgage-backed securities
|
|
13,513
|
|
|
0
|
|
|
13,513
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
37,571
|
|
|
0
|
|
|
37,571
|
|
|
0
|
|
||||
Collateralized debt obligations
|
|
51,745
|
|
|
0
|
|
|
43,168
|
|
|
8,577
|
|
||||
Other debt securities
|
|
2,200
|
|
|
0
|
|
|
2,200
|
|
|
0
|
|
||||
Total fixed maturities
|
|
587,209
|
|
|
0
|
|
|
578,563
|
|
|
8,646
|
|
||||
Common stock
|
|
12,732
|
|
|
12,732
|
|
|
0
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
599,941
|
|
|
12,732
|
|
|
578,563
|
|
|
8,646
|
|
||||
Other investments
(1)
|
|
4,526
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
604,467
|
|
|
$
|
12,732
|
|
|
$
|
578,563
|
|
|
$
|
8,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
||||||||||||||||||||||||||
(in thousands)
|
|
Beginning balance at June 30, 2016
|
|
Included in
earnings
(1)
|
|
Included
in other comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers
in and (out) of
Level 3
|
|
Ending balance at September 30, 2016
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate debt securities
|
|
$
|
8,851
|
|
|
$
|
22
|
|
|
$
|
38
|
|
|
$
|
3,217
|
|
|
$
|
(318
|
)
|
|
$
|
(1,621
|
)
|
|
$
|
10,189
|
|
Commercial mortgage-backed securities
|
|
1,003
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,003
|
)
|
|
0
|
|
|||||||
Collateralized debt obligations
|
|
1,200
|
|
|
0
|
|
|
7
|
|
|
3,000
|
|
|
0
|
|
|
914
|
|
|
5,121
|
|
|||||||
Total fixed maturities
|
|
11,054
|
|
|
22
|
|
|
45
|
|
|
6,217
|
|
|
(318
|
)
|
|
(1,710
|
)
|
|
15,310
|
|
|||||||
Total available-for-sale securities
|
|
11,054
|
|
|
22
|
|
|
45
|
|
|
6,217
|
|
|
(318
|
)
|
|
(1,710
|
)
|
|
15,310
|
|
|||||||
Total Level 3 assets
|
|
$
|
11,054
|
|
|
$
|
22
|
|
|
$
|
45
|
|
|
$
|
6,217
|
|
|
$
|
(318
|
)
|
|
$
|
(1,710
|
)
|
|
$
|
15,310
|
|
(1)
|
These amounts are reported in the Statement of Operations as net investment income and net realized investment gains (losses) for the
three months
ended
September 30, 2016
on Level 3 securities.
|
|
||||||||||||||||||||||||||||
(in thousands)
|
|
Beginning balance at December 31, 2015
|
|
Included in
earnings
(1)
|
|
Included
in other comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers
in and (out) of
Level 3
|
|
Ending balance at September 30, 2016
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate debt securities
|
|
$
|
69
|
|
|
$
|
67
|
|
|
$
|
119
|
|
|
$
|
11,887
|
|
|
$
|
(924
|
)
|
|
$
|
(1,029
|
)
|
|
$
|
10,189
|
|
Commercial mortgage-backed securities
|
|
0
|
|
|
0
|
|
|
3
|
|
|
1,000
|
|
|
0
|
|
|
(1,003
|
)
|
|
0
|
|
|||||||
Collateralized debt obligations
|
|
8,577
|
|
|
4
|
|
|
(5
|
)
|
|
7,722
|
|
|
(54
|
)
|
|
(11,123
|
)
|
|
5,121
|
|
|||||||
Total fixed maturities
|
|
8,646
|
|
|
71
|
|
|
117
|
|
|
20,609
|
|
|
(978
|
)
|
|
(13,155
|
)
|
|
15,310
|
|
|||||||
Total available-for-sale securities
|
|
8,646
|
|
|
71
|
|
|
117
|
|
|
20,609
|
|
|
(978
|
)
|
|
(13,155
|
)
|
|
15,310
|
|
|||||||
Total Level 3 assets
|
|
$
|
8,646
|
|
|
$
|
71
|
|
|
$
|
117
|
|
|
$
|
20,609
|
|
|
$
|
(978
|
)
|
|
$
|
(13,155
|
)
|
|
$
|
15,310
|
|
(1)
|
These amounts are reported in the Statement of Operations as net investment income and net realized investment gains (losses) for the
nine months
ended
September 30, 2016
on Level 3 securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
||||||||||||||||||||||||||
(in thousands)
|
|
Beginning balance at June 30, 2015
|
|
Included in
earnings
(1)
|
|
Included
in other
comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers
in and (out) of
Level 3
|
|
Ending balance at September 30, 2015
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate debt securities
|
|
$
|
0
|
|
|
$
|
(1
|
)
|
|
$
|
(58
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
124
|
|
|
$
|
65
|
|
Collateralized debt obligations
|
|
660
|
|
|
1
|
|
|
(3
|
)
|
|
4,546
|
|
|
0
|
|
|
0
|
|
|
5,204
|
|
|||||||
Total fixed maturities
|
|
660
|
|
|
0
|
|
|
(61
|
)
|
|
4,546
|
|
|
0
|
|
|
124
|
|
|
5,269
|
|
|||||||
Total available-for-sale securities
|
|
660
|
|
|
0
|
|
|
(61
|
)
|
|
4,546
|
|
|
0
|
|
|
124
|
|
|
5,269
|
|
|||||||
Total Level 3 assets
|
|
$
|
660
|
|
|
$
|
0
|
|
|
$
|
(61
|
)
|
|
$
|
4,546
|
|
|
$
|
0
|
|
|
$
|
124
|
|
|
$
|
5,269
|
|
(1)
|
These amounts are reported in the Statement of Operations as net investment income for the
three months
ended
September 30, 2015
on Level 3 securities.
