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ERIE INDEMNITY COMPANY
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Pennsylvania
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25-0466020
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(State or other jurisdiction
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(I.R.S. Employer
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of 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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Class A common stock, stated value $0.0292 per share, listed on the NASDAQ Stock Market, LLC
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(Title of each class)
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(Name of each exchange on which registered)
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Large Accelerated Filer
X
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Accelerated Filer
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Non-Accelerated Filer
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Smaller Reporting Company
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(Do not check if a smaller reporting company)
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PART
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ITEM NUMBER AND CAPTION
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PAGE
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•
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Interest rate risk
- the risk of adverse changes in the value of fixed income securities as a result of increases in market interest rates. A sustained low interest rate environment would pressure our net investment income.
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Investment credit risk
- the risk that the value of certain investments may decrease due to the deterioration in financial condition of, or the liquidity available to, one or more issuers of those securities or, in the case of asset-backed securities, due to the deterioration of the loans or other assets that underlie the securities, which, in each case, also includes the risk of permanent loss.
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Sector/Concentration risk
- the risk that the portfolio may be too heavily concentrated in the securities of one or more issuers, sectors, or industries. Events or developments that have a negative impact on any particular industry, group of related industries, or geographic region may have a greater adverse effect on our investment portfolio to the extent that the portfolio is concentrated within those issuers, sectors, or industries.
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•
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Liquidity risk
- the risk that we will not be able to convert investment securities into cash on favorable terms and on a timely basis, or that we will not be able to sell them at all, when desired. Disruptions in the financial markets or a lack of buyers for the specific securities that we are trying to sell, could prevent us from liquidating securities or cause a reduction in prices to levels that are not acceptable to us.
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Number of
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Field office ownership:
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field offices
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Erie Indemnity Company
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3
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Erie Insurance Exchange
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3
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Erie Family Life Insurance Company
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1
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Unaffiliated parties
(1)
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18
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25
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2016
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2015
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Stock sales price
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Cash dividend declared
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Stock sales price
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Cash dividend declared
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Quarter ended
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High
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Low
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Class A
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Class B
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High
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Low
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Class A
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Class B
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March 31
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$
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100.53
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$
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89.92
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$
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0.7300
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$
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109.500
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$
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93.01
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$
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84.11
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$
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0.681
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$
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102.15
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June 30
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99.34
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90.60
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0.7300
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109.500
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87.15
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80.02
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0.681
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102.15
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September 30
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103.69
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96.68
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0.7300
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109.500
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87.82
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79.79
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0.681
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102.15
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December 31
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114.60
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99.39
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0.7825
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117.375
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100.56
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81.37
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0.730
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109.50
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Total
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$
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2.9725
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$
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445.875
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$
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2.773
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$
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415.95
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2011
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2012
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2013
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2014
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2015
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2016
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Erie Indemnity Company Class A common stock
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$
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100
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(1)
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$
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95
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$
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102
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$
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131
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$
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143
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$
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171
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Standard & Poor's 500 Stock Index
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100
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(1)
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116
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153
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174
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176
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197
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Standard & Poor's Supercomposite Insurance Industry Group Index
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100
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(1)
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119
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173
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188
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195
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231
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(1)
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Assumes $100 invested at the close of trading, including reinvestment of dividends, on the last trading day preceding the first day of the fifth preceding fiscal year, in our Class A common stock, the Standard & Poor’s 500 Stock Index, and the Standard & Poor’s Supercomposite Insurance Industry Group Index.
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(in thousands, except per share data)
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Years Ended December 31,
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2016
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2015
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2014
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2013
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2012
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Operating Data:
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Operating revenue
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$
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1,596,631
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$
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1,505,508
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$
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1,407,119
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$
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1,297,331
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$
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1,188,430
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Operating expenses
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1,304,267
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1,272,967
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1,184,272
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1,087,995
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983,420
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Investment income
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27,828
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33,708
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28,417
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37,278
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36,204
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Income before income taxes
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320,091
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266,249
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251,264
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246,614
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241,214
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Net income
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210,366
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174,678
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167,505
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162,611
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160,145
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Per Share Data:
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Net income per Class A share – diluted
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$
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4.01
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$
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3.33
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$
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3.18
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$
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3.08
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$
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2.99
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Book value per share – Class A common and equivalent B shares
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15.62
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14.72
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13.45
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13.96
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12.11
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Dividends declared per Class A share
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2.9725
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2.773
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2.586
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2.4125
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4.25
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Dividends declared per Class B share
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445.875
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415.95
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387.90
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361.875
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637.50
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Financial Position Data:
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Investments
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$
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771,450
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$
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688,476
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$
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702,387
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$
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721,728
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$
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687,525
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Receivables from Erie Insurance Exchange and affiliates
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378,540
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348,055
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335,220
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300,442
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280,787
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Long-term borrowings
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24,766
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—
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—
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—
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—
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Total assets
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1,548,955
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1,407,296
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1,319,198
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1,213,042
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1,160,153
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Total equity
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816,910
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769,503
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703,134
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733,982
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641,870
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Page Number
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•
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dependence upon our relationship with the Exchange and the management fee under the agreement with the subscribers at the Exchange;
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costs of providing services to the Exchange under the subscriber’s agreement and investments in new technology and systems;
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credit risk from the Exchange;
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•
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dependence upon our relationship with the Exchange and the growth of the Exchange, including:
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◦
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general business and economic conditions;
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◦
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factors affecting insurance industry competition;
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◦
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dependence upon the independent agency system; and
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◦
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ability to maintain our reputation for customer service;
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•
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dependence upon our relationship with the Exchange and the financial condition of the Exchange, including:
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◦
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the Exchange’s ability to maintain acceptable financial strength ratings;
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factors affecting the quality and liquidity of the Exchange’s investment portfolio;
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◦
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changes in government regulation of the insurance industry;
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◦
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emerging claims and coverage issues in the industry; and
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◦
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severe weather conditions or other catastrophic losses, including terrorism;
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ability to attract and retain talented management and employees;
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ability to maintain uninterrupted business operations and difficulties with technology or data security breaches, including cyber attacks;
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•
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factors affecting the quality and liquidity of our investment portfolio;
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•
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our ability to meet liquidity needs and access capital; and
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•
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outcome of pending and potential litigation.
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Years ended December 31,
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(dollars in thousands, except per share data)
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2016
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%
Change
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2015
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%
Change
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2014
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|||||||||
Total operating revenue
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$
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1,596,631
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6.1
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%
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$
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1,505,508
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7.0
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%
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$
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1,407,119
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Total operating expenses
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1,304,267
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2.5
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1,272,967
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7.5
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1,184,272
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Net revenue from operations
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292,364
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25.7
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232,541
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4.3
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222,847
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Total investment income
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27,828
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(17.4
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)
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33,708
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18.6
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28,417
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Interest expense, net
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101
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NM
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—
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NM
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—
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Income before income taxes
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320,091
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20.2
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266,249
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6.0
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251,264
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Income tax expense
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109,725
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19.8
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91,571
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9.3
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83,759
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Net income
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$
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210,366
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20.4
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%
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$
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174,678
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4.3
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%
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$
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167,505
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Net income per share - diluted
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$
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4.01
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20.6
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%
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$
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3.33
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4.5
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%
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$
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3.18
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•
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An active market is one in which transactions for the assets being valued occur with sufficient frequency and volume to provide reliable pricing information.
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An inactive (illiquid) market is one in which there are few and infrequent transactions, where the prices are not current, price quotations vary substantially, and/or there is little information publicly available for the asset being valued.
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Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
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Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
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Level 3 – Unobservable inputs for the asset or liability.
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the extent and duration for which fair value is less than cost;
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historical operating performance and financial condition of the issuer;
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short- and long-term prospects of the issuer and its industry based upon analysts’ recommendations;
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•
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specific events that occurred affecting the issuer, including rating downgrades;
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•
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intent to sell or more likely than not we would be required to sell (debt securities); and
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•
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ability and intent to retain the investment for a period of time sufficient to allow for a recovery in value (equity securities).
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Years ended December 31,
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(dollars in thousands)
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2016
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%
Change
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2015
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%
Change
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2014
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||||||||
Direct and assumed premiums written by the Exchange
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$
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6,278,126
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6.2
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%
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$
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5,914,045
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7.3
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%
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$
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5,513,962
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Management fee rate
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25
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%
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25
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%
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25
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%
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Management fee revenue, gross
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1,569,531
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6.2
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1,478,511
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7.3
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1,378,490
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Change in allowance for management fee returned on cancelled policies
(1)
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(2,100
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)
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NM
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(3,000
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)
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NM
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(2,300
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)
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Management fee revenue, net of allowance
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$
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1,567,431
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6.2
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%
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$
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1,475,511
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7.2
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%
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$
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1,376,190
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Years ended December 31,
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(dollars in thousands)
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2016
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%
Change
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2015
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%
Change
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2014
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||||||||
Commissions:
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Total commissions
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$
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893,800
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5.4
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%
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$
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847,880
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8.3
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%
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|
$
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783,017
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Non-commission expense:
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||||||||
Underwriting and policy processing
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$
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135,855
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0.8
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%
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$
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134,837
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|
|
6.4
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%
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|
$
|
126,779
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Information technology
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121,249
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|
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(1.7
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)
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123,362
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|
|
1.9
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|
|
121,094
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|
|||
Sales and advertising
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|
63,423
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|
|
(1.5
|
)
|
|
64,403
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|
|
6.7
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|
|
60,334
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|
|||
Customer service
|
|
24,604
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|
|
(16.1
|
)
|
|
29,325
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|
|
10.6
|
|
|
26,522
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|
|||
Administrative and other
|
|
65,336
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|
|
(10.7
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)
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|
73,160
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|
|
10.0
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|
|
66,526
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|
|||
Total non-commission expense
|
|
410,467
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|
|
(3.4
|
)
|
|
425,087
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|
|
5.9
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|
|
401,255
|
|
|||
Total cost of management operations
|
|
$
|
1,304,267
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|
|
2.5
|
%
|
|
$
|
1,272,967
|
|
|
7.5
|
%
|
|
$
|
1,184,272
|
|
(dollars in thousands)
|
|
2016
|
|
%
Change
|
|
2015
|
|
%
Change
|
|
2014
|
||||||||
Net investment income
|
|
$
|
20,547
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|
|
15.5
|
%
|
|
$
|
17,791
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|
|
7.6
|
%
|
|
$
|
16,536
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|
Net realized investment gains
|
|
672
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|
|
36.5
|
|
|
492
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|
|
(53.4
|
)
|
|
1,057
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|
|||
Net impairment losses recognized in earnings
|
|
(416
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)
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|
NM
|
|
(1,558
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)
|
|
NM
|
|
|
(105
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)
|
||||
Equity in earnings of limited partnerships
|
|
7,025
|
|
|
(58.6
|
)
|
|
16,983
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|
|
55.4
|
|
|
10,929
|
|
|||
Total investment income
|
|
$
|
27,828
|
|
|
(17.4
|
)%
|
|
$
|
33,708
|
|
|
18.6
|
%
|
|
$
|
28,417
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Securities sold:
|
|
|
|
|
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|
||||||
Fixed maturities
|
|
$
|
(2
|
)
|
|
$
|
(193
|
)
|
|
$
|
120
|
|
Equity securities
|
|
(33
|
)
|
|
685
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|
|
937
|
|
|||
Common stock trading securities
|
|
707
|
|
|
0
|
|
|
0
|
|
|||
Total net realized investment gains
(1)
|
|
$
|
672
|
|
|
$
|
492
|
|
|
$
|
1,057
|
|
(1)
|
See Part II, Item 8. "Financial Statements and Supplementary Data – Note 5, Investments, of Notes to Financial Statements" contained within this report for additional disclosures regarding net realized investment gains (losses).
