|
ERIE INDEMNITY COMPANY
|
|
|
(Exact name of registrant as specified in its charter)
|
|
|
PENNSYLVANIA
|
|
25-0466020
|
|
|
(State or other jurisdiction of
|
|
(I.R.S. Employer
|
|
|
incorporation or organization)
|
|
Identification No.)
|
|
|
100 Erie Insurance Place, Erie, Pennsylvania
|
|
16530
|
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
|
|
|
|
|
|
(814) 870-2000
|
|
|
(Registrant’s telephone number, including area code)
|
|
|
Not applicable
|
|
|
(Former name, former address and former fiscal year, if changed since last report)
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Operating revenue
|
|
|
|
|
|
|
|
|
|
||||||
Management fee revenue
-
policy
issuance
and renewal services,
net
|
$
|
454,572
|
|
|
$
|
441,319
|
|
|
$
|
860,550
|
|
|
$
|
833,377
|
|
Management fee revenue - administrative services, net
|
13,299
|
|
|
—
|
|
|
26,373
|
|
|
—
|
|
||||
Administrative services reimbursement revenue
|
146,507
|
|
|
—
|
|
|
292,470
|
|
|
—
|
|
||||
Service agreement revenue
|
7,080
|
|
|
7,245
|
|
|
14,225
|
|
|
14,503
|
|
||||
Total operating revenue
|
621,458
|
|
|
448,564
|
|
|
1,193,618
|
|
|
847,880
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses
|
|
|
|
|
|
|
|
||||||||
Cost of operations - policy issuance and renewal services
|
379,628
|
|
|
365,116
|
|
|
728,258
|
|
|
697,492
|
|
||||
Cost of operations - administrative services
|
146,507
|
|
|
—
|
|
|
292,470
|
|
|
—
|
|
||||
Total operating expenses
|
526,135
|
|
|
365,116
|
|
|
1,020,728
|
|
|
697,492
|
|
||||
Operating income
|
95,323
|
|
|
83,448
|
|
|
172,890
|
|
|
150,388
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Investment income
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
7,104
|
|
|
6,239
|
|
|
13,924
|
|
|
12,220
|
|
||||
Net realized investment (losses) gains
|
(32
|
)
|
|
124
|
|
|
(497
|
)
|
|
640
|
|
||||
Net impairment losses recognized in earnings
|
(646
|
)
|
|
(61
|
)
|
|
(646
|
)
|
|
(182
|
)
|
||||
Equity in (losses) earnings of limited partnerships
|
(219
|
)
|
|
149
|
|
|
(411
|
)
|
|
362
|
|
||||
Total investment income
|
6,207
|
|
|
6,451
|
|
|
12,370
|
|
|
13,040
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
602
|
|
|
257
|
|
|
1,155
|
|
|
423
|
|
||||
Other income (expense)
|
58
|
|
|
(407
|
)
|
|
102
|
|
|
(816
|
)
|
||||
Income before income taxes
|
100,986
|
|
|
89,235
|
|
|
184,207
|
|
|
162,189
|
|
||||
Income tax expense
|
21,280
|
|
|
30,708
|
|
|
38,743
|
|
|
55,786
|
|
||||
Net income
|
$
|
79,706
|
|
|
$
|
58,527
|
|
|
$
|
145,464
|
|
|
$
|
106,403
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock – basic
|
$
|
1.71
|
|
|
$
|
1.26
|
|
|
$
|
3.12
|
|
|
$
|
2.28
|
|
Class A common stock – diluted
|
$
|
1.52
|
|
|
$
|
1.12
|
|
|
$
|
2.78
|
|
|
$
|
2.03
|
|
Class B common stock – basic
|
$
|
257
|
|
|
$
|
189
|
|
|
$
|
469
|
|
|
$
|
343
|
|
Class B common stock – diluted
|
$
|
257
|
|
|
$
|
188
|
|
|
$
|
468
|
|
|
$
|
343
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – Basic
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
46,188,705
|
|
|
46,180,852
|
|
|
46,188,309
|
|
|
46,184,666
|
|
||||
Class B common stock
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
52,312,849
|
|
|
52,299,395
|
|
|
52,311,741
|
|
|
52,355,214
|
|
||||
Class B common stock