|
|
||||||||||||||||||||||||||||
(in thousands)
|
|
Beginning balance at December 31, 2014
|
|
Included in
earnings
(1)
|
|
Included
in other
comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers
in and (out) of
Level 3
|
|
Ending balance at September 30, 2015
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate debt securities
|
|
$
|
0
|
|
|
$
|
(1
|
)
|
|
$
|
(58
|
)
|
|
$
|
110
|
|
|
$
|
0
|
|
|
$
|
14
|
|
|
$
|
65
|
|
Collateralized debt obligations
|
|
0
|
|
|
1
|
|
|
(3
|
)
|
|
5,206
|
|
|
0
|
|
|
0
|
|
|
5,204
|
|
|||||||
Total fixed maturities
|
|
0
|
|
|
0
|
|
|
(61
|
)
|
|
5,316
|
|
|
0
|
|
|
14
|
|
|
5,269
|
|
|||||||
Total available-for-sale securities
|
|
0
|
|
|
0
|
|
|
(61
|
)
|
|
5,316
|
|
|
0
|
|
|
14
|
|
|
5,269
|
|
|||||||
Total Level 3 assets
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(61
|
)
|
|
$
|
5,316
|
|
|
$
|
0
|
|
|
$
|
14
|
|
|
$
|
5,269
|
|
(1)
|
These amounts are reported in the Statement of Operations as net investment income for the
nine months
ended
September 30, 2015
on Level 3 securities.
|
(in thousands)
|
|
At September 30, 2016
|
||||||||||||||
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
Priced via pricing services
|
|
$
|
689,205
|
|
|
$
|
0
|
|
|
$
|
679,955
|
|
|
$
|
9,250
|
|
Priced via market comparables/broker quotes
|
|
6,150
|
|
|
0
|
|
|
90
|
|
|
6,060
|
|
||||
Total fixed maturities
|
|
695,355
|
|
|
0
|
|
|
680,045
|
|
|
15,310
|
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
||||||||
Priced via pricing services
|
|
9,020
|
|
|
9,020
|
|
|
0
|
|
|
0
|
|
||||
Total common stock
|
|
9,020
|
|
|
9,020
|
|
|
0
|
|
|
0
|
|
||||
Other investments:
|
|
|
|
|
|
|
|
|
||||||||
Priced via unobservable inputs
(1)
|
|
3,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total other investments
|
|
3,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
708,339
|
|
|
$
|
9,020
|
|
|
$
|
680,045
|
|
|
$
|
15,310
|
|
(1)
|
Other investments measured at fair value represent real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option using the net asset value practical expedient. These amounts are not required to be categorized in the fair value hierarchy. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner.
|
|
|
At September 30, 2016
|
||||||||||||||
(in thousands)
|
|
Amortized
cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government & agencies
|
|
$
|
2,008
|
|
|
$
|
40
|
|
|
$
|
0
|
|
|
$
|
2,048
|
|
States & political subdivisions
|
|
234,111
|
|
|
12,207
|
|
|
59
|
|
|
246,259
|
|
||||
Corporate debt securities
|
|
317,745
|
|
|
3,351
|
|
|
828
|
|
|
320,268
|
|
||||
Residential mortgage-backed securities
|
|
17,246
|
|
|
65
|
|
|
166
|
|
|
17,145
|
|
||||
Commercial mortgage-backed securities
|
|
41,565
|
|
|
213
|
|
|
793
|
|
|
40,985
|
|
||||
Collateralized debt obligations
|
|
66,448
|
|
|
263
|
|
|
64
|
|
|
66,647
|
|
||||
Other debt securities
|
|
2,000
|
|
|
3
|
|
|
0
|
|
|
2,003
|
|
||||
Total fixed maturities
|
|
681,123
|
|
|
16,142
|
|
|
1,910
|
|
|
695,355
|
|
||||
Common stock
|
|
8,949
|
|
|
71
|
|
|
0
|
|
|
9,020
|
|
||||
Total available-for-sale securities
|
|
$
|
690,072
|
|
|
$
|
16,213
|
|
|
$
|
1,910
|
|
|
$
|
704,375
|
|
|
|
At December 31, 2015
|
||||||||||||||
(in thousands)
|
|
Amortized
cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
States & political subdivisions
|
|
$
|
221,093
|
|
|
$
|
10,761
|
|
|
$
|
7
|
|
|
$
|
231,847
|
|
Corporate debt securities
|
|
254,464
|
|
|
281
|
|
|
4,412
|
|
|
250,333
|
|
||||
Residential mortgage-backed securities
|
|
13,639
|
|
|
4
|
|
|
130
|
|
|
13,513
|
|
||||
Commercial mortgage-backed securities
|
|
38,630
|
|
|
30
|
|
|
1,089
|
|
|
37,571
|
|
||||
Collateralized debt obligations
|
|
51,905
|
|
|
61
|
|
|
221
|
|
|
51,745
|
|
||||
Other debt securities
|
|
2,241
|
|
|
0
|
|
|
41
|
|
|
2,200
|
|
||||
Total fixed maturities
|
|
581,972
|
|
|
11,137
|
|
|
5,900
|
|
|
587,209
|
|
||||
Common stock
|
|
12,865
|
|
|
0
|
|
|
133
|
|
|
12,732
|
|
||||
Total available-for-sale securities
|
|
$
|
594,837
|
|
|
$
|
11,137
|
|
|
$
|
6,033
|
|
|
$
|
599,941
|
|
|
|
At September 30, 2016
|
||||||
(in thousands)
|
|
Amortized
|
|
Estimated
|
||||
|
|
cost
|
|
fair value
|
||||
Due in one year or less
|
|
$
|
51,666
|
|
|
$
|
51,821
|
|
Due after one year through five years
|
|
314,652
|
|
|
319,198
|
|
||
Due after five years through ten years
|
|
195,967
|
|
|
203,310
|
|
||
Due after ten years
|
|
118,838
|
|
|
121,026
|
|
||
Total fixed maturities
|
|
$
|
681,123
|
|
|
$
|
695,355
|
|
|
|
At September 30, 2016
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||||||||
|
|
Fair
value
|
|
Unrealized losses
|
|
Fair
value
|
|
Unrealized losses
|
|
Fair
value
|
|
Unrealized losses
|
|
No. of holdings
|
|||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
States & political subdivisions
|
|
$
|
14,735
|
|
|
$
|