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Private equity
|
|
$
|
(2,756
|
)
|
|
$
|
12,169
|
|
|
$
|
4,060
|
|
Mezzanine debt
|
|
51
|
|
|
1,788
|
|
|
1,882
|
|
|||
Real estate
|
|
9,730
|
|
|
3,026
|
|
|
4,987
|
|
|||
Total equity in earnings of limited partnerships
|
|
$
|
7,025
|
|
|
$
|
16,983
|
|
|
$
|
10,929
|
|
|
|
Carrying value at December 31,
|
||||||||||||
(dollars in thousands)
|
|
2016
|
|
% to
total
|
|
2015
|
|
% to
total
|
||||||
Fixed maturities
|
|
$
|
707,341
|
|
|
90
|
%
|
|
$
|
587,209
|
|
|
85
|
%
|
Common stock
|
|
5,950
|
|
|
1
|
|
|
12,732
|
|
|
2
|
|
||
Limited partnerships:
|
|
|
|
|
|
|
|
|
||||||
Private equity
|
|
35,228
|
|
|
5
|
|
|
48,397
|
|
|
7
|
|
||
Mezzanine debt
|
|
6,010
|
|
|
1
|
|
|
12,701
|
|
|
2
|
|
||
Real estate
|
|
16,921
|
|
|
3
|
|
|
27,437
|
|
|
4
|
|
||
Real estate mortgage loans
|
|
213
|
|
|
0
|
|
|
333
|
|
|
0
|
|
||
Total investments
|
|
$
|
771,663
|
|
|
100
|
%
|
|
$
|
688,809
|
|
|
100
|
%
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Non-investment
|
|
Fair
|
||||||||||||
Industry Sector
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
grade
|
|
value
|
||||||||||||
Indemnity
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic materials
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,011
|
|
|
$
|
0
|
|
|
$
|
11,610
|
|
|
$
|
13,621
|
|
Communications
|
|
0
|
|
|
0
|
|
|
2,006
|
|
|
8,424
|
|
|
19,191
|
|
|
29,621
|
|
||||||
Consumer
|
|
0
|
|
|
0
|
|
|
1,996
|
|
|
29,292
|
|
|
45,987
|
|
|
77,275
|
|
||||||
Diversified
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,052
|
|
|
1,052
|
|
||||||
Energy
|
|
0
|
|
|
5,008
|
|
|
5,506
|
|
|
5,585
|
|
|
13,649
|
|
|
29,748
|
|
||||||
Financial
|
|
0
|
|
|
4,976
|
|
|
28,199
|
|
|
54,823
|
|
|
19,952
|
|
|
107,950
|
|
||||||
Government-municipal
|
|
107,998
|
|
|
134,433
|
|
|
9,687
|
|
|
1,014
|
|
|
0
|
|
|
253,132
|
|
||||||
Government sponsored entity
|
|
0
|
|
|
2,026
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,026
|
|
||||||
Industrial
|
|
0
|
|
|
0
|
|
|
1,852
|
|
|
4,045
|
|
|
19,708
|
|
|
25,605
|
|
||||||
Structured securities
(2)
|
|
64,874
|
|
|
32,951
|
|
|
13,212
|
|
|
6,319
|
|
|
6,848
|
|
|
124,204
|
|
||||||
Technology
|
|
0
|
|
|
6,937
|
|
|
2,208
|
|
|
4,061
|
|
|
13,578
|
|
|
26,784
|
|
||||||
U.S. Treasury
|
|
5,031
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
5,031
|
|
||||||
Utilities
|
|
0
|
|
|
0
|
|
|
5,100
|
|
|
4,984
|
|
|
1,208
|
|
|
11,292
|
|
||||||
Total
|
|
$
|
177,903
|
|
|
$
|
186,331
|
|
|
$
|
71,777
|
|
|
$
|
118,547
|
|
|
$
|
152,783
|
|
|
$
|
707,341
|
|
|
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Net cash provided by operating activities
|
|
$
|
254,336
|
|
|
$
|
217,378
|
|
|
$
|
186,013
|
|
Net cash (used in) provided by investing activities
|
|
(136,944
|
)
|
|
622
|
|
|
(5,097
|
)
|
|||
Net cash used in financing activities
|
|
(111,209
|
)
|
|
(126,858
|
)
|
|
(138,218
|
)
|
|||
Net increase in cash
|
|
$
|
6,183
|
|
|
$
|
91,142
|
|
|
$
|
42,698
|
|
(
in thousands)
|
|
Payments due by period
|
||||||||||||||||||
|
|
Total
|
|
2017
|
|
2018-2019
|
|
2020-2021
|
|
2022 and thereafter
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
(1)
|
|
$
|
178,568
|
|
|
$
|
1,846
|
|
|
$
|
10,134
|
|
|
$
|
12,352
|
|
|
$
|
154,236
|
|
Limited partnership commitments
(2)
|
|
16,904
|
|
|
16,904
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Pension contribution
(3)
|
|
18,968
|
|
|
18,968
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Other commitments
(4)
|
|
48,632
|
|
|
30,356
|
|
|
17,593
|
|
|
683
|
|
|
0
|
|
|||||
Operating leases – vehicles
|
|
18,962
|
|
|
5,963
|
|
|
10,128
|
|
|
2,871
|
|
|
0
|
|
|||||
Operating leases – real estate
(5)
|
|
10,612
|
|
|
3,341
|
|
|
4,976
|
|
|
2,228
|
|
|
67
|
|
|||||
Operating leases – computer equipment
|
|
5,666
|
|
|
2,656
|
|
|
3,010
|
|
|
0
|
|
|
0
|
|
|||||
Gross contractual obligations
|
|
298,312
|
|
|
80,034
|
|
|
45,841
|
|
|
18,134
|
|
|
154,303
|
|
|||||
Estimated reimbursements from affiliates
(6)
|
|
70,023
|
|
|
39,378
|
|
|
26,265
|
|
|
4,336
|
|
|
44
|
|
|||||
Net contractual obligations
|
|
$
|
228,289
|
|
|
$
|
40,656
|
|
|
$
|
19,576
|
|
|
$
|
13,798
|
|
|
$
|
154,259
|
|
(1)
|
Long-term debt amount differs from the balance presented on the Statements of Financial Position as the long-term debt amount in the table above includes interest and principal payments based upon total expected draw commitments and excludes commitment fees.
|
(2)
|
Limited partnership commitments will be funded as required for capital contributions at any time prior to the agreement expiration date. The commitment amounts are presented using the expiration date as the factor by which to age when the amounts are due. At
December 31, 2016
, our total commitment to fund limited partnerships that invest in private equity securities was
$6.8 million
, mezzanine debt was
$8.2 million
, and real estate activities was
$1.9 million
.
|
(3)
|
The pension contribution for
2017
was estimated in accordance with the Pension Protection Act of 2006. Contributions anticipated in future years depend upon certain factors that cannot be reasonably predicted. Any contributions required in future years will be an amount equal to the greater of the target normal cost for the plan year or the amount necessary to fund the plan to 100% plus interest to the date the contribution is made. The obligations for our unfunded benefit plans, including the Supplemental Employee Retirement Plan (SERP) for our executive and senior management, are not included in gross contractual obligations. The recorded accumulated benefit obligation for this plan at
December 31, 2016
is
$14.4 million
. We expect to have sufficient cash flows from operations to meet the future benefit payments as these become due.
|
(4)
|
Other commitments include various agreements for services, including computer software, telephones, copiers, and maintenance.
|
(5)
|
Operating leases – real estate are for
18
of our
25
field offices and
two
operating leases are for office space and a warehouse facility.
|
(6)
|
We are reimbursed from the Exchange for a portion of the costs related to the pension, other commitments and operating leases.
|
(dollars in thousands)
|
|
2016
|
|
Percent of
total assets |
|
2015
|
|
Percent of
total assets |
||||||
Receivables from the Exchange and other affiliates (management fees, costs and reimbursements)
|
|
$
|
378,540
|
|
|
24.4
|
%
|
|
$
|
348,055
|
|
|
24.7
|
%
|
Note receivable from EFL
|
|
25,000
|
|
|
1.6
|
|
|
25,000
|
|
|
1.8
|
|
||
Total intercompany receivables
|
|
$
|
403,540
|
|
|
26.0
|
%
|
|
$
|
373,055
|
|
|
26.5
|
%
|
(dollars in thousands)
|
|
At December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Fair value of fixed maturity portfolio
|
|
$
|
707,341
|
|
|
$
|
587,209
|
|
Fair value assuming 100-basis point rise in interest rates
|
|
$
|
690,454
|
|
|
$
|
571,167
|
|
Effective duration (as a percentage)
|
|
2.4
|
|
|
2.5
|
|
|
|
|
||
(in thousands)
|
|
|
||
Fixed maturities:
|
|
December 31, 2015
|
||
2016
|
|
$
|
61,608
|
|
2017
|
|
76,526
|
|
|
2018
|
|
92,108
|
|
|
2019
|
|
37,921
|
|
|
2020
|
|
53,169
|
|
|
Thereafter
|
|
237,824
|
|
|
Total
(1)
|
|
$
|
559,156
|
|
Fair value
|
|
$
|
587,209
|
|
(dollars in thousands)
|
|
Amortized cost
|
|
Fair value
|
|
Percent of total
|
|||||
AAA, AA, A
|
|
$
|
433,133
|
|
|
$
|
436,011
|
|
|
62
|
%
|
BBB
|
|
118,593
|
|
|
118,547
|
|
|
17
|
|
||
Total investment grade
|
|
551,726
|
|
|
554,558
|
|
|
79
|
|
||
BB
|
|
49,914
|
|
|
50,242
|
|
|
7
|
|
||
B
|
|
79,918
|
|
|
81,131
|
|
|
11
|
|
||
CCC, CC, C, and below
|
|
20,845
|
|
|
21,410
|
|
|
3
|
|
||
Total non-investment grade
|
|
150,677
|
|
|
152,783
|
|
|
21
|
|
||
Total
|
|
$
|
702,403
|
|
|
$
|
707,341
|
|
|
100
|
%
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Operating revenue
|
|
|
|
|
|
|
||||||
Management fee revenue, net
|
|
$
|
1,567,431
|
|
|
$
|
1,475,511
|
|
|
$
|
1,376,190
|
|
Service agreement revenue
|
|
29,200
|
|
|
29,997
|
|
|
30,929
|
|
|||
Total operating revenue
|
|
1,596,631
|
|
|
1,505,508
|
|
|
1,407,119
|
|
|||
|
|
|
|
|
|
|
||||||
Operating expenses
|
|
|
|
|
|
|
||||||
Commissions
|
|
893,800
|
|
|
847,880
|
|
|
783,017
|
|
|||
Salaries and employee benefits
|
|
213,356
|
|
|
226,713
|
|
|
206,690
|
|
|||
All other operating expenses
|
|
197,111
|
|
|
198,374
|
|
|
194,565
|
|
|||
Total operating expenses
|
|
1,304,267
|
|
|
1,272,967
|
|
|
1,184,272
|
|
|||
Net revenue from operations
|
|
292,364
|
|
|
232,541
|
|
|
222,847
|
|
|||
|
|
|
|
|
|
|
||||||
Investment income
|
|
|
|
|
|
|
||||||
Net investment income
|
|
20,547
|
|
|
17,791
|
|
|
16,536
|
|
|||
Net realized investment gains
|
|
672
|
|
|
492
|
|
|
1,057
|
|
|||
Net impairment losses recognized in earnings
|
|
(416
|
)
|
|
(1,558
|
)
|
|
(105
|
)
|
|||
Equity in earnings of limited partnerships
|
|
7,025
|
|
|
16,983
|
|
|
10,929
|
|
|||
Total investment income
|
|
27,828
|
|
|
33,708
|
|
|
28,417
|
|
|||
Interest expense, net
|
|
101
|
|
|
—
|
|
|
—
|
|
|||
Income before income taxes
|
|
320,091
|
|
|
266,249
|
|
|
251,264
|
|
|||
Income tax expense
|
|
109,725
|
|
|
91,571
|
|
|
83,759
|
|
|||
Net income
|
|
$
|
210,366
|
|
|
$
|
174,678
|
|
|
$
|
167,505
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
Earnings Per Share
|
|
|
|
|
|
|
||||||
Net income per share
|
|
|
|
|
|
|
||||||
Class A common stock – basic
|
|
$
|
4.52
|
|
|
$
|
3.75
|
|
|
$
|
3.59
|
|
Class A common stock – diluted