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends declared per share
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
$
|
0.8400
|
|
|
$
|
0.7825
|
|
|
$
|
1.6800
|
|
|
$
|
1.5650
|
|
Class B common stock
|
$
|
126.000
|
|
|
$
|
117.375
|
|
|
$
|
252.000
|
|
|
$
|
234.750
|
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income
|
|
$
|
79,706
|
|
|
$
|
58,527
|
|
|
$
|
145,464
|
|
|
$
|
106,403
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive (loss) income, net of tax
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrealized holding (losses) gains on available-for-sale securities
|
|
(551
|
)
|
|
1,092
|
|
|
(5,978
|
)
|
|
2,613
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
|
$
|
79,155
|
|
|
$
|
59,619
|
|
|
$
|
139,486
|
|
|
$
|
109,016
|
|
|
|
June 30,
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||||
Assets
|
|
(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
198,412
|
|
|
$
|
215,721
|
|
Available-for-sale securities
|
|
107,369
|
|
|
71,190
|
|
||
Receivables from Erie Insurance Exchange and affiliates
|
|
445,211
|
|
|
418,328
|
|
||
Prepaid expenses and other current assets
|
|
45,426
|
|
|
34,890
|
|
||
Federal income taxes recoverable
|
|
0
|
|
|
29,900
|
|
||
Note receivable from Erie Family Life Insurance Company
|
|
25,000
|
|
|
25,000
|
|
||
Accrued investment income
|
|
6,647
|
|
|
6,853
|
|
||
Total current assets
|
|
828,065
|
|
|
801,882
|
|
||
|
|
|
|
|
||||
Available-for-sale securities
|
|
598,059
|
|
|
687,523
|
|
||
Equity securities
|
|
12,488
|
|
|
—
|
|
||
Limited partnership investments
|
|
39,651
|
|
|
45,122
|
|
||
Fixed assets, net
|
|
94,651
|
|
|
83,149
|
|
||
Deferred income taxes, net
|
|
31,527
|
|
|
19,390
|
|
||
Other assets
|
|
47,834
|
|
|
28,793
|
|
||
Total assets
|
|
$
|
1,652,275
|
|
|
$
|
1,665,859
|
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Commissions payable
|
|
$
|
253,328
|
|
|
$
|
228,124
|
|
Agent bonuses
|
|
56,482
|
|
|
122,528
|
|
||
Accounts payable and accrued liabilities
|
|
97,139
|
|
|
104,533
|
|
||
Dividends payable
|
|
39,119
|
|
|
39,116
|
|
||
Contract liability
|
|
33,137
|
|
|
—
|
|
||
Deferred executive compensation
|
|
8,801
|
|
|
15,605
|
|
||
Federal income taxes payable
|
|
8,933
|
|
|
0
|
|
||
Current portion of long-term borrowings
|
|
925
|
|
|
0
|
|
||
Total current liabilities
|
|
497,864
|
|
|
509,906
|
|
||
|
|
|
|
|
||||
Defined benefit pension plans
|
|
145,667
|
|
|
207,530
|
|
||
Employee benefit obligations
|
|
194
|
|
|
423
|
|
||
Contract liability
|
|
17,452
|
|
|
—
|
|
||
Deferred executive compensation
|
|
11,688
|
|
|
14,452
|
|
||
Long-term borrowings
|
|
98,800
|
|
|
74,728
|
|
||
Other long-term liabilities
|
|
422
|
|
|
1,476
|
|
||
Total liabilities
|
|
772,087
|
|
|
808,515
|
|
||
|
|
|
|
|
||||
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
|
|
16,459
|
|
|
16,470
|
|
||
Accumulated other comprehensive loss
|
|
(162,037
|
)
|
|
(156,059
|
)
|
||
Retained earnings
|
|
2,169,686
|
|
|
2,140,853
|
|
||
Total contributed capital and retained earnings
|
|
2,026,278
|
|
|
2,003,434
|
|
||
Treasury stock, at cost; 22,110,132 shares held
|
|
(1,156,999
|
)
|
|
(1,155,668
|
)
|
||
Deferred compensation
|
|
10,909
|
|
|
9,578
|
|
||
Total shareholders’ equity