59
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
14,735
|
|
|
$
|
59
|
|
|
7
|
|
Corporate debt securities
|
|
71,837
|
|
|
407
|
|
|
14,876
|
|
|
421
|
|
|
86,713
|
|
|
828
|
|
|
152
|
|
||||||
Residential mortgage-backed securities
|
|
7,225
|
|
|
27
|
|
|
2,816
|
|
|
139
|
|
|
10,041
|
|
|
166
|
|
|
11
|
|
||||||
Commercial mortgage-backed securities
|
|
18,373
|
|
|
107
|
|
|
8,426
|
|
|
686
|
|
|
26,799
|
|
|
793
|
|
|
25
|
|
||||||
Collateralized debt obligations
|
|
11,092
|
|
|
31
|
|
|
8,727
|
|
|
33
|
|
|
19,819
|
|
|
64
|
|
|
10
|
|
||||||
Total fixed maturities
|
|
123,262
|
|
|
631
|
|
|
34,845
|
|
|
1,279
|
|
|
158,107
|
|
|
1,910
|
|
|
205
|
|
||||||
Total available-for-sale securities
|
|
$
|
123,262
|
|
|
$
|
631
|
|
|
$
|
34,845
|
|
|
$
|
1,279
|
|
|
$
|
158,107
|
|
|
$
|
1,910
|
|
|
205
|
|
Quality breakdown of fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment grade
|
|
$
|
100,205
|
|
|
$
|
296
|
|
|
$
|
27,442
|
|
|
$
|
688
|
|
|
$
|
127,647
|
|
|
$
|
984
|
|
|
79
|
|
Non-investment grade
|
|
23,057
|
|
|
335
|
|
|
7,403
|
|
|
591
|
|
|
30,460
|
|
|
926
|
|
|
126
|
|
||||||
Total fixed maturities
|
|
$
|
123,262
|
|
|
$
|
631
|
|
|
$
|
34,845
|
|
|
$
|
1,279
|
|
|
$
|
158,107
|
|
|
$
|
1,910
|
|
|
205
|
|
|
|
At December 31, 2015
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||||||||
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
No. of
holdings
|
|||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
States & political subdivisions
|
|
$
|
5,867
|
|
|
$
|
7
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
5,867
|
|
|
$
|
7
|
|
|
3
|
|
Corporate debt securities
|
|
172,831
|
|
|
2,447
|
|
|
19,086
|
|
|
1,965
|
|
|
191,917
|
|
|
4,412
|
|
|
349
|
|
||||||
Residential mortgage-backed securities
|
|
9,827
|
|
|
84
|
|
|
936
|
|
|
46
|
|
|
10,763
|
|
|
130
|
|
|
9
|
|
||||||
Commercial mortgage-backed securities
|
|
13,081
|
|
|
68
|
|
|
19,081
|
|
|
1,021
|
|
|
32,162
|
|
|
1,089
|
|
|
24
|
|
||||||
Collateralized debt obligations
|
|
27,981
|
|
|
103
|
|
|
9,174
|
|
|
118
|
|
|
37,155
|
|
|
221
|
|
|
19
|
|
||||||
Other debt securities
|
|
1,960
|
|
|
40
|
|
|
241
|
|
|
1
|
|
|
2,201
|
|
|
41
|
|
|
2
|
|
||||||
Total fixed maturities
|
|
231,547
|
|
|
2,749
|
|
|
48,518
|
|
|
3,151
|
|
|
280,065
|
|
|
5,900
|
|
|
406
|
|
||||||
Common stock
|
|
12,732
|
|
|
133
|
|
|
0
|
|
|
0
|
|
|
12,732
|
|
|
133
|
|
|
1
|
|
||||||
Total available-for-sale securities
|
|
$
|
244,279
|
|
|
$
|
2,882
|
|
|
$
|
48,518
|
|
|
$
|
3,151
|
|
|
$
|
292,797
|
|
|
$
|
6,033
|
|
|
407
|
|
Quality breakdown of fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment grade
|
|
$
|
174,723
|
|
|
$
|
1,296
|
|
|
$
|
38,369
|
|
|
$
|
1,256
|
|
|
$
|
213,092
|
|
|
$
|
2,552
|
|
|
105
|
|
Non-investment grade
|
|
56,824
|
|
|
1,453
|
|
|
10,149
|
|
|
1,895
|
|
|
66,973
|
|
|
3,348
|
|
|
301
|
|
||||||
Total fixed maturities
|
|
$
|
231,547
|
|
|
$
|
2,749
|
|
|
$
|
48,518
|
|
|
$
|
3,151
|
|
|
$
|
280,065
|
|
|
$
|
5,900
|
|
|
406
|
|
(in thousands)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Fixed maturities
|
|
$
|
5,245
|
|
|
$
|
4,010
|
|
|
$
|
14,629
|
|
|
$
|
12,239
|
|
Equity securities
|
|
50
|
|
|
218
|
|
|
132
|
|
|
718
|
|
||||
Cash equivalents and other
|
|
366
|
|
|
287
|
|
|
1,011
|
|
|
862
|
|
||||
Total investment income
|
|
5,661
|
|
|
4,515
|
|
|
15,772
|
|
|
13,819
|
|
||||
Less: investment expenses
|
|
330
|
|
|
169
|
|
|
888
|
|
|
497
|
|
||||
Net investment income
|
|
$
|
5,331
|
|
|
$
|
4,346
|
|
|
$
|
14,884
|
|
|
$
|
13,322
|
|
(in thousands)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
$
|
603
|
|
|
$
|
120
|
|
|
$
|
1,175
|
|
|
$
|
491
|
|
Gross realized losses
|
|
(27
|
)
|
|
(661
|
)
|
|
(1,819
|
)
|
|
(1,036
|
)
|
||||
Net realized gains (losses)
|
|
576
|
|
|
(541
|
)
|
|
(644
|
)
|
|
(545
|
)
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
0
|
|
|
57
|
|
|
0
|
|
|
419
|
|
||||
Gross realized losses
|
|
0
|
|
|
0
|
|
|
(34
|
)
|
|
0
|
|
||||
Net realized gains (losses)
|
|
0
|
|
|
57
|
|
|
(34
|
)
|
|
419
|
|
||||
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
121
|
|
|
0
|
|
|
707
|
|
|
0
|
|
||||
Gross realized losses
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
||||
Increases in fair value
(1)
|
|
21
|
|
|
0
|
|
|
0
|
|
|
0
|
|
||||
Net realized gains
|
|
142
|
|
|
0
|
|
|
707
|
|
|
0
|
|
||||
Miscellaneous:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
0
|
|
|
1
|
|
|
0
|
|
|
1
|
|
||||
Gross realized losses
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
||||
Net realized gains
|
|
0
|
|
|
1
|
|
|
0
|
|
|
1
|
|
||||
Net realized investment gains (losses)
|
|
$
|
718
|
|
|
$
|
(483
|
)
|
|
$
|
29
|
|
|
$
|
(125
|
)
|
(1)
|
The fair value of our common stocks is determined based upon exchange traded prices provided by a nationally recognized pricing service.