|
|
$
|
4.01
|
|
|
$
|
3.33
|
|
|
$
|
3.18
|
|
Class B common stock – basic
|
|
$
|
678
|
|
|
$
|
563
|
|
|
$
|
539
|
|
Class B common stock – diluted
|
|
$
|
677
|
|
|
$
|
562
|
|
|
$
|
538
|
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding – Basic
|
|
|
|
|
|
|
||||||
Class A common stock
|
|
46,188,952
|
|
|
46,186,671
|
|
|
46,247,876
|
|
|||
Class B common stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|||
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding – Diluted
|
|
|
|
|
|
|
||||||
Class A common stock
|
|
52,435,303
|
|
|
52,498,811
|
|
|
52,616,234
|
|
|||
Class B common stock
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Net income
|
|
$
|
210,366
|
|
|
$
|
174,678
|
|
|
$
|
167,505
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive (loss) income, net of tax
|
|
|
|
|
|
|
|
|
|
|||
Change in unrealized holding gains (losses) on available-for-sale securities
|
|
43
|
|
|
(4,280
|
)
|
|
823
|
|
|||
Pension and other postretirement plans
|
|
(24,560
|
)
|
|
25,117
|
|
|
(59,425
|
)
|
|||
Total other comprehensive (loss) income, net of tax
|
|
(24,517
|
)
|
|
20,837
|
|
|
(58,602
|
)
|
|||
Comprehensive income
|
|
$
|
185,849
|
|
|
$
|
195,515
|
|
|
$
|
108,903
|
|
|
|
2016
|
|
2015
|
||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
189,072
|
|
|
$
|
182,889
|
|
Available-for-sale securities
|
|
56,138
|
|
|
62,067
|
|
||
Receivables from Erie Insurance Exchange and affiliates
|
|
378,540
|
|
|
348,055
|
|
||
Prepaid expenses and other current assets
|
|
30,169
|
|
|
24,697
|
|
||
Federal income taxes recoverable
|
|
5,260
|
|
|
11,947
|
|
||
Accrued investment income
|
|
6,337
|
|
|
5,491
|
|
||
Total current assets
|
|
665,516
|
|
|
635,146
|
|
||
|
|
|
|
|
||||
Available-for-sale securities
|
|
657,153
|
|
|
537,874
|
|
||
Limited partnership investments
|
|
58,159
|
|
|
88,535
|
|
||
Fixed assets, net
|
|
69,142
|
|
|
59,087
|
|
||
Deferred income taxes, net
|
|
53,889
|
|
|
40,686
|
|
||
Note receivable from Erie Family Life Insurance Company
|
|
25,000
|
|
|
25,000
|
|
||
Other assets
|
|
20,096
|
|
|
20,968
|
|
||
Total assets
|
|
$
|
1,548,955
|
|
|
$
|
1,407,296
|
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Commissions payable
|
|
$
|
210,559
|
|
|
$
|
195,542
|
|
Agent bonuses
|
|
114,772
|
|
|
106,752
|
|
||
Accounts payable and accrued liabilities
|
|
88,153
|
|
|
88,532
|
|
||
Dividends payable
|
|
36,441
|
|
|
33,996
|
|
||
Deferred executive compensation
|
|
19,675
|
|
|
20,877
|
|
||
Total current liabilities
|
|
469,600
|
|
|
445,699
|
|
||
|
|
|
|
|
||||
Defined benefit pension plans
|
|
221,827
|
|
|
172,700
|
|
||
Employee benefit obligations
|
|
756
|
|
|
1,234
|
|
||
Deferred executive compensation
|
|
13,233
|
|
|
16,580
|
|
||
Long-term borrowings
|
|
24,766
|
|
|
—
|
|
||
Other long-term liabilities
|
|
1,863
|
|
|
1,580
|
|
||
Total liabilities
|
|
732,045
|
|
|
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
|
|
(121,381
|
)
|
|
(96,864
|
)
|
||
Retained earnings
|
|
2,065,911
|
|
|
1,993,976
|
|
||
Total contributed capital and retained earnings
|
|
1,963,000
|
|
|
1,915,593
|
|
||
Treasury stock, at cost; 22,110,132 shares held
|
|
(1,155,846
|
)
|
|
(1,155,108
|
)
|
||
Deferred compensation
|
|
9,756
|
|
|
9,018
|
|
||
Total shareholders’ equity
|
|
816,910
|
|
|
769,503
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
1,548,955
|
|
|
$
|
1,407,296
|
|
|
Class A common stock
|
Class B common stock
|
Additional paid-in-capital
|
Accumulated other comprehensive income (loss)
|
Retained earnings
|
Treasury stock
|
Deferred compensation
|
Total shareholders' equity
|
||||||||||||||||
Balance, December 31, 2013
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,365
|
|
$
|
(59,099
|
)
|
$
|
1,901,428
|
|
$
|
(1,126,883
|
)
|
$
|
—
|
|
$
|
733,981
|
|
Net income
|
|
|
|
|
167,505
|
|
|
|
167,505
|
|
||||||||||||||
Other comprehensive loss
|
|
|
|
(58,602
|
)
|
|
|
|
(58,602
|
)
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $2.586 per share
|
|
|
|
|
(119,509
|
)
|
|
|
(119,509
|
)
|
||||||||||||||
Class B $387.90 per share
|
|
|
|
|
(986
|
)
|
|
|
(986
|
)
|
||||||||||||||
Net purchase of treasury stock
|
|
|
(48
|
)
|
|
|
(19,207
|
)
|
|
(19,255
|
)
|
|||||||||||||
Balance, December 31, 2014
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,317
|
|
$
|
(117,701
|
)
|
$
|
1,948,438
|
|
$
|
(1,146,090
|
)
|
$
|
—
|
|
$
|
703,134
|
|
Net income
|
|
|
|
|
174,678
|
|
|
|
174,678
|
|
||||||||||||||
Other comprehensive income
|
|
|
|
20,837
|
|
|
|
|
20,837
|
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $2.773 per share
|
|
|
|
|
(128,082
|
)
|
|
|
(128,082
|
)
|
||||||||||||||
Class B $415.95 per share
|
|
|
|
|
(1,058
|
)
|
|
|
(1,058
|
)
|
||||||||||||||
Net purchase of treasury stock
(1)
|
|
|
(6
|
)
|
|
|
0
|
|
|
(6
|
)
|
|||||||||||||
Deferred compensation
|
|
|
|
|
|
(9,018
|
)
|
$
|
9,018
|
|
0
|
|
||||||||||||
Balance, December 31, 2015
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,311
|
|
$
|
(96,864
|
)
|
$
|
1,993,976
|
|
$
|
(1,155,108
|
)
|
$
|
9,018
|
|
$
|
769,503
|
|
Net income
|
|
|
|
|
210,366
|
|
|
|
210,366
|
|
||||||||||||||
Other comprehensive loss
|
|
|
|
(24,517
|
)
|
|
|
|
(24,517
|
)
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $2.9725 per share
|
|
|
|
|
(137,297
|
)
|
|
|
(137,297
|
)
|
||||||||||||||
Class B $445.875 per share
|
|
|
|
|
(1,134
|
)
|
|
|
(1,134
|
)
|
||||||||||||||
Net purchase of treasury stock
(1)
|
|
|
(11
|
)
|
|
|
0
|
|
|
(11
|
)
|
|||||||||||||
Deferred compensation
|
|
|
|
|
|
(738
|
)
|
738
|
|
0
|
|
|||||||||||||
Balance, December 31, 2016
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,300
|
|
$
|
(121,381
|
)
|
$
|
2,065,911
|
|
$
|
(1,155,846
|
)
|
$
|
9,756
|
|
$
|
816,910
|
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
||||||
Management fee received
|
|
$
|
1,536,699
|
|
|
$
|
1,454,902
|
|
|
$
|
1,348,885
|
|
Service agreement fee received
|
|
29,200
|
|
|
29,997
|
|
|
30,929
|
|
|||
Net investment income received
|
|
26,796
|
|
|
25,999
|
|
|
22,846
|
|
|||
Limited partnership distributions
|
|
17,837
|
|
|
14,112
|
|
|
15,327
|
|
|||
Increase (decrease) in reimbursements collected from affiliates
|
|
247
|
|
|
7,775
|
|
|
(7,472
|
)
|
|||
Commissions paid to agents
|
|
(756,713
|
)
|
|
(725,714
|
)
|
|
(665,154
|
)
|
|||
Agents bonuses paid
|
|
(113,859
|
)
|
|
(96,749
|
)
|
|
(83,436
|
)
|
|||
Salaries and wages paid
|
|
(160,985
|
)
|
|
(155,303
|
)
|
|
(153,459
|
)
|
|||
Pension contribution and employee benefits paid
|
|
(44,250
|
)
|
|
(40,993
|
)
|
|
(48,516
|
)
|
|||
General operating expenses paid
|
|
(176,029
|
)
|
|
(190,301
|
)
|
|
(178,452
|
)
|
|||
Income taxes paid
|
|
(104,607
|
)
|
|
(106,347
|
)
|
|
(95,485
|
)
|
|||
Net cash provided by operating activities
|
|
254,336
|
|
|
217,378
|
|
|
186,013
|
|
|||
|
|
|
|
|
|
|
||||||
Cash flows from investing activities
|
|
|
|
|
|
|
||||||
Purchase of investments:
|
|
|
|
|
|
|
||||||
Available-for-sale securities
|
|
(369,811
|
)
|
|
(228,308
|
)
|
|
(250,789
|
)
|
|||
Limited partnerships
|
|
(578
|
)
|
|
(928
|
)
|
|
(1,123
|
)
|
|||
Proceeds from investments:
|
|
|
|
|
|
|
||||||
Available-for-sale securities sales
|
|
89,498
|
|
|
102,286
|
|
|
116,401
|
|
|||
Available-for-sale securities maturities/calls
|
|
146,285
|
|
|
112,705
|
|
|
119,679
|
|
|||
Trading securities
|
|
5,171
|
|
|
0
|
|
|
0
|
|
|||
Limited partnerships
|
|
16,113
|
|
|
26,735
|
|
|
28,613
|
|
|||
Net purchase of fixed assets
|
|
(25,208
|
)
|
|
(12,556
|
)
|
|
(19,473
|
)
|
|||
Net collections on agent loans
|
|
1,586
|
|
|
688
|
|
|
1,595
|
|
|||
Net cash (used in) provided by investing activities
|
|
(136,944
|
)
|
|
622
|
|
|
(5,097
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
||||||
Purchase of treasury stock
|
|
0
|
|
|
0
|
|
|
(19,692
|
)
|
|||
Dividends paid to shareholders
|
|
(135,985
|
)
|
|
(126,858
|
)
|
|
(118,526
|
)
|
|||
Net proceeds from long-term borrowings
|
|
24,776
|
|
|
—
|
|
|
—
|
|
|||
Net cash used in financing activities
|
|
(111,209
|
)
|
|
(126,858
|
)
|
|
(138,218
|
)
|
|||
|
|
|
|
|
|
|
||||||
Net increase in cash and cash equivalents
|
|
6,183
|
|
|
91,142
|
|
|
42,698
|
|
|||
Cash and cash equivalents, beginning of year
|
|
182,889
|
|
|
91,747
|
|
|
49,049
|
|
|||
Cash and cash equivalents, end of year
|
|
$
|
189,072
|
|
|
$
|
182,889
|
|
|
$
|
91,747
|
|
|
|
|
|
|
|
|
||||||
Supplemental disclosure of noncash transactions
|
|
|
|
|
|
|
||||||
Transfer of investments from limited partnerships to trading securities
|
|
$
|
4,464
|
|
|
$
|
—
|
|
|
$
|
—
|
|
•
|
Indemnity's management fee revenues are included on the face of the Statements of Operations. The Noncontrolling Interest - Exchange revenues and expenses are no longer included in the Statements of Operations, Statements of Comprehensive Income or Statements of Cash Flows.
|
•
|
The assets and liabilities of the Noncontrolling Interest - Exchange are not included on the Statements of Financial Position. The assets and liabilities of Indemnity are presented on a classified basis, which distinguishes between current and noncurrent on the Statements of Financial Position.
|
•
|
There is
no
cumulative effect to Indemnity's shareholders’ equity. The noncontrolling interest in total equity that represented the amount of the Exchange’s subscribers’ equity was presented separately from Indemnity's shareholders’ equity.
|
•
|
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.