|
|
880,188
|
|
|
857,344
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
1,652,275
|
|
|
$
|
1,665,859
|
|
|
|
Six months ended
|
||||||
|
|
June 30,
|
||||||
|
|
2018
|
|
2017
|
||||
Cash flows from operating activities
|
|
|
|
|
||||
Management fee received
|
|
$
|
859,694
|
|
|
$
|
806,129
|
|
Administrative services reimbursements received
|
|
298,056
|
|
|
—
|
|
||
Service agreement fee received
|
|
14,225
|
|
|
14,503
|
|
||
Net investment income received
|
|
17,279
|
|
|
15,022
|
|
||
Limited partnership distributions
|
|
3,037
|
|
|
1,339
|
|
||
Decrease in reimbursements collected from affiliates
|
|
—
|
|
|
(5,633
|
)
|
||
Commissions paid to agents
|
|
(413,880
|
)
|
|
(386,400
|
)
|
||
Agents bonuses paid
|
|
(126,594
|
)
|
|
(115,056
|
)
|
||
Salaries and wages paid
|
|
(102,601
|
)
|
|
(95,462
|
)
|
||
Pension contribution and employee benefits paid
|
|
(99,334
|
)
|
|
(33,737
|
)
|
||
General operating expenses paid
|
|
(111,381
|
)
|
|
(113,122
|
)
|
||
Administrative services expenses paid
|
|
(295,635
|
)
|
|
—
|
|
||
Income taxes paid
|
|
(208
|
)
|
|
(47,767
|
)
|
||
Interest paid
|
|
(1,065
|
)
|
|
(325
|
)
|
||
Net cash provided by operating activities
|
|
41,593
|
|
|
39,491
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
||||
Purchase of investments:
|
|
|
|
|
||||
Available-for-sale securities
|
|
(114,848
|
)
|
|
(184,803
|
)
|
||
Equity securities
|
|
(1,035
|
)
|
|
—
|
|
||
Limited partnerships
|
|
(215
|
)
|
|
(325
|
)
|
||
Proceeds from investments:
|
|
|
|
|
||||
Available-for-sale securities sales
|
|
76,387
|
|
|
57,851
|
|
||
Available-for-sale securities maturities/calls
|
|
69,674
|
|
|
100,042
|
|
||
Equity securities
|
|
1,157
|
|
|
—
|
|
||
Limited partnerships
|
|
2,682
|
|
|
4,344
|
|
||
Net purchase of fixed assets
|
|
(18,121
|
)
|
|
(9,972
|
)
|
||
Net distributions on agent loans
|
|
(21,334
|
)
|
|
(3,083
|
)
|
||
Net cash used in investing activities
|
|
(5,653
|
)
|
|
(35,946
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
||||
Dividends paid to shareholders
|
|
(78,235
|
)
|
|
(72,883
|
)
|
||
Net proceeds from long-term borrowings
|
|
24,986
|
|
|
24,975
|
|
||
Net cash used in financing activities
|
|
(53,249
|
)
|
|
(47,908
|
)
|
||
|
|
|
|
|
||||
Net decrease in cash and cash equivalents
|
|
(17,309
|
)
|
|
(44,363
|
)
|
||
Cash and cash equivalents, beginning of period
|
|
215,721
|
|
|
189,072
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
198,412
|
|
|
$
|
144,709
|
|
(in thousands)
|
|
Balance at December 31, 2017
|
Adjustments due to ASC 606
|
Balance at January 1, 2018
|
||||||
Statement of Financial Position:
|
|
|
|
|
||||||
Assets
|
|
|
|
|
||||||
Deferred tax asset
|
|
$
|
19,390
|
|
$
|
10,188
|
|
$
|
29,578
|
|
Liabilities
|
|
|
|
|
||||||
Contract liability
|
|
—
|
|
48,514
|
|
48,514
|
|
|||
Equity
|
|
|
|
|
||||||
Retained earnings
|
|
2,140,853
|
|
(38,326
|
)
|
2,102,527
|
|
|
|
June 30, 2018
|
||||||||
(in thousands)
|
|
As Reported
|
Balances without ASC 606
|
Impact of Change
Higher/(Lower) |
||||||
|
|
(Unaudited)
|
||||||||
Statement of Financial Position:
|
|
|
|
|
||||||
Assets
|
|
|
|
|
||||||
Deferred tax asset
|
|
$
|
31,527
|
|
$
|
20,903
|
|
$
|
10,624
|
|
Liabilities
|
|
|
|
|
||||||
Contract liability
|
|