|
(in thousands)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Fixed maturities
|
|
$
|
0
|
|
|
$
|
(480
|
)
|
|
$
|
(345
|
)
|
|
$
|
(635
|
)
|
Total other-than-temporary impairments
|
|
0
|
|
|
(480
|
)
|
|
(345
|
)
|
|
(635
|
)
|
||||
Portion recognized in other comprehensive income
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
||||
Net impairment losses recognized in earnings
|
|
$
|
0
|
|
|
$
|
(480
|
)
|
|
$
|
(345
|
)
|
|
$
|
(635
|
)
|
(in thousands)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Equity in (losses) earnings of limited partnerships accounted for under the equity method
|
|
$
|
(1,778
|
)
|
|
$
|
3,235
|
|
|
$
|
(436
|
)
|
|
$
|
16,554
|
|
Change in fair value of limited partnerships accounted for under the fair value option
|
|
55
|
|
|
602
|
|
|
157
|
|
|
348
|
|
||||
Equity in (losses) earnings of limited partnerships
|
|
$
|
(1,723
|
)
|
|
$
|
3,837
|
|
|
$
|
(279
|
)
|
|
$
|
16,902
|
|
(in thousands)
|
|
At September 30, 2016
|
|
At December 31, 2015
|
||||
Private equity
|
|
$
|
37,248
|
|
|
$
|
48,397
|
|
Mezzanine debt
|
|
8,404
|
|
|
12,701
|
|
||
Real estate
|
|
16,333
|
|
|
22,911
|
|
||
Real estate - fair value option
|
|
3,964
|
|
|
4,526
|
|
||
Total limited partnership investments
|
|
$
|
65,949
|
|
|
$
|
88,535
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
2016
|
|
2015
|
||||||||
Service cost for benefits earned
|
|
$
|
7,050
|
|
|
$
|
7,608
|
|
$
|
21,150
|
|
|
$
|
22,824
|
|
Interest cost on benefits obligation
|
|
8,281
|
|
|
7,689
|
|
24,844
|
|
|
23,067
|
|
||||
Expected return on plan assets
|
|
(9,880
|
)
|
|
(8,980
|
)
|
(29,640
|
)
|
|
(26,940
|
)
|
||||
Prior service cost amortization
|
|
174
|
|
|
168
|
|
522
|
|
|
502
|
|
||||
Net actuarial loss amortization
|
|
2,029
|
|
|
3,507
|
|
6,084
|
|
|
10,523
|
|
||||
Pension plan cost
(1)
|
|
$
|
7,654
|
|
|
$
|
9,992
|
|
$
|
22,960
|
|
|
$
|
29,976
|
|
(1)
|
Pension plan costs represent the total cost before reimbursements from the Exchange and EFL.
|
(in thousands)
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||
|
2016
|
2015
|
2016
|
2015
|
||||||||
Investment securities:
|
|
|
|
|
||||||||
Accumulated other comprehensive income, beginning of the period
|
$
|
9,018
|
|
$
|
4,324
|
|
$
|
2,527
|
|
$
|
6,807
|
|
Other comprehensive income (loss) before reclassifications, net of tax (expense) benefit of $(392), $618, $(3,328) and $1,884, respectively
|
729
|
|
(1,147
|
)
|
6,181
|
|
(3,498
|
)
|
||||
Reclassifications:
|
|
|
|
|
||||||||
Realized investment (gains) losses, net of tax benefit (expense) of $202, $(169), $(237), and $(44), respectively
|
(374
|
)
|
314
|
|
441
|
|
81
|
|
||||
Impairment losses, net of tax expense of $0, $168, $121 and $222, respectively
|
0
|
|
312
|
|
224
|
|
413
|
|
||||
Other comprehensive income (loss), net of tax
|
355
|
|
(521
|
)
|
6,846
|
|
(3,004
|
)
|
||||
Accumulated other comprehensive income, end of the period
|
$
|
9,373
|
|
$
|
3,803
|
|
$
|
9,373
|
|
$
|
3,803
|
|
|
|
|
|
|
||||||||
Pension and other postretirement plans
(1)
:
|
|
|
|
|
||||||||
Accumulated other comprehensive loss, beginning of the period
|
$
|
(99,391
|
)
|
$
|
(124,508
|
)
|
$
|
(99,391
|
)
|
$
|
(124,508
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
0
|
|
0
|
|
0
|
|
0
|
|
||||
Reclassifications:
|
|
|
|
|
||||||||
Amortization of prior service costs, net of tax
|
0
|
|
0
|
|
0
|
|
0
|
|
||||
Amortization of net actuarial loss, net of tax
|
0
|
|
0
|
|
0
|
|
0
|
|
||||
Other comprehensive income (loss), net of tax
|
0
|
|
0
|
|
0
|
|
0
|
|
||||
Accumulated other comprehensive loss, end of the period
|
$
|
(99,391
|
)
|
$
|
(124,508
|
)
|
$
|
(99,391
|
)
|
$
|
(124,508
|
)
|
|
|
|
|
|
||||||||
Total
|
|
|
|
|
||||||||
Accumulated other comprehensive loss, beginning of the period
|
$
|
(90,373
|
)
|
$
|
(120,184
|
)
|
$
|
(96,864
|
)
|
$
|
(117,701
|
)
|
Investment securities
|
355
|
|
(521
|
)
|
6,846
|
|
(3,004
|
)
|
||||
Pension and other postretirement plans
|
0
|
|
0
|
|
0
|
|
0
|
|
||||
Other comprehensive income (loss), net of tax
|
355
|
|
(521
|
)
|
6,846
|
|
(3,004
|
)
|
||||
Accumulated other comprehensive loss, end of the period
|
$
|
(90,018
|
)
|
$
|
(120,705
|
)
|
$
|
(90,018
|
)
|
$
|
(120,705
|
)
|
(1)
|
There are no comprehensive income items or amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.