|
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
For the years ended December 31,
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||||||||||||||
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per- share amount
|
|
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
|
|
$
|
208,644
|
|
|
46,188,952
|
|
|
$
|
4.52
|
|
|
$
|
173,248
|
|
|
46,186,671
|
|
|
$
|
3.75
|
|
|
$
|
166,134
|
|
|
46,247,876
|
|
|
$
|
3.59
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
145,551
|
|
|
—
|
|
|
0
|
|
|
211,340
|
|
|
—
|
|
|
0
|
|
|
267,558
|
|
|
—
|
|
||||||
Assumed conversion of Class B shares
|
|
1,722
|
|
|
6,100,800
|
|
|
—
|
|
|
1,430
|
|
|
6,100,800
|
|
|
—
|
|
|
1,371
|
|
|
6,100,800
|
|
|
—
|
|
||||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
210,366
|
|
|
52,435,303
|
|
|
$
|
4.01
|
|
|
$
|
174,678
|
|
|
52,498,811
|
|
|
$
|
3.33
|
|
|
$
|
167,505
|
|
|
52,616,234
|
|
|
$
|
3.18
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income available to Class B stockholders
|
|
$
|
1,722
|
|
|
2,542
|
|
|
$
|
678
|
|
|
$
|
1,430
|
|
|
2,542
|
|
|
$
|
563
|
|
|
$
|
1,371
|
|
|
2,542
|
|
|
$
|
539
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income available to Class B stockholders
|
|
$
|
1,721
|
|
|
2,542
|
|
|
$
|
677
|
|
|
$
|
1,429
|
|
|
2,542
|
|
|
$
|
562
|
|
|
$
|
1,369
|
|
|
2,542
|
|
|
$
|
538
|
|
•
|
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 December 31, 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. treasury
|
|
$
|
5,031
|
|
|
$
|
0
|
|
|
$
|
5,031
|
|
|
$
|
0
|
|
Government sponsored entities
|
|
2,026
|
|
|
0
|
|
|
2,026
|
|
|
0
|
|
||||
States & political subdivisions
|
|
253,132
|
|
|
0
|
|
|
253,132
|
|
|
0
|
|
||||
Corporate debt securities
|
|
322,948
|
|
|
0
|
|
|
313,596
|
|
|
9,352
|
|
||||
Residential mortgage-backed securities
|
|
16,102
|
|
|
0
|
|
|
16,102
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
36,849
|
|
|
0
|
|
|
36,849
|
|
|
0
|
|
||||
Collateralized debt obligations
|
|
69,253
|
|
|
0
|
|
|
69,253
|
|
|
0
|
|
||||
Other debt securities
|
|
2,000
|
|
|
0
|
|
|
2,000
|
|
|
0
|
|
||||
Total fixed maturities
|
|
707,341
|
|
|
0
|
|
|
697,989
|
|
|
9,352
|
|
||||
Common stock
|
|
5,950
|
|
|
5,950
|
|
|
0
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
713,291
|
|
|
5,950
|
|
|
697,989
|
|
|
9,352
|
|
||||
Other investments
(1)
|
|
4,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
717,703
|
|
|
$
|
5,950
|
|
|
$
|
697,989
|
|
|
$
|
9,352
|
|
|
|
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 December 31, 2015
|
|
Included
in
earnings
(1)
|
|
Included
in other
comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers
in and (out)
of
Level 3
|
|
Ending balance at December 31, 2016
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate debt securities
|
|
$
|
69
|
|
|
$
|
173
|
|
|
$
|
107
|
|
|
$
|
13,935
|
|
|
$
|
(1,854
|
)
|
|
$
|
(3,078
|
)
|
|
$
|
9,352
|
|
Commercial mortgage-backed securities
|
|
0
|
|
|
0
|
|
|
3
|
|
|
1,000
|
|
|
0
|
|
|
(1,003
|
)
|
|
0
|
|
|||||||
Collateralized debt obligations
|
|
8,577
|
|
|
4
|
|
|
(5
|
)
|
|
7,722
|
|
|
(54
|
)
|
|
(16,244
|
)
|
|
0
|
|
|||||||
Total fixed maturities
|
|
8,646
|
|
|
177
|
|
|
105
|
|
|
22,657
|
|
|
(1,908
|
)
|
|
(20,325
|
)
|
|
9,352
|
|
|||||||
Total available-for-sale securities
|
|
8,646
|
|
|
177
|
|
|
105
|
|
|
22,657
|
|
|
(1,908
|
)
|
|
(20,325
|
)
|
|
9,352
|
|
|||||||
Total Level 3 assets
|
|
$
|
8,646
|
|
|
$
|
177
|
|
|
$
|
105
|
|
|
$
|
22,657
|
|
|
$
|
(1,908
|
)
|
|
$
|
(20,325
|
)
|
|
$
|
9,352
|
|
(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 December 31, 2015
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Corporate debt securities
|
|
$
|
0
|
|
|
$
|
(1
|
)
|
|
$
|
(59
|
)
|
|
$
|
180
|
|
|
$
|
0
|
|
|
$
|
(51
|
)
|
|
$
|
69
|
|
Collateralized debt obligations
|
|
0
|
|
|
3
|
|
|
(7
|
)
|
|
8,581
|
|
|
0
|
|
|
0
|
|
|
8,577
|
|
|||||||
Total fixed maturities
|
|
0
|
|
|
2
|
|
|
(66
|
)
|
|
8,761
|
|
|
0
|
|
|
(51
|
)
|
|
8,646
|
|
|||||||
Total available-for-sale securities
|
|
0
|
|
|
2
|
|
|
(66
|
)
|
|
8,761
|
|
|
0
|
|
|
(51
|
)
|
|
8,646
|
|
|||||||
Total Level 3 assets
|
|
$
|
0
|
|
|
$
|
2
|
|
|
$
|
(66
|
)
|
|
$
|
8,761
|
|
|
$
|
0
|
|
|
$
|
(51
|
)
|
|
$
|
8,646
|
|
(in thousands)
|
|
At December 31, 2016
|
||||||||||||||
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
||||||||
Priced via pricing services
|
|
$
|
707,341
|
|
|
$
|
0
|
|
|
$
|
697,989
|
|
|
$
|
9,352
|
|
Total fixed maturities
|
|
707,341
|
|
|
0
|
|
|
697,989
|
|
|
9,352
|
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
||||||||
Priced via pricing services
|
|
5,950
|
|
|
5,950
|
|
|
0
|
|
|
0
|
|
||||
Total common stock
|
|
5,950
|
|
|
5,950
|
|
|
0
|
|
|
0
|
|
||||
Other investments:
|
|
|
|
|
|
|
|
|
||||||||
Priced via unobservable inputs
(1)
|
|
4,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total other investments
|
|
4,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
717,703
|
|
|
$
|
5,950
|
|
|
$
|
697,989
|
|
|
$
|
9,352
|
|
(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 December 31, 2016
|
||||||||||||||
(in thousands)
|
|
Amortized cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury
|
|
$
|
5,093
|
|
|
$
|
0
|
|
|
$
|
62
|
|
|
$
|
5,031
|
|
Government sponsored entities
|
|
2,004
|
|
|
22
|
|
|
0
|
|
|
2,026
|
|
||||
States & political subdivisions
|
|
249,312
|
|
|
6,113
|
|
|
2,293
|
|
|
253,132
|
|
||||
Corporate debt securities
|
|
321,041
|
|
|
3,293
|
|
|
1,386
|
|
|
322,948
|
|
||||
Residential mortgage-backed securities
|
|
16,232
|
|
|
61
|
|
|
191
|
|
|
16,102
|
|
||||
Commercial mortgage-backed securities
|
|
37,723
|
|
|
59
|
|
|
933
|
|
|
36,849
|
|
||||
Collateralized debt obligations
|
|
68,998
|
|
|
351
|
|
|
96
|
|
|
69,253
|
|
||||
Other debt securities
|
|
2,000
|
|
|
0
|
|
|
0
|
|
|
2,000
|
|
||||
Total fixed maturities
|
|
702,403
|
|
|
9,899
|
|
|
4,961
|
|
|
707,341
|
|
||||
Common stock
|
|
6,152
|
|
|
0
|
|
|
202
|
|
|
5,950
|
|
||||
Total available-for-sale securities
|
|
$
|
708,555
|
|
|
$
|
9,899
|
|
|
$
|
5,163
|
|
|
$
|
713,291
|
|
|
|
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 December 31, 2016
|
||||||
(in thousands)
|
|
Amortized
|
|
Estimated
|
||||
|
|
cost
|
|
fair value
|
||||
Due in one year or less
|
|
$
|
55,304
|
|
|
$
|
55,394
|
|
Due after one year through five years
|
|
329,377
|
|
|
331,617
|
|
||
Due after five years through ten years
|
|
203,880
|
|
|
207,358
|
|
||
Due after ten years
|
|
113,842
|
|
|
112,972
|
|
||
Total fixed maturities
|
|
$
|
702,403
|
|
|
$
|
707,341
|
|
|
|
At December 31, 2016
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||||||||
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
No. of
|
|||||||||||||
|
|
value
|
|
losses
|
|
value
|
|
losses
|
|
value
|
|
losses
|
|
holdings
|
|||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. treasury
|
|
$
|
5,031
|
|
|
$
|
62
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
5,031
|
|
|
$
|
62
|
|
|
1
|
|
States & political subdivisions
|
|
84,611
|
|
|
2,293
|
|
|
0
|
|
|
0
|
|
|
84,611
|
|
|
2,293
|
|
|
40
|
|
||||||
Corporate debt securities
|
|
112,453
|
|
|
987
|
|
|
8,692
|
|
|
399
|
|
|
121,145
|
|
|
1,386
|
|
|
155
|
|
||||||
Residential mortgage-backed securities
|
|
7,451
|
|
|
60
|
|
|
4,974
|
|
|
131
|
|
|
12,425
|
|
|
191
|
|
|
13
|
|
||||||
Commercial mortgage-backed securities
|
|
26,509
|
|
|
437
|
|
|
4,319
|
|
|
496
|
|
|
30,828
|
|
|
933
|
|
|
28
|
|
||||||
Collateralized debt obligations
|
|
27,470
|
|
|
75
|
|
|
4,208
|
|
|
21
|
|
|
31,678
|
|
|
96
|
|
|
15
|
|
||||||
Total fixed maturities
|
|
263,525
|
|
|
3,914
|
|
|
22,193
|
|
|
1,047
|
|
|
285,718
|
|
|
4,961
|
|
|
252
|
|
||||||
Common stock
|
|
5,950
|
|
|
202
|
|
|
0
|
|
|
0
|
|
|
5,950
|
|
|
202
|
|
|
1
|
|
||||||
Total available-for-sale securities
|
|
$
|
269,475
|
|
|
$
|
4,116
|
|
|
$
|
22,193
|
|
|
$
|
1,047
|
|
|
$
|
291,668
|
|
|
$
|
5,163
|
|
|
253
|
|
Quality breakdown of fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investment grade
|
|
$
|
239,041
|
|
|
$
|
3,605
|
|
|
$
|
16,061
|
|
|
$
|
399
|
|
|
$
|
255,102
|
|
|
$
|
4,004
|
|
|
136
|
|
Non-investment grade
|
|
24,484
|
|
|
309
|
|
|
6,132
|
|
|
648
|
|
|
30,616
|
|
|
957
|
|
|
116
|
|
||||||
Total fixed maturities
|
|
$
|
263,525
|
|
|
$
|
3,914
|
|
|
$
|
22,193
|
|
|
$
|
1,047
|
|
|
$
|
285,718
|
|
|
$
|
4,961
|
|
|
252
|
|
|
|
At December 31, 2015
|
|||||||||||||||||||||||||
(dollars in thousands)
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||||||||
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
No. of
|
|||||||||||||
|
|
value
|
|
losses
|
|
value
|
|
losses
|
|
value
|
|
losses
|
|
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)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed maturities
|
|
$
|
20,175
|
|
|
$
|
16,457
|
|
|
$
|
14,173
|
|
Equity securities
|
|
171
|
|
|
1,045
|
|
|
1,550
|
|
|||
Cash equivalents and other
|
|
1,391
|
|
|
1,174
|
|
|
1,207
|
|
|||
Total investment income
|
|
21,737
|
|
|
18,676
|
|
|
16,930
|
|
|||
Less: investment expenses
|
|
1,190
|
|
|
885
|
|
|
394
|
|
|||
Investment income, net of expenses
|
|
$
|
20,547
|
|
|
$
|
17,791
|
|
|
$
|
16,536
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Available-for-sale securities:
|
|
|
|
|
|
|
||||||
Fixed maturities:
|
|
|
|
|
|
|
||||||
Gross realized gains
|
|
$
|
2,111
|
|
|
$
|
1,571
|
|
|
$
|
453
|
|
Gross realized losses
|
|
(2,113
|
)
|
|
(1,764
|
)
|
|
(333
|
)
|
|||
Net realized (losses) gains
|
|
(2
|
)
|
|
(193
|
)
|
|
120
|
|
|||
Equity securities:
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
1
|
|
|
759
|
|
|
1,132
|
|
|||
Gross realized losses
|
|
(34
|
)
|
|
(74
|
)
|
|
(195
|
)
|
|||
Net realized (losses) gains
|
|
(33
|
)
|
|
685
|
|
|
937
|
|
|||
Trading securities:
|
|
|
|
|
|
|
|
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
$
|
707
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Net realized gains
|
|
707
|
|
|
0
|
|
|
0
|
|
|||
Net realized investment gains
|
|
$
|
672
|
|
|
$
|
492
|
|
|
$
|
1,057
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Fixed maturities
|
|
$
|
(416
|
)
|
|
$
|
(1,558
|
)
|
|
$
|
(105
|
)
|
Total other-than-temporary impairments
|
|
(416
|
)
|
|
(1,558
|
)
|
|
(105
|
)
|
|||
Portion recognized in other comprehensive income
|
|
0
|
|
|
0
|
|
|
0
|
|
|||
Net impairment losses recognized in earnings
|
|
$
|
(416
|
)
|
|
$
|
(1,558
|
)
|
|
$
|
(105
|
)
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Equity in earnings of limited partnerships accounted for under the equity method
|
|
$
|
6,273
|
|
|
$
|
16,545
|
|
|
$
|
8,517
|
|
Change in fair value of limited partnerships accounted for under the fair value option
|
|
752
|
|
|
438
|
|
|
2,412
|
|
|||
Equity in earnings of limited partnerships
|
|
$
|
7,025
|
|
|
$
|
16,983
|
|
|
$
|
10,929
|
|
(in thousands)
|
|
2016
|
|
2015
|
||||
Private equity
|
|
$
|
35,228
|
|
|
$
|
48,397
|
|
Mezzanine debt
|
|
6,010
|
|
|
12,701
|
|
||
Real estate
|
|
12,509
|
|
|
22,911
|
|
||
Real estate - fair value option
|
|
4,412
|
|
|
4,526
|
|
||
Total limited partnerships
|
|
$
|
58,159
|
|
|
$
|
88,535
|
|
|
|
|
|
|
|
(in thousands)
|
|
2016
|
|
2015
|
||||
Software
|
|
$
|
124,093
|
|
|
$
|
110,405
|
|
Equipment
|
|
11,771
|
|
|
10,679
|
|
||
Land, buildings, and building improvements
|
|
7,627
|
|
|
7,627
|
|
||
Leasehold improvements
|
|
1,375
|
|
|
1,171
|
|
||
Projects in progress
|
|
17,812
|
|
|
17,719
|
|
||
Construction in progress
|
|
9,622
|
|
|
—
|
|
||
Total fixed assets, gross
|
|
172,300
|
|
|
147,601
|
|
||
Less: Accumulated depreciation
|
|
(103,158
|
)
|
|
(88,514
|
)
|
||
Fixed assets, net
|
|
$
|
69,142
|
|
|
$
|
59,087
|
|
(1)
|
Pension plan costs represent the total cost before reimbursements to Indemnity from the Exchange and EFL.