50,589
|
|
—
|
|
50,589
|
|
|||
Equity
|
|
|
|
|
||||||
Retained earnings
|
|
2,169,686
|
|
2,209,651
|
|
(39,965
|
)
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||||||
(in thousands)
|
|
As Reported
|
Balances without ASC 606
|
Impact of Change
Higher/(Lower) |
|
As Reported
|
Balances without ASC 606
|
Impact of Change
Higher/(Lower) |
||||||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||||||
Statement of Operations:
|
|
|
|
|
|
|
|
|
||||||||||||
Management fee revenue allocated to policy issuance and renewal services, gross
|
|
$
|
456,896
|
|
$
|
471,999
|
|
$
|
(15,103
|
)
|
|
$
|
864,132
|
|
$
|
892,698
|
|
$
|
(28,566
|
)
|
Less: change in allowance for management fee returned on cancelled policies
|
|
(2,324
|
)
|
(2,400
|
)
|
76
|
|
|
(3,582
|
)
|
(3,700
|
)
|
118
|
|
||||||
Management fee revenue allocated to policy issuance and renewal services, net
|
|
$
|
454,572
|
|
$
|
469,599
|
|
$
|
(15,027
|
)
|
|
$
|
860,550
|
|
$
|
888,998
|
|
$
|
(28,448
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
Management fee revenue allocated to administrative services, gross
|
|
$
|
13,313
|
|
$
|
—
|
|
$
|
13,313
|
|
|
$
|
26,401
|
|
$
|
—
|
|
$
|
26,401
|
|
Less: change in allowance for management fee returned on cancelled policies
|
|
(14
|
)
|
—
|
|
(14
|
)
|
|
(28
|
)
|
—
|
|
(28
|
)
|
||||||
Management fee revenue allocated to administrative services, net
|
|
13,299
|
|
—
|
|
13,299
|
|
|
26,373
|
|
—
|
|
26,373
|
|
||||||
Administrative services reimbursement revenue
|
|
146,507
|
|
—
|
|
146,507
|
|
|
292,470
|
|
—
|
|
292,470
|
|
||||||
Total revenue allocated to administrative services
|
|
$
|
159,806
|
|
$
|
—
|
|
$
|
159,806
|
|
|
$
|
318,843
|
|
$
|
—
|
|
$
|
318,843
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||
Administrative services expenses
|
|
$
|
146,507
|
|
$
|
—
|
|
$
|
146,507
|
|
|
$
|
292,470
|
|
$
|
—
|
|
$
|
292,470
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||
(in thousands)
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
Management fee revenue - policy issuance and renewal services
|
$
|
454,572
|
|
$
|
441,319
|
|
|
$
|
860,550
|
|
$
|
833,377
|
|
|
|
|
|
|
|
||||||||
Management fee revenue - administrative services
|
13,299
|
|
—
|
|
|
26,373
|
|
—
|
|
||||
Administrative services reimbursement revenue
|
146,507
|
|
—
|
|
|
292,470
|
|
—
|
|
||||
Total administrative services
|
$
|
159,806
|
|
$
|
—
|
|
|
$
|
318,843
|
|
$
|
—
|
|
|
|
Three months ended June 30,
|
||||||||||||||||||||
|
|
2018
|
|
2017
|
||||||||||||||||||
(dollars in thousands, except per share data)
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
||||||||||
Class A – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class A stockholders
|
|
$
|
79,053
|
|
|
46,188,705
|
|
|
$
|
1.71
|
|
|
$
|
58,048
|
|
|
46,180,852
|
|
|
$
|
1.26
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
23,344
|
|
|
—
|
|
|
0
|
|
|
17,743
|
|
|
—
|
|
||||
Assumed conversion of Class B shares
|
|
653
|
|
|
6,100,800
|
|
|
—
|
|
|
479
|
|
|
6,100,800
|
|
|
—
|
|
||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
79,706
|
|
|
52,312,849
|
|
|
$
|
1.52
|
|
|
$
|
58,527
|
|
|
52,299,395
|
|
|
$
|
1.12
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
653
|
|
|
2,542
|
|
|
$
|
257
|
|