|
(in thousands)
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
2016
|
|
2015
|
||||||||
Erie Insurance Exchange
|
|
$
|
103,498
|
|
|
$
|
106,307
|
|
$
|
329,761
|
|
|
$
|
313,353
|
|
Erie Family Life Insurance
|
|
9,535
|
|
|
8,517
|
|
29,039
|
|
|
27,273
|
|
||||
Total cash settlements
|
|
$
|
113,033
|
|
|
$
|
114,824
|
|
$
|
358,800
|
|
|
$
|
340,626
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
dependence upon our relationship with the Erie Insurance Exchange ("Exchange") and the management fee under the agreement with the subscribers at the Exchange;
|
•
|
costs of providing services to the Exchange under the subscriber’s agreement;
|
•
|
credit risk from the Exchange;
|
•
|
dependence upon our relationship with the Exchange and the growth of the Exchange, including:
|
◦
|
general business and economic conditions;
|
◦
|
factors affecting insurance industry competition;
|
◦
|
dependence upon the independent agency system; and
|
◦
|
ability to maintain our reputation for customer service;
|
•
|
dependence upon our relationship with the Exchange and the financial condition of the Exchange, including:
|
◦
|
the Exchange’s ability to maintain acceptable financial strength ratings;
|
◦
|
factors affecting the quality and liquidity of the Exchange’s investment portfolio;
|
◦
|
changes in government regulation of the insurance industry;
|
◦
|
emerging claims and coverage issues in the industry; and
|
◦
|
severe weather conditions or other catastrophic losses, including terrorism;
|
•
|
ability to attract and retain talented management and employees;
|
•
|
ability to maintain uninterrupted business operations;
|
•
|
factors affecting the quality and liquidity of our investment portfolio;
|
•
|
our ability to meet liquidity needs and access capital; and
|
•
|
outcome of pending and potential litigation.
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||||
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
|
|
|
||||||||||||||
Total operating revenue
|
|
$
|
418,406
|
|
|
$
|
396,637
|
|
|
5.5
|
|
%
|
|
$
|
1,217,018
|
|
|
$
|
1,149,128
|
|
|
5.9
|
|
%
|
Total operating expenses
|
|
336,151
|
|
|
328,348
|
|
|
2.4
|
|
|
|
981,339
|
|
|
958,426
|
|
|
2.4
|
|
|
||||
Net revenue from operations
|
|
82,255
|
|
|
68,289
|
|
|
20.5
|
|
|
|
235,679
|
|
|
190,702
|
|
|
23.6
|
|
|
||||
Total investment income
|
|
4,326
|
|
|
7,220
|
|
|
(40.1
|
)
|
|
|
14,289
|
|
|
29,464
|
|
|
(51.5
|
)
|
|
||||
Income before income taxes
|
|
86,581
|
|
|
75,509
|
|
|
14.7
|
|
|
|
249,968
|
|
|
220,166
|
|
|
13.5
|
|
|
||||
Income tax expense
|
|
29,205
|
|
|
25,947
|
|
|
12.6
|
|
|
|
85,388
|
|
|
75,621
|
|
|
12.9
|
|
|
||||
Net income
|
|
$
|
57,376
|
|
|
$
|
49,562
|
|
|
15.8
|
|
%
|
|
$
|
164,580
|
|
|
$
|
144,545
|
|
|
13.9
|
|
%
|
Net income per share - diluted
|
|
$
|
1.09
|
|
|
$
|
0.94
|
|
|
16.2
|
|
%
|
|
$
|
3.14
|
|
|
$
|
2.75
|
|
|
14.2
|
|
%
|
(in thousands, except per share data)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Operating income
|
|
$
|
56,910
|
|
|
$
|
50,188
|
|
|
$
|
164,786
|
|
|
$
|
145,039
|
|
Net realized gains (losses) and impairments on investments
|
|
718
|
|
|
(963
|
)
|
|
(316
|
)
|
|
(760
|
)
|
||||
Income tax (expense) benefit
|
|
(252
|
)
|
|
337
|
|
|
110
|
|
|
266
|
|
||||
Realized gains (losses) and impairments, net of income taxes
|
|
466
|
|
|
(626
|
)
|
|
(206
|
)
|
|
(494
|
)
|
||||
Net income
|
|
$
|
57,376
|
|
|
$
|
49,562
|
|
|
$
|
164,580
|
|
|
$
|
144,545
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Per Class A common share-diluted:
|
|
|
|
|
|
|
|
|
||||||||
Operating income
|
|
$
|
1.08
|
|
|
$
|
0.95
|
|
|
$
|
3.14
|
|
|
$
|
2.76
|
|
Net realized gains (losses) and impairments on investments
|
|
0.01
|
|
|
(0.01
|
)
|
|
0.00
|
|
|
(0.01
|
)
|
||||
Income tax (expense) benefit
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
|
0.00
|
|
||||
Realized gains (losses) and impairments, net of income taxes
|
|
0.01
|
|
|
(0.01
|
)
|
|
0.00
|
|
|
(0.01
|
)
|
||||
Net income
|
|
$
|
1.09
|
|
|
$
|
0.94
|
|
|
$
|
3.14
|
|
|
$
|
2.75
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||||
(dollars in thousands)
|
2016
|
2015
|
% Change
|
|
2016
|
2015
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||||
Management fee revenue, net
|
$
|
411,139
|
|
$
|
389,168
|
|
5.6
|
|
%
|
|
$
|
1,195,262
|
|
$
|
1,126,626
|
|
6.1
|
|
%
|
Service agreement revenue
|
7,267
|
|
7,469
|
|
(2.7
|
)
|
|
|
21,756
|
|
22,502
|
|
(3.3
|
)
|
|
||||
Total operating revenue
|
418,406
|
|
396,637
|
|
5.5
|
|
|
|
1,217,018
|
|
1,149,128
|
|
5.9
|
|
|
||||
Total operating expenses
|
336,151
|
|
328,348
|
|
2.4
|
|
|
|
981,339
|
|
958,426
|
|
2.4
|
|
|
||||
Net revenue from operations
|
$
|
82,255
|
|
$
|
68,289
|
|
20.5
|
|
%
|
|
$
|
235,679
|
|
$
|
190,702
|
|
23.6
|
|
%
|
Gross margin
|
19.7
|
%
|
17.2
|
%
|
2.5
|
|
pts.
|
|
19.4
|
%
|
16.6
|
%
|
2.8
|
|
pts.
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||
(dollars in thousands)
|
2016
|
2015
|
% Change
|
|
2016
|
2015
|
% Change
|
||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||
Direct and assumed premiums written by the Exchange
|
$
|
1,643,755
|
|
$
|
1,557,873
|
|
5.5
|
%
|
|
$
|
4,795,446
|
|
$
|
4,520,506
|
|
6.1
|
%
|
Management fee rate
|
25
|
%
|
25
|
%
|
|
|
|
25
|
%
|
25
|
%
|
|
|
||||
Management fee revenue, gross
|
410,939
|
|
389,468
|
|
5.5
|
|
|
1,198,862
|
|
1,130,126
|
|
6.1
|
|
||||
Change in allowance for management fee returned on cancelled policies
(1)
|
200
|
|
(300
|
)
|
NM
|
|
|
(3,600
|
)
|
(3,500
|
)
|
NM
|
|
||||
Management fee revenue, net of allowance
|
$
|
411,139
|
|
$
|
389,168
|
|
5.6
|
%
|
|
$
|
1,195,262
|
|
$
|
1,126,626
|
|
6.1
|
%
|
(1)
|
Management fees are returned to the Exchange when policies are cancelled mid-term and unearned premiums are refunded. We record an estimated allowance for management fees returned on mid-term policy cancellations.