|
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
||||
Employee pension plan:
|
|
|
|
|
|
|
|
|
|
||||
Discount rate
|
|
4.24
|
%
|
|
4.57
|
%
|
|
4.17
|
%
|
|
5.11
|
%
|
|
Expected return on assets
(1)
|
|
7.00
|
|
|
7.00
|
|
|
7.00
|
|
|
7.50
|
|
|
Compensation increases
(2)
|
|
3.32
|
|
|
3.32
|
|
|
3.32
|
|
|
4.15
|
|
|
SERP:
|
|
|
|
|
|
|
|
|
|
|
|||
Discount rate – pre-retirement/post-retirement
|
|
4.24/3.74
|
|
|
4.57/4.07
|
|
|
4.17/3.67
|
|
|
5.11/4.61
|
|
|
Rate of compensation increase
|
|
5.00
|
|
|
5.00
|
|
|
5.00
|
|
|
6.00
|
|
|
(1)
|
The expected return on assets used to measure the net periodic benefit cost for 2017 is
6.75%
.
|
(2)
|
The rate of compensation increase for the employee plan is age-graded. An equivalent single compensation increase rate of
3.32%
in
2016
,
2015
and
2014
would produce similar results.
|
(1)
|
Effective September 12, 2016, a plan amendment was adopted to allow part time employees to participate in the pension plan, which added prior service cost of
$1.7 million
. Additionally, there was
one
new SERP participant in 2016, which contributed
$0.4 million
.
|
|
|
|
|
||||||||||
|
|
Target asset
allocation
|
|
Target asset
allocation
|
|
Actual asset
allocation
|
|
Actual asset
allocation
|
|
||||
Asset allocation:
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
||||
U.S. equity securities
|
|
35
|
%
|
(1)
|
35
|
%
|
|
38
|
%
|
|
36
|
%
|
|
Non-U.S. equity securities
|
|
20
|
|
(2)
|
20
|
|
|
18
|
|
|
20
|
|
|
Total equity securities
|
|
55
|
|
|
55
|
|
|
56
|
|
|
56
|
|
|
Debt securities
|
|
44
|
|
(3)
|
44
|
|
|
43
|
|
|
43
|
|
|
Other
|
|
1
|
|
(4)
|
1
|
|
|
1
|
|
|
1
|
|
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
(1)
|
U.S. equity securities
–
22%
seek to achieve excess returns relative to the Russell 2000 Index, while
30%
seek to achieve excess returns relative to the S&P 500. The remaining
48%
of the allocation to U.S. equity securities are comprised of equity index funds that track the S&P 500.
|
(2)
|
Non-U.S. equity securities
–
11%
are allocated to international small cap investments, while another
11%
are allocated to international emerging market investments. The remaining
78%
of the Non-U.S. equity securities are allocated to investments seeking to achieve excess returns relative to an international market index.
|
(3)
|
Debt securities
–
44%
are allocated to long U.S. Treasury Strips,
44%
are allocated to U.S. corporate bonds with an emphasis on long duration bonds rated A or better, while the remaining
12%
are allocated to floating rate high income leverage loans.
|
(4)
|
Institutional money market fund.
|
|
|
|
|
||||||||||||||
|
|
At December 31, 2016
|
|
||||||||||||||
|
|
Fair value measurements of plan assets using:
|
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Quoted prices in
active markets for
identical assets
Level 1
|
|
Significant
observable
inputs
Level 2
|
|
Significant
unobservable
inputs
Level 3
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. equity securities
|
|
$
|
225,446
|
|
|
$
|
0
|
|
|
$
|
225,446
|
|
|
$
|
0
|
|
|
Non-U.S. equity securities
|
|
107,953
|
|
|
0
|
|
|
107,953
|
|
|
0
|
|
|
||||
Total equity securities
|
|
333,399
|
|
|
0
|
|
|
333,399
|
|
|
0
|
|
|
||||
Debt securities
|
|
253,197
|
|
|
0
|
|
|
253,197
|
|
|
0
|
|
|
||||
Other
|
|
5,948
|
|
|
5,948
|
|
|
0
|
|
|
0
|
|
|
||||
Total
|
|
$
|
592,544
|
|
|
$
|
5,948
|
|
|
$
|
586,596
|
|
|
$
|
0
|
|
|
|
|
|
|
||||||||||||||
|
|
At December 31, 2015
|
|
||||||||||||||
|
|
Fair value measurements of plan assets using:
|
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Quoted prices in
active markets for
identical assets
Level 1
|
|
Significant
observable
inputs
Level 2
|
|
Significant
unobservable
inputs
Level 3
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
||||||||
U.S. equity securities
|
|
$
|
201,021
|
|
|
$
|
0
|
|
|
$
|
201,021
|
|
|
$
|
0
|
|
|
Non-U.S. equity securities
|
|
107,945
|
|
|
0
|
|
|
107,945
|
|
|
0
|
|
|
||||
Total equity securities
|
|
308,966
|
|
|
0
|
|
|
308,966
|
|
|
0
|
|
|
||||
Debt securities
|
|
236,619
|
|
|
0
|
|
|
236,619
|
|
|
0
|
|
|
||||
Other
|
|
5,906
|
|
|
5,906
|
|
|
0
|
|
|
0
|
|
|
||||
Total
|
|
$
|
551,491
|
|
|
$
|
5,906
|
|
|
$
|
545,585
|
|
|
$
|
0
|
|
|
(in thousands)
|
|
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Current income tax expense
|
|
$
|
109,727
|
|
|
$
|
106,155
|
|
|
$
|
87,064
|
|
Deferred income tax benefit
|
|
(2
|
)
|
|
(14,584
|
)
|
|
(3,305
|
)
|
|||
Income tax expense
|
|
$
|
109,725
|
|
|
$
|
91,571
|
|
|
$
|
83,759
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||||||||||||||
|
|
Before Tax
|
|
Income Tax
|
|
Net
|
|
|
Before Tax
|
|
Income Tax
|
|
Net
|
|
|
Before Tax
|
|
Income Tax
|
|
Net
|
|
|||||||||
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI, beginning of year
|
|
$
|
3,888
|
|
$
|
1,361
|
|
$
|
2,527
|
|
|
$
|
10,473
|
|
$
|
3,666
|
|
$
|
6,807
|
|
|
$
|
9,206
|
|
$
|
3,222
|
|
$
|
5,984
|
|
OCI (loss) before reclassifications
|
|
(385
|
)
|
(135
|
)
|
(250
|
)
|
|
(7,651
|
)
|
(2,678
|
)
|
(4,973
|
)
|
|
1,808
|
|
633
|
|
1,175
|
|
|||||||||
Realized investment losses (gains)
|
|
35
|
|
12
|
|
23
|
|
|
(492
|
)
|
(172
|
)
|
(320
|
)
|
|
(646
|
)
|
(226
|
)
|
(420
|
)
|
|||||||||
Impairment losses
|
|
416
|
|
146
|
|
270
|
|
|
1,558
|
|
545
|
|
1,013
|
|
|
105
|
|
37
|
|
68
|
|
|||||||||
OCI (loss)
|
|
66
|
|
23
|
|
43
|
|
|
(6,585
|
)
|
(2,305
|
)
|
(4,280
|
)
|
|
1,267
|
|
444
|
|
823
|
|
|||||||||
AOCI, end of year
|
|
$
|
3,954
|
|
$
|
1,384
|
|
$
|
2,570
|
|
|
$
|
3,888
|
|
$
|
1,361
|
|
$
|
2,527
|
|
|
$
|
10,473
|
|
$
|
3,666
|
|
$
|
6,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Pension and other postretirement plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI (loss), beginning of year
|
|
$
|
(152,910
|
)
|
$
|
(53,519
|
)
|
$
|
(99,391
|
)
|
|
$
|
(191,552
|
)
|
$
|
(67,044
|
)
|
$
|
(124,508
|
)
|
|
$
|
(100,128
|
)
|
$
|
(35,045
|
)
|
$
|
(65,083
|
)
|
OCI (loss) before reclassifications
|
|
(46,244
|
)
|
(16,185
|
)
|
(30,059
|
)
|
|
24,094
|
|
$
|
8,433
|
|
15,661
|
|
|
(98,223
|
)
|
(34,378
|
)
|
(63,845
|
)
|
||||||||
Amortization of prior service costs
(1)
|
|
695
|
|
243
|
|
452
|
|
|
668
|
|
234
|
|
434
|
|
|
709
|
|
248
|
|
461
|
|
|||||||||
Amortization of net actuarial loss
(1)
|
|
7,764
|
|
2,717
|
|
5,047
|
|
|
13,880
|
|
4,858
|
|
9,022
|
|
|
6,090
|
|
2,131
|
|
3,959
|
|
|||||||||
OCI (loss)
|
|
(37,785
|
)
|
(13,225
|
)
|
(24,560
|
)
|
|
38,642
|
|
13,525
|
|
25,117
|
|
|
(91,424
|
)
|
(31,999
|
)
|
(59,425
|
)
|
|||||||||
AOCI (loss), end of year
|
|
$
|
(190,695
|
)
|
$
|
(66,744
|
)
|
$
|
(123,951
|
)
|
|
$
|
(152,910
|
)
|
$
|
(53,519
|
)
|
$
|
(99,391
|
)
|
|
$
|
(191,552
|
)
|
$
|
(67,044
|
)
|
$
|
(124,508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI (loss), beginning of year
|
|
$
|
(149,022
|
)
|
$
|
(52,158
|
)
|
$
|
(96,864
|
)
|
|
$
|
(181,079
|
)
|
$
|
(63,378
|
)
|
$
|
(117,701
|
)
|
|
$
|
(90,922
|
)
|
$
|
(31,823
|
)
|
$
|
(59,099
|
)
|
Investment securities
|
|
66
|
|
23
|
|
43
|
|
|
(6,585
|
)
|
(2,305
|
)
|
(4,280
|
)
|
|
1,267
|
|
444
|
|
823
|
|
|||||||||
Pension and other postretirement plans
|
|
(37,785
|
)
|
(13,225
|
)
|
(24,560
|
)
|
|
38,642
|
|
13,525
|
|
25,117
|
|
|
(91,424
|
)
|
(31,999
|
)
|
(59,425
|
)
|
|||||||||
OCI (loss)
|
|
(37,719
|
)
|
(13,202
|
)
|
(24,517
|
)
|
|
32,057
|
|
11,220
|
|
20,837
|
|
|
(90,157
|
)
|
(31,555
|
)
|
(58,602
|
)
|
|||||||||
AOCI (loss), end of year
|
|
$
|
(186,741
|
)
|
$
|
(65,360
|
)
|
$
|
(121,381
|
)
|
|
$
|
(149,022
|
)
|
$
|
(52,158
|
)
|
$
|
(96,864
|
)
|
|
$
|
(181,079
|
)
|
$
|
(63,378
|
)
|
$
|
(117,701
|
)
|
(1)
|
These components of accumulated other comprehensive income (loss) are included in the computation of net periodic pension cost. See Note 8, "Postretirement Benefits", for additional information.