|
$
|
479
|
|
|
2,542
|
|
|
$
|
189
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
653
|
|
|
2,542
|
|
|
$
|
257
|
|
|
$
|
479
|
|
|
2,542
|
|
|
$
|
188
|
|
|
|
Six months ended June 30,
|
||||||||||||||||||||
|
|
2018
|
|
2017
|
||||||||||||||||||
(dollars in thousands, except per share data)
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
|
Allocated net income (numerator)
|
|
Weighted shares (denominator)
|
|
Per-share amount
|
||||||||||
Class A – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class A stockholders
|
|
$
|
144,273
|
|
|
46,188,309
|
|
|
$
|
3.12
|
|
|
$
|
105,532
|
|
|
46,184,666
|
|
|
$
|
2.28
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
22,632
|
|
|
—
|
|
|
0
|
|
|
69,748
|
|
|
—
|
|
||||
Assumed conversion of Class B shares
|
|
1,191
|
|
|
6,100,800
|
|
|
—
|
|
|
871
|
|
|
6,100,800
|
|
|
—
|
|
||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
145,464
|
|
|
52,311,741
|
|
|
$
|
2.78
|
|
|
$
|
106,403
|
|
|
52,355,214
|
|
|
$
|
2.03
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class B stockholders
|
|
$
|
1,191
|
|
|
2,542
|
|
|
$
|
469
|
|
|
$
|
871
|
|
|
2,542
|
|
|
$
|
343
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
1,191
|
|
|
2,542
|
|
|
$
|
468
|
|
|
$
|
871
|
|
|
2,542
|
|
|
$
|
343
|
|
•
|
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 June 30, 2018
|
||||||||||||||
|
|
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
|
|
$
|
36,442
|
|
|
$
|
0
|
|
|
$
|
36,442
|
|
|
$
|
0
|
|
States & political subdivisions
|
|
258,491
|
|
|
0
|
|
|
258,491
|
|
|
0
|
|
||||
Foreign government securities
|
|
499
|
|
|
0
|
|
|
499
|
|
|
0
|
|
||||
Corporate debt securities
|
|
282,006
|
|
|
0
|
|
|
270,886
|
|
|
11,120
|
|
||||
Residential mortgage-backed securities
|
|
21,869
|
|
|
0
|
|
|
21,869
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
32,276
|
|
|
0
|
|
|
32,276
|
|
|
0
|
|
||||
Collateralized debt obligations
|
|
70,976
|
|
|
0
|
|
|
70,976
|
|
|
0
|
|
||||
Other debt securities
|
|
2,869
|
|
|
0
|
|
|
2,869
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
705,428
|
|
|
0
|
|
|
694,308
|
|
|
11,120
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Nonredeemable preferred stock - financial services sector
|
|
12,488
|
|
|
1,973
|
|
|
10,515
|
|
|
0
|
|
||||
Total equity securities
|
|
12,488
|
|
|
1,973
|
|
|
10,515
|
|
|
0
|
|
||||
Other investments
(1)
|
|
3,752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
721,668
|
|
|
$
|
1,973
|
|
|
$
|
704,823
|
|
|
$
|
11,120
|
|
|
|
At December 31, 2017
|
||||||||||||||
|
|
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
|
|
$
|
11,734
|
|
|
$
|
0
|
|
|
$
|
11,734
|
|
|
$
|
0
|
|
States & political subdivisions
|
|
259,264
|
|
|
0
|
|
|
259,264
|
|
|
0
|
|
||||
Foreign government securities
|
|
503
|
|
|
0
|
|
|
503
|
|
|
0
|
|
||||
Corporate debt securities
|
|
346,523
|
|
|
0
|
|
|
338,644
|
|
|
7,879
|
|
||||
Residential mortgage-backed securities
|
|
25,571
|
|
|
0
|
|
|
25,571
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
32,804
|
|
|
0
|
|
|
32,804
|
|
|
0
|
|
||||
Collateralized debt obligations
|
|
58,034
|
|
|
0
|
|
|
55,834
|
|
|
2,200
|
|
||||
Other debt securities
|
|
11,528
|
|
|
0
|
|
|
11,528
|
|
|
0
|
|
||||
Total fixed maturities
|
|
745,961