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||
(in thousands)
|
2016
|
2015
|
% Change
|
|
2016
|
2015
|
% Change
|
||||||||||
|
(Unaudited)
|
|
|
(Unaudited)
|
|
||||||||||||
Commissions:
|
|
|
|
|
|
|
|
||||||||||
Total commissions
|
$
|
232,455
|
|
$
|
223,741
|
|
3.9
|
%
|
|
$
|
676,963
|
|
$
|
641,189
|
|
5.6
|
%
|
Non-commission expense:
|
|
|
|
|
|
|
|
||||||||||
Underwriting and policy processing
|
$
|
33,946
|
|
$
|
34,003
|
|
(0.2
|
)%
|
|
$
|
102,108
|
|
$
|
101,531
|
|
0.6
|
%
|
Information technology
|
31,114
|
|
27,885
|
|
11.6
|
|
|
87,714
|
|
94,125
|
|
(6.8
|
)
|
||||
Sales and advertising
|
14,869
|
|
15,638
|
|
(4.9
|
)
|
|
46,872
|
|
47,247
|
|
(0.8
|
)
|
||||
Customer service
|
5,381
|
|
7,255
|
|
(25.8
|
)
|
|
18,689
|
|
21,565
|
|
(13.3
|
)
|
||||
Administrative and other
|
18,386
|
|
19,826
|
|
(7.3
|
)
|
|
48,993
|
|
52,769
|
|
(7.2
|
)
|
||||
Total non-commission expense
|
103,696
|
|
104,607
|
|
(0.9
|
)
|
|
304,376
|
|
317,237
|
|
(4.1
|
)
|
||||
Total cost of management operations
|
$
|
336,151
|
|
$
|
328,348
|
|
2.4
|
%
|
|
$
|
981,339
|
|
$
|
958,426
|
|
2.4
|
%
|
(in thousands)
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||||||||||
|
2016
|
|
2015
|
|
% Change
|
|
2016
|
|
2015
|
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
||||||||||||
Net investment income
|
$
|
5,331
|
|
|
$
|
4,346
|
|
|
22.7
|
|
%
|
|
$
|
14,884
|
|
|
$
|
13,322
|
|
|
11.7
|
|
%
|
Net realized investment gains (losses)
|
718
|
|
|
(483
|
)
|
|
NM
|
|
|
|
29
|
|
|
(125
|
)
|
|
NM
|
|
|
||||
Net impairment losses recognized in earnings
|
0
|
|
|
(480
|
)
|
|
NM
|
|
|
|
(345
|
)
|
|
(635
|
)
|
|
(45.7
|
)
|
|
||||
Equity in (losses) earnings of limited partnerships
|
(1,723
|
)
|
|
3,837
|
|
|
NM
|
|
|
|
(279
|
)
|
|
16,902
|
|
|
NM
|
|
|
||||
Total investment income
|
$
|
4,326
|
|
|
$
|
7,220
|
|
|
(40.1
|
)
|
%
|
|
$
|
14,289
|
|
|
$
|
29,464
|
|
|
(51.5
|
)
|
%
|
(in thousands)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Securities sold:
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Fixed maturities
|
|
$
|
576
|
|
|
$
|
(541
|
)
|
|
$
|
(644
|
)
|
|
$
|
(545
|
)
|
Equity securities
|
|
0
|
|
|
57
|
|
|
(34
|
)
|
|
419
|
|
||||
Common stock trading securities
|
|
121
|
|
|
0
|
|
|
707
|
|
|
0
|
|
||||
Common stock increases in fair value
(1)
|
|
21
|
|
|
0
|
|
|
0
|
|
|
0
|
|
||||
Miscellaneous
|
|
0
|
|
|
1
|
|
|
0
|
|
|
1
|
|
||||
Net realized investment gains (losses)
(2)
|
|
$
|
718
|
|
|
$
|
(483
|
)
|
|
$
|
29
|
|
|
$
|
(125
|
)
|
(1)
|
The fair value of our common stocks is determined based upon exchange traded prices provided by a nationally recognized pricing service.
|
(2)
|
See Part I, Item 1. "Financial Statements - Note 5, Investments, of Notes to Financial Statements" contained within this report for additional disclosures regarding net realized investment gains (losses.)