|
(in thousands)
|
|
2016
|
|
2015
|
||||
Erie Insurance Exchange
|
|
|
|
|
||||
Operating expenses
|
|
$
|
429,985
|
|
|
$
|
406,246
|
|
Investment expenses
|
|
27,240
|
|
|
24,620
|
|
||
|
|
457,225
|
|
|
430,866
|
|
||
Erie Family Life Insurance
|
|
|
|
|
||||
Operating expenses
|
|
$
|
36,818
|
|
|
$
|
33,988
|
|
Investment expenses
|
|
2,070
|
|
|
1,773
|
|
||
|
|
38,888
|
|
|
35,761
|
|
||
Total cash settlements
|
|
$
|
496,113
|
|
|
$
|
466,627
|
|
(in thousands)
|
|
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
210,366
|
|
|
$
|
174,678
|
|
|
$
|
167,505
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
15,154
|
|
|
16,461
|
|
|
15,656
|
|
|||
Deferred income tax benefit
|
|
(2
|
)
|
|
(14,584
|
)
|
|
(3,305
|
)
|
|||
Realized (gains) losses and impairments on investments
|
|
(256
|
)
|
|
1,066
|
|
|
(952
|
)
|
|||
Equity in earnings of limited partnerships
|
|
(7,025
|
)
|
|
(16,983
|
)
|
|
(10,929
|
)
|
|||
Net amortization of bond premium
|
|
7,436
|
|
|
8,160
|
|
|
7,225
|
|
|||
(Decrease) increase in deferred compensation
|
|
(4,561
|
)
|
|
(1,526
|
)
|
|
6,149
|
|
|||
Limited partnership distributions
|
|
17,837
|
|
|
14,112
|
|
|
15,327
|
|
|||
Increase in receivables from affiliates
|
|
(30,485
|
)
|
|
(12,835
|
)
|
|
(34,778
|
)
|
|||
(Increase) decrease in accrued investment income
|
|
(846
|
)
|
|
47
|
|
|
(915
|
)
|
|||
Decrease (increase) in federal income taxes recoverable
|
|
6,687
|
|
|
(499
|
)
|
|
(8,421
|
)
|
|||
Decrease in prepaid pension
|
|
10,524
|
|
|
20,307
|
|
|
557
|
|
|||
(Increase) decrease in prepaid expenses and other assets
|
|
(4,674
|
)
|
|
1,193
|
|
|
(1,747
|
)
|
|||
Increase in accounts payable and accrued expenses
|
|
11,144
|
|
|
3,633
|
|
|
1,753
|
|
|||
Increase in commissions payable
|
|
15,017
|
|
|
5,624
|
|
|
20,596
|
|
|||
Increase in accrued agent bonuses
|
|
8,020
|
|
|
18,524
|
|
|
12,292
|
|
|||
Net cash provided by operating activities
|
|
$
|
254,336
|
|
|
$
|
217,378
|
|
|
$
|
186,013
|
|
|
|
Year ended December 31, 2016
|
||||||||||||||||||
(in thousands, except per share data)
|
|
First
quarter
|
|
Second
quarter
|
|
Third
quarter
|
|
Fourth
quarter
|
|
Year
|
||||||||||
Operating revenue
|
|
$
|
374,728
|
|
|
$
|
423,884
|
|
|
$
|
418,406
|
|
|
$
|
379,613
|
|
|
$
|
1,596,631
|
|
Operating expenses
|
|
307,063
|
|
|
338,125
|
|
|
336,151
|
|
|
322,928
|
|
|
1,304,267
|
|
|||||
Investment income, net of interest expense
|
|
2,559
|
|
|
7,404
|
|
|
4,326
|
|
|
13,438
|
|
|
27,727
|
|
|||||
Income before income taxes
|
|
70,224
|
|
|
93,163
|
|
|
86,581
|
|
|
70,123
|
|
|
$
|
320,091
|
|
||||
Net income
|
|
$
|
45,895
|
|
|
$
|
61,309
|
|
|
$
|
57,376
|
|
|
$
|
45,786
|
|
|
$
|
210,366
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share
(1)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Class A common stock – basic
|
|
$
|
0.99
|
|
|
$
|
1.32
|
|
|
$
|
1.23
|
|
|
$
|
0.98
|
|
|
$
|
4.52
|
|
Class A common stock – diluted
|
|
$
|
0.87
|
|
|
$
|
1.17
|
|
|
$
|
1.09
|
|
|
$
|
0.87
|
|
|
$
|
4.01
|
|
Class B common stock – basic
|
|
$
|
148
|
|
|
$
|
197
|
|
|
$
|
185
|
|
|
$
|
147
|
|
|
$
|
678
|
|
Class B common stock – diluted
|
|
$
|
148
|
|
|
$
|
197
|
|
|
$
|
185
|
|
|
$
|
147
|
|
|
$
|
677
|
|
(
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.
|
|
|
Year ended December 31, 2015
|
||||||||||||||||||
(in thousands, except per share data)
|
|
First
quarter
|
|
Second
quarter
|
|
Third
quarter
|
|
Fourth
quarter
|
|
Year
|
||||||||||
Operating revenue
|
|
$
|
350,831
|
|
|
$
|
401,660
|
|
|
$
|
396,637
|
|
|
$
|
356,380
|
|
|
$
|
1,505,508
|
|
Operating expenses
|
|
298,401
|
|
|
331,677
|
|
|
328,348
|
|
|
314,541
|
|
|
1,272,967
|
|
|||||
Investment income
|
|
6,539
|
|
|
15,705
|
|
|
7,220
|
|
|
4,244
|
|
|
33,708
|
|
|||||
Income before income taxes
|
|
58,969
|
|
|
85,688
|
|
|
75,509
|
|
|
46,083
|
|
|
$
|
266,249
|
|
||||
Net income
|
|
$
|
38,833
|
|
|
$
|
56,150
|
|
|
$
|
49,562
|
|
|
$
|
30,133
|
|
|
$
|
174,678
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share
(1)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Class A common stock – basic
|
|
$
|
0.83
|
|
|
$
|
1.21
|
|
|
$
|
1.06
|
|
|
$
|
0.65
|
|
|
$
|
3.75
|
|
Class A common stock –
diluted
|
|
$
|
0.74
|
|
|
$
|
1.07
|
|
|
$
|
0.94
|
|
|
$
|
0.57
|
|
|
$
|
3.33
|
|
Class B common stock – basic
|
|
$
|
125
|
|
|
$
|
181
|
|
|
$
|
160
|
|
|
$
|
97
|
|
|
$
|
563
|
|
Class B common stock – diluted
|
|
$
|
125
|
|
|
$
|
180
|
|
|
$
|
159
|
|
|
$
|
97
|
|
|
$
|
562
|
|
(
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.
|
/s/ Timothy G. NeCastro
|
|
/s/ Gregory J. Gutting
|
|
/s/ Julie M. Pelkowski
|
|
Timothy G. NeCastro
|
|
Gregory J. Gutting
|
|
Julie M. Pelkowski
|
|
President and
|
|
Executive Vice President
|
|
Senior Vice President
|
|
Chief Executive Officer
|
|
and Chief Financial Officer
|
|
and Controller
|
|
February 23, 2017
|
|
February 23, 2017
|
|
February 23, 2017
|
|
Name
|
|
Age as of 12/31/2016
|
|
Principal Occupation and Positions for Past Five Years
|
|
|
|
|
|
President & Chief Executive Officer:
|
|
|
|
|
Timothy G. NeCastro
|
|
56
|
|
President and Chief Executive Officer since January 2017; Chief Executive Officer, August 2016 through December 2016; President and Chief Executive Officer Designate, June 2016 through July 2016; Senior Vice President, West Region, February 2010 through June 2016; Director, Erie Family Life Insurance Company ("EFL"), Erie Insurance Company ("EIC"), Flagship City Insurance Company ("Flagship"), Erie Insurance Company of New York ("ENY") and Erie Insurance Property & Casualty Company ("EPC").
|
Executive Vice Presidents:
|
|
|
|
|
Lorianne Feltz
|
|
47
|
|
Executive Vice President, Claims & Customer Service since November 2016; Senior Vice President, Customer Service, January 2011 through November 2016.
|
|
|
|
|
|
Gregory J. Gutting
|
|
53
|
|
Executive Vice President and Chief Financial Officer since August 2016; Interim Executive Vice President and Chief Financial Officer, October 2015 through July 2016; Senior Vice President and Controller, March 2009 through September 2015; Director, EFL, EIC, Flagship, ENY and EPC.
|
|
|
|
|
|
Robert C. Ingram, III
|
|
58
|
|
Executive Vice President and Chief Information Officer since August 2012; Senior Vice President and Chief Information Officer (for Commercial Lines, Hartford Investment Management Company and Enterprise Risk Management), The Hartford Financial Services Group, February 2011 through August 2012; Senior Vice President and Chief Information Officer, Commercial and Consumer Markets, The Hartford Financial Services Group, August 2009 through February 2011; Director, EFL, EIC, Flagship, ENY and EPC.
|
|
|
|
|
|
Sean J. McLaughlin
|
|
61
|
|
Executive Vice President and General Counsel since January 2016; Executive Vice President, Secretary and General Counsel, August 2013 through December 2015; Chief Judge, United States District Court for the Western District of Pennsylvania, April 2013 through August 2013; United States District Judge for the Western District of Pennsylvania, October 1994 through April 2013; Director, EFL, EIC, Flagship, ENY and EPC.
|
|
|
|
|
|
Douglas E. Smith
|
|
42
|
|
Executive Vice President, Sales & Products since November 2016; Senior Vice President, Personal Lines, November 2008 through October 2016.
|
•
|
Report of Independent Registered Public Accounting Firm on the Effectiveness of Internal Control over Financial Reporting
|
•
|
Report of Independent Registered Public Accounting Firm on the Financial Statements
|
•
|
Statements of Operations for the three years ended
December 31, 2016
,
2015
and
2014
|
•
|
Statements of Comprehensive Income for the three years ended
December 31, 2016
,
2015
and
2014
|
•
|
Statements of Financial Position as of
December 31, 2016
and
2015
|
•
|
Statements of Shareholders’ Equity for the three years ended
December 31, 2016
,
2015
and
2014
|
•
|
Statements of Cash Flows for the three years ended
December 31, 2016
,
2015
and
2014
|
•
|
Notes to Financial Statements
|
|
|
|
|
Page
|
|
|
|
February 23, 2017
|
ERIE INDEMNITY COMPANY
|
|
|
(Registrant)
|
|
|
|
|
By:
|
/s/ Timothy G. NeCastro
|
|
|
Timothy G. NeCastro, President and CEO
|
|
|
(Principal Executive Officer)
|
|
February 23, 2017
|
/s/ Timothy G. NeCastro
|
|
||
|
Timothy G. NeCastro, President and CEO
|
|
||
|
(Principal Executive Officer)
|
|
||
|
|
|
|
|
|
|
/s/ Gregory J. Gutting
|
|
|
|
Gregory J. Gutting, Executive Vice President and CFO
|
|
||
|
(Principal Financial Officer)
|
|
||
|
|
|
||
|
/s/ Julie M. Pelkowski
|
|
||
|
Julie M. Pelkowski, Senior Vice President and Controller
|
|
||
|
(Principal Accounting Officer)
|
|
/s/ J. Ralph Borneman, Jr.
|
|
/s/ George R. Lucore
|
J. Ralph Borneman, Jr.
|
|
George R. Lucore
|
|
|
|
/s/ LuAnn Datesh
|
|
/s/ Thomas W. Palmer
|
LuAnn Datesh
|
|
Thomas W. Palmer
|
|
|
|
/s/ Jonathan Hirt Hagen
|
|
/s/ Martin P. Sheffield
|
Jonathan Hirt Hagen
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|
Martin P. Sheffield
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|
|
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/s/ Thomas B. Hagen
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/s/ Richard L. Stover
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Thomas B. Hagen, Chairman
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Richard L. Stover
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|
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/s/ C. Scott Hartz
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/s/ Elizabeth Hirt Vorsheck
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C. Scott Hartz
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Elizabeth Hirt Vorsheck
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/s/ Claude C. Lilly, III
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/s/ Robert C. Wilburn
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Claude C. Lilly, III
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Robert C. Wilburn
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Exhibit
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Number
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Description of Exhibit
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3.1
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Articles of Incorporation of Registrant. Such exhibit is incorporated by reference to the like numbered exhibit in the Registrant’s Form 10 Registration Statement Number 0-24000 filed with the Commission on May 2, 1994.