|
|
|
0
|
|
|
735,882
|
|
|
10,079
|
|
||||
Nonredeemable preferred stock - financial services sector
|
|
11,659
|
|
|
2,015
|
|
|
9,644
|
|
|
0
|
|
||||
Nonredeemable preferred stock - utilities sector
|
|
1,093
|
|
|
0
|
|
|
1,093
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
758,713
|
|
|
2,015
|
|
|
746,619
|
|
|
10,079
|
|
||||
Other investments
(1)
|
|
4,816
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
763,529
|
|
|
$
|
2,015
|
|
|
$
|
746,619
|
|
|
$
|
10,079
|
|
(in thousands) |
|
Beginning balance at March 31, 2018
|
|
Included in earnings
(1)
|
|
Included
in other comprehensive income |
|
Purchases
|
|
Sales
|
|
Transfers into Level 3
(2)
|
|
Transfers out of Level 3
(2)
|
|
Ending balance at June 30, 2018
|
||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
$
|
6,309
|
|
|
$
|
10
|
|
|
$
|
(53
|
)
|
|
$
|
3,047
|
|
|
$
|
(472
|
)
|
|
$
|
5,370
|
|
|
$
|
(3,091
|
)
|
|
$
|
11,120
|
|
Total Level 3 available-for-sale securities
|
|
$
|
6,309
|
|
|
$
|
10
|
|
|
$
|
(53
|
)
|
|
$
|
3,047
|
|
|
$
|
(472
|
)
|
|
$
|
5,370
|
|
|
$
|
(3,091
|
)
|
|
$
|
11,120
|
|
(in thousands)
|
|
Beginning balance at December 31, 2017
|
|
Included in earnings
(1)
|
|
Included
in other comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers into Level 3
(2)
|
|
Transfers out of Level 3
(2)
|
|
Ending balance at June 30, 2018
|
||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
$
|
7,879
|
|
|
$
|
1
|
|
|
$
|
(48
|
)
|
|
$
|
3,047
|
|
|
$
|
(965
|
)
|
|
$
|
7,782
|
|
|
$
|
(6,576
|
)
|
|
$
|
11,120
|
|
Collateralized debt obligations
|
|
2,200
|
|
|
0
|
|
|
7
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,207
|
)
|
|
0
|
|
||||||||
Total Level 3 available-for-sale securities
|
|
$
|
10,079
|
|
|
$
|
1
|
|
|
$
|
(41
|
)
|
|
$
|
3,047
|
|
|
$
|
(965
|
)
|
|
$
|
7,782
|
|
|
$
|
(8,783
|
)
|
|
$
|
11,120
|
|
(in thousands) |
|
Beginning balance at March 31, 2017
|
|
Included in earnings
(1)
|
|
Included
in other comprehensive income |
|
Purchases
|
|
Sales
|
|
Transfers into Level 3
(2)
|
|
Transfers out of Level 3
(2)
|
|
Ending balance at June 30, 2017
|
||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
$
|
9,803
|
|
|
$
|
29
|
|
|
$
|
(23
|
)
|
|
$
|
2,110
|
|
|
$
|
(1,283
|
)
|
|
$
|
3,626
|
|
|
$
|
(4,967
|
)
|
|
$
|
9,295
|
|
Total Level 3 available-for-sale securities
|
|
$
|
9,803
|
|
|
$
|
29
|
|
|
$
|
(23
|
)
|
|
$
|
2,110
|
|
|
$
|
(1,283
|
)
|
|
$
|
3,626
|
|
|
$
|
(4,967
|
)
|
|
$
|
9,295
|
|
(in thousands)
|
|
Beginning balance at December 31, 2016
|
|
Included in earnings
(1)
|
|
Included
in other
comprehensive
income
|
|
Purchases
|
|
Sales
|
|
Transfers into Level 3
(2)
|
|
Transfers out of Level 3
(2)
|
|
Ending balance at June 30, 2017
|
||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
$
|
9,352
|
|
|
$
|
(21
|
)
|
|
$
|
(48
|
)
|
|
$
|
3,981
|
|
|
$
|
(3,132
|
)
|
|
$
|
5,811
|
|
|
$
|
(6,648
|
)
|
|
$
|
9,295
|
|
Total Level 3 available-for-sale securities
|
|
$
|
9,352
|
|
|
$
|
(21
|
)
|
|
$
|
(48
|
)
|
|
$
|
3,981
|
|
|
$
|
(3,132
|
)
|
|
$
|
5,811
|
|
|
$
|
(6,648
|
)
|
|
$
|
9,295
|
|
(1)
|
These amounts are reported in the Statements of Operations as net investment income and net realized investment gains (losses) for the each of the periods presented above.