|
(in thousands)
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Private equity
|
|
$
|
(443
|
)
|
|
$
|
2,627
|
|
|
$
|
(2,240
|
)
|
|
$
|
12,784
|
|
Mezzanine debt
|
|
(120
|
)
|
|
611
|
|
|
(26
|
)
|
|
1,748
|
|
||||
Real estate
|
|
(1,160
|
)
|
|
599
|
|
|
1,987
|
|
|
2,370
|
|
||||
Total equity in (losses) earnings of limited partnerships
|
|
$
|
(1,723
|
)
|
|
$
|
3,837
|
|
|
$
|
(279
|
)
|
|
$
|
16,902
|
|
|
|
Carrying value at
|
|
|
|
Carrying value at
|
|
|
||||||
(dollars in thousands)
|
|
September 30, 2016
|
|
% to total
|
|
December 31, 2015
|
|
% to total
|
||||||
|
|
(Unaudited)
|
|
|
|
|
|
|
||||||
Fixed maturities
|
|
$
|
695,355
|
|
|
90
|
%
|
|
$
|
587,209
|
|
|
85
|
%
|
Common stock
|
|
9,020
|
|
|
1
|
|
|
12,732
|
|
|
2
|
|
||
Limited partnerships:
|
|
|
|
|
|
|
|
|
||||||
Private equity
|
|
37,248
|
|
|
5
|
|
|
48,397
|
|
|
7
|
|
||
Mezzanine debt
|
|
8,404
|
|
|
1
|
|
|
12,701
|
|
|
2
|
|
||
Real estate
|
|
20,297
|
|
|
3
|
|
|
27,437
|
|
|
4
|
|
||
Real estate mortgage loans
|
|
232
|
|
|
0
|
|
|
333
|
|
|
0
|
|
||
Total investments
|
|
$
|
770,556
|
|
|
100
|
%
|
|
$
|
688,809
|
|
|
100
|
%
|
|
|
At September 30, 2016
|
||||||||||||||||||||||
(in thousands)
|
|
(Unaudited)
|
||||||||||||||||||||||
Industry Sector
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
Non- investment
grade
|
|
Fair
value
|
||||||||||||
Basic materials
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,027
|
|
|
$
|
1,605
|
|
|
$
|
11,268
|
|
|
$
|
14,900
|
|
Communications
|
|
0
|
|
|
0
|
|
|
2,017
|
|
|
10,504
|
|
|
18,899
|
|
|
31,420
|
|
||||||
Consumer
|
|
0
|
|
|
0
|
|
|
2,004
|
|
|
31,388
|
|
|
46,488
|
|
|
79,880
|
|
||||||
Diversified
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,638
|
|
|
1,638
|
|
||||||
Energy
|
|
0
|
|
|
2,025
|
|
|
5,517
|
|
|
5,616
|
|
|
15,017
|
|
|
28,175
|
|
||||||
Financial
|
|
0
|
|
|
2,000
|
|
|
20,347
|
|
|
60,221
|
|
|
18,042
|
|
|
100,610
|
|
||||||
Government-municipal
|
|
110,565
|
|
|
124,858
|
|
|
9,812
|
|
|
1,024
|
|
|
0
|
|
|
246,259
|
|
||||||
Government sponsored enterprises
|
|
0
|
|
|
2,048
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,048
|
|
||||||
Industrial
|
|
0
|
|
|
0
|
|
|
1,989
|
|
|
4,083
|
|
|
22,250
|
|
|
28,322
|
|
||||||
Structured securities
(2)
|
|
59,429
|
|
|
35,497
|
|
|
15,270
|
|
|
11,470
|
|
|
5,114
|
|
|
126,780
|
|
||||||
Technology
|
|
0
|
|
|
4,028
|
|
|
2,250
|
|
|
4,269
|
|
|
13,718
|
|
|
24,265
|
|
||||||
Utilities
|
|
0
|
|
|
0
|
|
|
5,137
|
|
|
5,031
|
|
|
890
|
|
|
11,058
|
|
||||||
Total
|
|
$
|
169,994
|
|
|
$
|
170,456
|
|
|
$
|
66,370
|
|
|
$
|
135,211
|
|
|
$
|
153,324
|
|
|
$
|
695,355
|
|
(1)
|
Ratings are supplied by S&P, Moody’s, and Fitch. The table is based upon the lowest rating for each security.
|
(2)
|
Structured securities include residential mortgage-backed securities, commercial mortgage-backed securities, collateralized debt obligations, and asset-backed securities.
|
|
|
Fair value at:
|
||||||||
(in thousands)
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||
Industry sector
|
|
|
(Unaudited)
|
|
|
|
||||
Funds
(1)
|
|
|
$
|
9,020
|
|
|
|
$
|
12,732
|
|
Total
|
|
|
$
|
9,020
|
|
|
|
$
|
12,732
|
|
(1)
|
Includes exchange traded funds with underlying holdings of fixed maturity securities. These securities meet the criteria of a common stock under U.S. GAAP, and are included on the balance sheet as available-for-sale equity securities.
|
|
|
|
(in thousands)
|
|
2016
|
|
2015
|
||||
|
|
(Unaudited)
|
||||||
Net cash provided by operating activities
|
|
$
|
155,551
|
|
|
$
|
130,995
|
|
Net cash used in investing activities
|
|
(96,638
|
)
|
|
(5,461
|
)
|
||
Net cash used in financing activities
|
|
(101,989
|
)
|
|
(95,143
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
|
$
|
(43,076
|
)
|
|
$
|
30,391
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 6.
|
EXHIBITS
|
Exhibit
|
|
|
Number
|
|
Description of Exhibit
|
|
|
|
10.1
|
|
Form of Indemnification Agreement by and between Erie Indemnity Company and each of LuAnn Datesh, George R. Lucore, Timothy G. NeCastro and Julie M. Pelkowski. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-K that was filed with the Commission on February 26, 2009.
|
|
|
|
10.2
|
|
Agreement between Erie Indemnity Company and John F. Kearns dated July 21, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant's Form 8-K that was filed with the Commission on July 27, 2016.
|
|
|
|
10.3
|
|
Retirement Agreement between Erie Indemnity Company and Terrence W. Cavanaugh dated July 28, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant's Form 8-K that was filed with the Commission on July 28, 2016.
|
|
|
|
10.4*
|
|
First Amendment to Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2014), dated September 12, 2016.
|
|
|
|
10.5*
|
|
Second Amendment to Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2014), dated September 12, 2016.
|
|
|
|
10.6*
|
|
First Amendment to Erie Insurance Group Employee Savings Plan (As Amended and Restated Effective as of January 1, 2015), dated September 12, 2016.
|
|
|
|
10.7*
|
|
First Amendment to Erie Indemnity Company Annual Incentive Plan (As Amended and Restated Effective as of January 1, 2014), dated August 1, 2016.
|
|
|
|
10.8*
|
|
Second Amendment to Erie Indemnity Company Long-Term Incentive Plan (As Amended and Restated Effective as of January 1, 2014), dated August 1, 2016.
|
|
|
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32*
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS*
|
|
XBRL Instance Document.
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
Erie Indemnity Company
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
October 27, 2016
|
By:
|
/s/ Timothy G. NeCastro
|
|
|
|
|
Timothy G. NeCastro, Chief Executive Officer
|
|
|
|
|
|
|
|
|
By:
|
/s/ Gregory J. Gutting
|
|
|
|
|
Gregory J. Gutting, Executive Vice President & CFO
|
|
1.
|
Section 2.11 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
2.11
|
“Compensation” for any period shall mean the rate of base compensation of a Covered Employee from the Employers during the period. For this purpose, “base compensation” shall mean regular base salary in the case of an employee compensated on a salaried basis, and regular base wages in the case of an employee compensated on an hourly basis, and in all cases shall exclude Form W-2 income in the form of overtime compensation, bonuses, commissions, deferred compensation plan payments or severance pay under any severance benefit plan and any other items of compensation, but shall include Form W-2 income paid as a lump sum in lieu of merit increase and compensation excluded from Form W-2 income because of salary reduction agreements in connection with plans described in Section 125, 132(f)(4) or 401(k) of the Code, or resulting from deferred compensation contracts for the period in question. Compensation shall exclude any differential wage payments made on behalf of a Covered Employee who is on military leave. Effective for each Plan Year beginning on and after December 31, 1989, in no event shall the amount of Compensation taken into account under the Plan exceed the adjusted annual limitation permitted under Section 401(a)(17) of the Code for such Plan Year. Such adjusted annual limitation shall be, for each Plan Year beginning on and after December 31, 2001, $200,000 (as adjusted for cost-of-living increases in accordance
|
2.