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3.1A
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Amendment to the Articles of Incorporation of Registrant effective May 2, 1996. Such exhibit is incorporated by reference to the like numbered exhibit in the Registrant’s Form 10-Q that was filed with the Commission on July 29, 2010.
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3.1B
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Amendment to the Articles of Incorporation of Registrant effective May 4, 2001. Such exhibit is incorporated by reference to the like numbered exhibit in the Registrant’s Form 10-Q that was filed with the Commission on July 29, 2010.
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3.1C
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Amendment to the Articles of Incorporation of Registrant effective May 10, 2007. Such exhibit is incorporated by reference to the like numbered exhibit in the Registrant’s Form 10-Q that was filed with the Commission on July 29, 2010.
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3.7
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Erie Indemnity Company Amended and Restated Bylaws effective May 5, 2009. 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 May 11, 2009.
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3.8
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Amended and Restated Articles of Incorporation of Registrant dated April 19, 2011. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on August 2, 2011.
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10.12
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Form of Subscriber’s Agreement whereby policyholders of Erie Insurance Exchange appoint Registrant as their Attorney-in-Fact. Such exhibit is incorporated by reference to the like titled but renumbered exhibit in the Registrant’s Form 10-Q that was filed with the Securities and Exchange Commission on November 6, 2002.
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10.129
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Lease Agreement between Erie Insurance Exchange and Erie Indemnity Company dated January 1, 2011. 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 24, 2011.
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10.145
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Erie Indemnity Company Equity Compensation Plan (incorporated by reference to Appendix A to the Registrant's Information Statement for the 2013 Annual Meeting of Shareholders filed with the Commission on March 18, 2013).
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|
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10.146
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Amended and Restated Credit Agreement among JPMorgan Chase Bank, National Association, as Administrative Agent; the Lenders named therein; and Erie Indemnity Company, dated October 25, 2013. 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 October 30, 2013.
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|
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10.152
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Erie Indemnity Company Annual Incentive Plan (As Amended and Restated Effective as of January 1, 2014). Such exhibit is incorporated by reference to Appendix A to the Registrant's Information Statement for the 2014 Annual Meeting of Shareholders filed with the Commission on March 14, 2014.
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|
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10.153
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Erie Indemnity Company Long-Term Incentive Plan (As Amended and Restated Effective as of January 1, 2014). Such exhibit is incorporated by reference to Appendix B to the Registrant's Information Statement for the 2014 Annual Meeting of Shareholders filed with the Commission on March 14, 2014.
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10.154
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First Amendment to Erie Indemnity Company Equity Compensation Plan effective January 1, 2014, dated March 10, 2014. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on May 1, 2014.
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10.156
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Form of Indemnification Agreement by and between Erie Indemnity Company and each Director and Executive Officer of Erie Indemnity Company. 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.
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10.157
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First Amendment to Erie Indemnity Company Long-Term Incentive Plan (As Amended and Restated Effective as of January 1, 2014), dated March 25, 2015. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on April 30, 2015.
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Exhibit
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Number
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Description of Exhibit
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10.158
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Erie Indemnity Company Deferred Compensation Plan for Outside Directors (As Amended and Restated as of July 29, 2015), dated October 20, 2015. 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 25, 2016.
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10.159
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Erie Indemnity Company Deferred Stock Plan for Outside Directors (As of July 29, 2015), dated October 20, 2015. 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 25, 2016.
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10.160
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First Amendment to Amended and Restated Credit Agreement among JPMorgan Chase Bank, National Association, as Administrative Agent; the Lenders named therein; and Erie Indemnity Company, dated October 28, 2015. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on October 29, 2015.
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10.162
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Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2014), dated December 18, 2015. 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 25, 2016.
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10.163
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Erie Insurance Group Employee Savings Plan (As Amended and Restated Effective as of January 1, 2015), dated December 18, 2015. 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 25, 2016.
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10.164
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Agreement between Erie Indemnity Company and Marcia A. Dall, dated December 20, 2015. 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 December 22, 2015.
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10.165
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Agreement between Erie Indemnity Company and Richard F. Burt, Jr. dated February 16, 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 February 19, 2016.
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10.166
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First Amendment to Erie Indemnity Company Deferred Stock Plan for Outside Directors (As Amended and Restated as of July 29, 2015), dated March 31, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on April 28, 2016.
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10.167
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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.
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10.168
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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.
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10.169
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First Amendment to Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2014), dated September 12, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on October 27, 2016.
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10.170
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Second Amendment to Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2014), dated September 12, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on October 27, 2016.
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10.171
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First Amendment to Erie Insurance Group Employee Savings Plan (As Amended and Restated Effective as of January 1, 2015), dated September 12, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on October 27, 2016.
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10.172
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First Amendment to Erie Indemnity Company Annual Incentive Plan (As Amended and Restated Effective as of January 1, 2014), dated August 1, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on October 27, 2016.
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10.173
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Second Amendment to Erie Indemnity Company Long-Term Incentive Plan (As Amended and Restated Effective as of January 1, 2014), dated August 1, 2016. Such exhibit is incorporated by reference to the like titled exhibit in the Registrant’s Form 10-Q that was filed with the Commission on October 27, 2016.
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10.174
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Credit Agreement by and among Erie Indemnity Company and PNC Bank, National Association, dated as of November 7, 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 November 14, 2016.
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Exhibit
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Number
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Description of Exhibit
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10.175
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Pledge Agreement made by Erie Indemnity Company in favor of PNC Bank, National Association, dated as of November 7, 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 November 14, 2016.
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10.176
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Second Amendment to Amended and Restated Credit Agreement by and among Erie Indemnity Company, the lenders named therein and JPMorgan Chase Bank, National Association, as administrative agent dated November 7, 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 November 14, 2016.
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10.177*
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Erie Indemnity Company Incentive Compensation Deferral Plan (Effective January 1, 2017), dated December 7, 2016.
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10.178*
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Third Amendment to Erie Insurance Group Retirement Plan for Employees (As Amended and Restated Effective December 31, 2014), dated December 22, 2016.
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14.3
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Code of Conduct. 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 25, 2016.
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14.4
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Code of Ethics for Senior Financial Officers. 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 June 1, 2016.
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23*
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Consent of Independent Registered Public Accounting Firm.
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31.1*
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2*
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32*
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS*
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XBRL Instance Document.
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101.SCH*
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XBRL Taxonomy Extension Schema Document.
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document.
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101.DEF*
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XBRL Taxonomy Extension Definition Linkbase Document.
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase Document.
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document.
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a)
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A Separation from Service shall not be considered to have occurred if the individual’s employment relationship is treated by the Company or Affiliate as continuing while the individual is on military leave, sick leave, or other bona fide leave of absence if such period of leave does not exceed six months or, if longer, so long as the individual’s right to reemployment is provided by statute or by contract. If the period of leave exceeds six months and such reemployment rights are not provided, the employment relationship is deemed to cease on the first date immediately following such six-month period.
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b)
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A Separation from Service shall also not be considered to have occurred if the individual’s employment relationship is treated by the Company or Affiliate as continuing while the individual is on a leave of absence due to any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of not less than six months, where such impairment causes the individual to be unable to perform the duties of his position or any substantially similar position, provided that, for purposes of the Plan, the employment relationship shall be considered to continue no longer than 29 months or, if longer, so long as the individual’s right to reemployment is provided by statute or by contract. If the period of leave exceeds 29 months and such reemployment rights are not provided, the employment relationship is deemed to cease on the first date immediately following such 29-month period.
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c)
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A Separation from Service shall also not be considered to have occurred, regardless of the level of services anticipated or provided by the individual as an employee or in a capacity other than an employee, if the individual continues to provide services to the Company or any Affiliate at a rate that is fifty percent (50%) or more of the level of services rendered, on average, during the immediately preceding 36-month period (or the full period of such services, if less than 36 months) and the remuneration for such services is fifty percent (50%) or more of the average remuneration earned during the 36-month period (or the full period of such services, if less than 36 months).
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d)
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Otherwise, a Separation from Service is presumed to have occurred if the facts and circumstances indicate that (A) the Company or Affiliate and the individual reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the individual would perform after such date would permanently decrease to 20% or less of the average level of bona fide services over the immediately preceding 36-month period (or the full period of such services, if less than 36 months) or (B) the level of bona fide services the individual performs after a given date decreases to a level equal to 20% or less of the average level of bona fide services performed by the individual over the immediately preceding 36-month period (or the full period of such services, if less than 36 months).
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a)
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The percentage of any award under the AIP to be deferred, as provided in Section 4.1, for the calendar year performance period to which the election applies;
|
b)
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The percentage of any award determined under the LTIP to be deferred, as provided in Section 4.1, for the multi-year performance period to which the election applies; and
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c)
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The Beneficiary to whom payment of all amounts credited to the Participant’s Deferred Stock Account will be made in the event of the Participant’s death.
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a)
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Except as provided under paragraph (b) below, an Employee who is eligible to participate under Section 3.1 shall first become a Participant in the Plan as of the first day of the calendar year that immediately follows the calendar year in which the Administrator receives the Employee’s properly completed and executed Election Form. For any given period, the effective date for the deferral of an AIP or LTIP award shall be the date such award would otherwise be payable to the Participant in cash.
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b)
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A newly hired Employee or a newly promoted Employee who is eligible to participate under Section 3.1 shall first become a Participant in the Plan as of the date that the Employee begins active employment with the Company or an Affiliate or the date on which the Employee’s promotion is effective, provided the Administrator has received the Employee’s Election Form prior to such date. Notwithstanding the preceding sentence, a newly hired Employee or newly promoted Employee who is eligible to participate under Section 3.1 may elect to participate under the provisions of Section 3.2 by delivering a properly completed and executed Election Form to the Administrator within 30 days of the Employee’s date of hire or, if applicable, effective date of promotion. In the event such an Employee completes such action, the Employee’s elections under Section 3.2 shall apply only with respect to that portion of an AIP and/or LTIP award that is attributable to the Employee’s services performed after the Election Form has been delivered to the Administrator and the effective date for participation of such Employee shall be the date as of which the Administrator determines such Election Form to be effective.
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a)
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Deferral Election for Initial Year of Participation.
An Employee who is first eligible to participate in the Plan under the provisions of Section 3.1 may elect to defer receipt of up to 100% of an AIP award for the calendar year performance period commencing as of the January 1 next following the Employee’s election and/or up to 100% of a LTIP award for the multi-year performance period commencing as of the January 1 next following the Employee’s election. An Employee shall make such election(s) by delivering a properly completed and executed Election Form to the Administrator as provided in Section 3.2. Except as provided in Section 3.3(b), a properly completed and executed Election Form shall be considered to be delivered on a timely basis if it is provided to the Administrator by the last day of the last full pay period ending in the calendar year which immediately precedes the beginning of the calendar year or multi-year performance period for which the deferral election is effective and the AIP or LTIP award is to be earned. Except as provided in paragraph (d) or (e) below, any such deferral election(s) shall be irrevocable as of the last day of the last full pay period ending in the calendar year that immediately precedes the beginning of the calendar year or multi-year performance period to which the election applies. Any such deferral election shall automatically terminate as to any AIP award and any LTIP award attributable to any subsequent performance periods.
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b)
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Deferral Elections for Subsequent Years of Participation.