|
Section 2.12 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
2.12
|
“Covered Employee” shall mean any Employee of an Employer, excluding:
|
(a)
|
any such Employee whose employment is governed by the terms of a collective bargaining agreement under which retirement benefits were the subject of good faith bargaining,
|
(b)
|
any such Employee who has voluntarily waived participation in the Plan,
|
(c)
|
for periods before May 5, 2011, any such Employee who is compensated on an hourly basis, and
|
(d)
|
for periods on and after May 5, 2011, any such Employee who is classified by his Employer as a docent, an intern, or a driver-catastrophe response unit.
|
3.
|
A new section is added to the Plan immediately following Section 2.17 and such new section, designated as Section 2.17A, shall read as follows:
|
2.17A
|
“Eligibility Service” shall mean an Employee’s service determined in accordance with Article IV hereof for the purpose of determining the participation date of Part-Time Employees as otherwise provided hereunder.
|
4.
|
A new section is added to the Plan immediately following Section 2.19 and such new section, designated as Section 2.19A, shall read as follows:
|
2.19A
|
“Entry Date” shall mean, with respect to a Covered Employee who is a Part-Time Employee, the December 31 or June 30 next following the later of:
|
(a)
|
the date the Covered Employee attains age 21; and
|
(b)
|
the date the Covered Employee completes one year of Eligibility Service.
|
5.
|
Section 2.21 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
2.21
|
“Final Average Earnings” shall mean 1/36th of the Participant’s aggregate Compensation during the thirty-six consecutive calendar months as both a Covered Employee and a Participant which produces the greatest aggregate Compensation out of the one hundred twenty calendar month period as both a Covered Employee and a Participant ending on the earlier of the date on which the Participant retires or terminates employment with the Employers or on such other date on which the Participant is no longer considered both a Covered Employee and a Participant. In the event a Participant does not have thirty-six consecutive calendar months of Compensation as both a Covered Employee and a Participant (i) months in which the Participant is not a Covered Employee and months in which the Participant has no Compensation will be excluded for purposes of determining consecutive months for the thirty-six and one hundred twenty month periods and (ii) with respect to a Participant with fewer than thirty-six total calendar months of Compensation as both a Covered Employee and a Participant, Final Average Earnings will be determined as the average monthly Compensation over the Participant’s entire period of employment as both a Covered Employee and a Participant.
|
6.
|
Section 2.28 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
2.28
|
“Participant” shall mean any Covered Employee who participates in the Plan in accordance with Section 3.12 and any former Covered Employee who is entitled to, or who is receiving, a retirement benefit or deferred vested pension under the Plan
|
7.
|
A new section is added to the Plan immediately following Section 2.28 and such new section, designated as Section 2.28A, shall read as follows:
|
2.28A
|
“Part-Time Employee” shall mean an Employee who is regularly scheduled to work for fewer than thirty-seven and one-half (37½) hours per work week, with respect to the period before November 1, 2015, and twenty-five (25) or fewer hours per work week, with respect to the period on and after November 1, 2015.
|
8.
|
Section 2.32 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
2.32
|
“Service” shall mean an Employee’s service determined in accordance with Article IV hereof for the purpose of meeting the vesting requirements for a benefit under the Plan.
|
9.
|
A new section is added to the Plan immediately following Section 3.11 and such new section, designated as Section 3.12, shall read as follows:
|
3.12
|
Participation Date of Covered Employee
|
(a)
|
For periods before May 5, 2011, a Covered Employee entered the Plan and became a Participant on such Covered Employee’s Date of Hire.
|
(b)
|
Effective on and after May 5, 2011, a Covered Employee shall first enter the Plan and shall become a Participant hereunder as provided below:
|
(i)
|
A Covered Employee who is not a Part-Time Employee shall enter the Plan and become a Participant on such Covered Employee’s Date of Hire.
|
(ii)
|
A Covered Employee who is a Part-Time Employee shall enter the Plan and become a Participant on such Covered Employee’s Entry Date.
|
10.
|
A new section is added to the Plan immediately following Section 4.1 and such new section, designated as Section 4.1A, shall read as follows:
|
4.1A
|
Eligibility Service
|
11.
|
Section 4.2 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
4.2
|
Credited Service
|
12.
|
Section 4.5 of the Plan is deleted in its entirety and the following shall be inserted in lieu thereof:
|
4.5
|
Transfer From Other Employment
|
13.
|
This amendment to the Plan as amended and restated as of December 31, 2014 shall be effective as of May 5, 2011. It shall also be considered to amend the pertinent provisions of the Plan document as in effect prior to December 31, 2014 retroactively to May 5, 2011.
|
2.19
|
“Employer(s)” shall mean the Company, Erie Family Life Insurance Company, Erie Insurance Exchange, Erie Insurance Company, EI Holding Corp., EI Service Corp., Erie Insurance Company of New York, Erie Insurance Property & Casualty Company, Flagship City Insurance Company, Erie Resource Management Corp. and any other Affiliate which may adopt this Plan.
|
1.13
|
“Employer(s)” means the Company, Erie Family Life Insurance Company, Erie Insurance Exchange, Erie Insurance Company, EI Holding Corp., EI Service Corp., Erie Insurance Company of New York, Erie Insurance Property & Casualty Company, Flagship City Insurance Company, Erie Resource Management Corp. and any other Affiliate which may adopt this Plan.
|
Date:
|
October 27, 2016
|
|
|
|
|
|
|
/s/ Timothy G. NeCastro
|
|
|
Timothy G. NeCastro
|
|
|
Chief Executive Officer
|
Date:
|
October 27, 2016
|
|
|
|
|
|
|
/s/ Gregory J. Gutting
|
|
|
Gregory J. Gutting
|
|
|
Executive Vice President & CFO
|
(1)
|
The
Quarterly
Report on Form
10-Q
of the Company for the
quarterly
period ended
September 30, 2016
(the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Timothy G. NeCastro
|
|
Timothy G. NeCastro
|
|
Chief Executive Officer
|
|
|
|
/s/ Gregory J. Gutting
|
|
Gregory J. Gutting
|
|
Executive Vice President & CFO
|
|
|
|
|
|
October 27, 2016
|
|