With respect to any calendar year or multi-year performance periods beginning after the year an Employee first becomes eligible to participate under Section 3.1, the Employee may elect to defer receipt of up to 100% of an AIP award for the calendar year performance period commencing as of the January 1 next following the Employee’s election and/or up to 100% of a LTIP award for the multi-year performance period commencing as of the January 1 next following the Employee’s election. An Employee shall make such election(s) by delivering a properly completed and executed Election Form to the Administrator as provided in Section 3.2. A properly completed and executed Election Form shall be considered to be delivered on a timely basis if it is provided to the Administrator by the last day of the last full pay period ending in the calendar year which immediately precedes the beginning of the calendar year or multi-year performance period for which the deferral election is effective and the AIP or LTIP award is to be earned. Except as provided in paragraph (d) or (e) below, any such deferral election(s) shall be irrevocable as of the last day of the last full pay period ending in the calendar year that immediately precedes the
|
c)
|
An AIP and/or LTIP award deferred under this Section 4.1 shall be credited as an Incentive Compensation Deferral Share Credit to the Deferred Stock Account maintained on behalf of the Participant as of the Share Credit Allocation Date.
|
d)
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If a Participant makes a hardship withdrawal under the terms of the Erie Insurance Group Employee Savings Plan (or any successor plan) or a withdrawal due to an unforeseeable emergency under the terms of the Deferred Compensation Plan of Erie Indemnity Company (or any successor plan) all deferral elections made by the Participant under this Section 4.1 with respect to an AIP and/or a LTIP award shall be cancelled. Such Participant shall not be permitted to make any further deferral under the Plan until the Participant satisfies the procedures set forth in paragraph (b) above
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e)
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Participant deferrals of an AIP and/or LTIP award under the Plan shall be cancelled in such other events or conditions as the Commissioner of Internal Revenue may prescribe in generally applicable guidance published in the Internal Revenue Bulletin which the Administrator, in its discretion, chooses to apply under the Plan; provided, however, that a Participant shall have no direct or indirect election to the application of such events or conditions to his individual circumstances.
|
a)
|
AIP Award
. With respect to the deferral of an AIP award, such cash amount shall be determined as the product of the Participant’s AIP award for the given performance period and the deferral percentage applicable to such AIP award elected by the Participant on the Participant’s Election Form applicable to such performance period.
|
b)
|
LTIP Award
. With respect to the deferral of a LTIP award, such cash amount shall be determined as the product of the Participant’s LTIP award for the given performance period and the deferral percentage applicable to such LTIP award elected by the Participant on the Participant’s Election Form applicable to such performance period.
|
a)
|
A dividend credit is determined, expressed in cash, equal to the product of:
|
(i)
|
The dividend payable by the Company on one share of Common Stock for such quarterly period; and
|
(ii)
|
The number of accumulated Share Credits credited to the Participant’s Deferred Stock Account as of the Common Stock dividend record date applicable to such quarterly period.
|
b)
|
The dividend credit determined in paragraph (a) above will immediately be converted into a Share Credit by dividing such cash dividend credit by the consolidated closing bid price for Common Stock on the date on which the dividend is paid on Common Stock for such quarterly period.
|
a)
|
The Participant needs to avoid a violation of an applicable federal, state, local, or foreign ethics law or conflicts of interest law.
|
b)
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The Participant incurs state, local, or foreign tax obligations arising from participation in the Plan that apply to a Plan interest before such interest is otherwise payable from the Plan.
|
c)
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The Participant incurs federal employment tax obligations under Sections 3101, 3121(a), or 3121(v)(2) of the Code with respect to a Vested Deferred Stock Account and any federal, state, local, or foreign tax obligations arising from such employment tax obligations.
|
d)
|
The Plan is terminated and liquidated in accordance with generally applicable guidance prescribed by the Commissioner of Internal Revenue and published in the Internal Revenue Bulletin.
|
e)
|
Such other events or conditions as the Commissioner of Internal Revenue may prescribe in generally applicable guidance published in the Internal Revenue Bulletin which the Administrator, in its discretion, chooses to apply under the Plan; provided, however, that a Participant shall have no direct or indirect election as to the application of such events or conditions to his individual circumstances.
|
a)
|
The Administrator reasonably anticipates that if Plan payments were to be made as scheduled, the Company’s deduction with respect to such payments would not be permitted under Section 162(m) of the Code; provided such scheduled payments are then made during the Participant’s first taxable year in which the Administrator reasonably anticipates that the Company’s deduction will not be barred by application of Section 162(m) of the Code.
|
b)
|
The Administrator reasonably anticipates that making scheduled Plan payments will violate federal securities laws or other applicable law; provided that the scheduled
|
c)
|
Such other events or conditions as the Commissioner of Internal Revenue may prescribe in generally applicable guidance published in the Internal Revenue Bulletin which the Administrator, in its discretion, chooses to apply under the Plan; provided, however, that a Participant shall have no direct or indirect election as to the application of such events or conditions to his individual circumstances.
|
a)
|
In the event of a Participant’s death, the amount represented by the Vested Deferred Stock Account maintained on behalf of the Participant (or, if the Participant began payment prior to death, the remaining balance of such account) shall be paid by the Company to the Participant’s Beneficiary in the form of a lump sum during the month next following the month of the Participant’s death. Except as provided in Sections 5.2 or 5.3, no payment to a Beneficiary under this paragraph (a) shall be made before or after such identified payment date; provided, however, that if the Company makes a payment within the permitted payment period (as defined below) and the actual date of payment is not within the direct or indirect control of the Beneficiary, such payment shall be treated as having been made on such identified payment date. The “permitted payment period” for this purpose shall begin on the first day of the month next following the month of the Participant’s death and shall end on the later of (i) the last day of the calendar year that includes the identified payment date, and (ii) the fifteenth day of the third month following the identified payment date.
|
b)
|
Payment of the distributable amount represented by the Vested Deferred Stock Account maintained on behalf of the deceased Participant shall be made in shares of Common Stock equal to the number of full Share Credits credited to such account as of the payment date, with fractional Share Credits payable in cash.
|
a)
|
Original Claim
. In the event a claim of any Participant, Beneficiary, or other person (hereinafter referred to in this Section as the “Claimant”) for a benefit is partially or completely denied, the Administrator shall give, within ninety (90) days after receipt of the claim (or if special circumstances, made known to the Claimant, require an extension of time for processing the claim, within one hundred eighty (180) days after receipt of the claim), written notice of such denial to the Claimant. Such notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reason or reasons for the denial (with reference to pertinent Plan provisions upon which the denial is based); an explanation of additional material or information, if any, necessary for the
|
b)
|
Review of Denied Claim
.
|
(i)
|
A Claimant whose claim is partially or completely denied shall have the right to request a full and fair review of the denial by a written request delivered to the Administrator within sixty (60) days of receipt of the written notice of claim denial, or within such longer time as the Administrator, under uniform rules, determines. In such review, the Claimant or his duly authorized representative shall have the right to review, upon request and free of charge, all documents, records or other information relevant to the claim and to submit any written comments, documents, or records relating to the claim to the Administrator.
|
(ii)
|
The Administrator, within sixty (60) days after the request for review, or in special circumstances, such as where the Administrator in its sole discretion holds a hearing, within one hundred twenty (120) days of the request for review, will submit its decision in writing. Such decision shall take into account all comments, documents, records and other information properly submitted by the Claimant, whether or not such information was considered in the original claim determination. The decision on review will be binding on all parties, will be written in a manner calculated to be understood by the Claimant, will contain specific reasons for the decision and specific references to the pertinent Plan provisions upon which the decision is based, will indicate that the Claimant may review, upon request and free of charge, all documents, records or other information relevant to the claim and will contain a statement of the Claimant’s right to bring a civil action under Section 502(a) of ERISA.
|
(iii)
|
If a Claimant fails to file a claim or request for review in the manner and in accordance with the time limitations specified herein, such claim or request for review shall be waived, and the Claimant shall thereafter be barred from again asserting such claim.
|
c)
|
Determination by the Administrator is Conclusive.
The Administrator’s determination of factual matter relating to Participants, Beneficiaries and other persons including, without limitation, a Participant’s compensation, the amount of any Share Credit and any other factual matters, shall be conclusive.
|
6.3
|
EXHAUSTION OF ADMINISTRATIVE REMEDIES
|
a)
|
No claimant shall be permitted to commence any civil action to recover Plan benefits or to enforce or clarify rights under the Plan under Section 502 or Section 510 of ERISA or under any other provision of law, whether or not statutory, until the claims review procedure set forth herein has been exhausted in its entirety; and
|
b)
|
In any such civil action all explicit and all implicit determinations by the Administrator (including, but not limited to, determinations as to whether the claim, or a request for a review of a denied claim, was timely filed) shall be afforded the maximum deference permitted by law.
|
6.4
|
DEADLINE TO FILE CIVIL ACTION
|
a)
|
Thirty months after the claimant knew or reasonably should have known of the principal facts on which the claim is based; or
|
b)
|
Six months after the claimant has exhausted the claims review procedure.
|
6.5
|
FICA AND OTHER TAXES
|
8.1
|
NO EFFECT ON EMPLOYMENT RIGHTS
|
8.2
|
GENERAL CONTRACTUAL OBLIGATION
|
a)
|
It is the intent of this Plan, and each Participant understands, that eligibility and participation in this Plan does not grant any Participant or Beneficiary any interest in any asset of the Company or any Affiliate. The Company’s obligation to pay to the Participant or Beneficiary the amounts credited hereunder is a general contract obligation and shall be satisfied solely from the general assets of the Company. Nothing contained in the Plan shall constitute a guaranty by the Company, any Affiliate, or any other entity or person that the assets of the Company will be sufficient to pay amounts determined in accordance with the Plan. The obligation of the Company under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay amounts in the future.
|
b)
|
The Company has entered into a trust agreement with a trustee to establish a grantor trust fund and intends to transfer assets thereto, subject to the claims of creditors of the Company. The time, manner, and amount of any such asset transfer shall at all times be in the sole discretion of the Company. The assets of such trust fund shall be used to pay some or all of the amounts credited under the Plan and may be used, at the sole discretion of the Company, to pay administrative expenses of the Plan and the trust. Payments by the trustee from such trust fund to or on behalf of a Participant or Beneficiary shall discharge, to the extent thereof, the Company’s obligation to make payments of amounts credited under the Plan from other Company assets.
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c)
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In each case in which amounts represented by the balances credited to a Participant’s Vested Deferred Stock Account have been distributed to the Participant, Beneficiary, or other person entitled to receipt thereof and which purports to cover in full the benefits hereunder, such Participant, Beneficiary or
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8.3
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BINDING ON COMPANY, PARTICIPANTS AND THEIR SUCCESSORS
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8.4
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SPENDTHRIFT PROVISIONS
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8.5
|
NO SPOUSAL RIGHTS
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8.6
|
DISCLOSURE
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8.7
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INCAPACITY OF RECIPIENT
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8.8
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INFORMATION FURNISHED BY PARTICIPANTS AND BENEFICIARIES
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8.9
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OVERPAYMENTS
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8.10
|
UNCLAIMED BENEFIT
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8.11
|
ELECTIONS, APPLICATIONS, NOTICES
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8.12
|
COUNTERPARTS
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8.13
|
SEVERABILITY
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8.14
|
GOVERNING LAW
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8.15
|
HEADINGS
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8.16
|
CONSTRUCTION
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(1)
|
Registration Statement (Form S-8 No. 333-188244) pertaining to the Erie Indemnity Company Equity Compensation Plan,
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(2)
|
Registration Statement (Form S-8 No. 333-148705) pertaining to the Erie Indemnity Company 2004 Long-Term Incentive Plan, Erie Indemnity Company 1997 Long-Term Incentive Plan, and Erie Indemnity Company Deferred Compensation Plan for Outside Directors,
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(3)
|
Registration Statement (Form S-8 No. 333-82062) pertaining to the Erie Indemnity Company Long-Term Incentive Plan,
|
(4)
|
Registration Statement (Form S-8 No. 333-53318) pertaining to the Erie Indemnity Company Long-Term Incentive Plan
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Date:
|
February 23, 2017
|
|
|
|
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/s/ Timothy G. NeCastro
|
|
|
Timothy G. NeCastro
|
|
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President & CEO
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Date:
|
February 23, 2017
|
|
|
|
|
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/s/ Gregory J. Gutting
|
|
|
Gregory J. Gutting
|
|
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Executive Vice President & CFO
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(1)
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The
Annual
Report on Form
10-K
of the Company for the
annual
period ended
December 31, 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
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(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
|
|
President & CEO
|
|
|
|
/s/ Gregory J. Gutting
|
|
Gregory J. Gutting
|
|
Executive Vice President & CFO
|
|
|
|
|
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February 23, 2017
|
|