|
(2)
|
Transfers into and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
|
|
|
At June 30, 2018
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Available-for-sale securities priced via pricing services
|
|
$
|
705,428
|
|
|
$
|
0
|
|
|
$
|
694,308
|
|
|
$
|
11,120
|
|
Equity securities priced via pricing services
|
|
12,488
|
|
|
1,973
|
|
|
10,515
|
|
|
0
|
|
||||
Other investments priced via unobservable inputs
(1)
|
|
3,752
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
721,668
|
|
|
$
|
1,973
|
|
|
$
|
704,823
|
|
|
$
|
11,120
|
|
(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 NAV 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 NAV information provided by the general partner.
|
|
|
At June 30, 2018
|
||||||||||||||
(in thousands)
|
|
Amortized
cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury
|
|
$
|
36,769
|
|
|
$
|
0
|
|
|
$
|
327
|
|
|
$
|
36,442
|
|
States & political subdivisions
|
|
257,498
|
|
|
3,443
|
|
|
2,450
|
|
|
258,491
|
|
||||
Foreign government securities
|
|
500
|
|
|
0
|
|
|
1
|
|
|
499
|
|
||||
Corporate debt securities
|
|
285,639
|
|
|
663
|
|
|
4,296
|
|
|
282,006
|
|
||||
Residential mortgage-backed securities
|
|
21,739
|
|
|
374
|
|
|
244
|
|
|
21,869
|
|
||||
Commercial mortgage-backed securities
|
|
32,878
|
|
|
5
|
|
|
607
|
|
|
32,276
|
|
||||
Collateralized debt obligations
|
|
71,009
|
|
|
103
|
|
|
136
|
|
|
70,976
|
|
||||
Other debt securities
|
|
2,863
|
|
|
6
|
|
|
0
|
|
|
2,869
|
|
||||
Total available-for-sale securities
|
|
$
|
708,895
|
|
|
$
|
4,594
|
|
|
$
|
8,061
|
|
|
$
|
705,428
|
|
|
|
At December 31, 2017
|
||||||||||||||
(in thousands)
|
|
Amortized
cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury
|
|
$
|
11,873
|
|
|
$
|
0
|
|
|
$
|
139
|
|
|
$
|
11,734
|
|
States & political subdivisions
|
|
254,533
|
|
|
5,351
|
|
|
620
|
|
|
259,264
|
|
||||
Foreign government securities
|
|
501
|
|
|
2
|
|
|
0
|
|
|
503
|
|
||||
Corporate debt securities
|
|
346,759
|
|
|
1,688
|
|
|
1,924
|
|
|
346,523
|
|
||||
Residential mortgage-backed securities
|
|
25,324
|
|
|
371
|
|
|
124
|
|
|
25,571
|
|
||||
Commercial mortgage-backed securities
|
|
33,475
|
|
|
26
|
|
|
697
|
|
|
32,804
|
|
||||
Collateralized debt obligations
|
|
57,838
|
|
|
237
|
|
|
41
|
|
|
58,034
|
|
||||
Other debt securities
|
|
11,496
|
|
|
32
|
|
|
0
|
|
|
11,528
|
|
||||
Total fixed maturities
|
|
741,799
|
|
|
7,707
|
|
|
3,545
|
|
|
745,961
|
|
||||
Nonredeemable preferred stock - financial services sector
|
|
11,719
|
|
|
15
|
|
|
75
|
|
|
11,659
|
|
||||
Nonredeemable preferred stock - utilities sector
|
|
1,118
|
|
|
0
|
|
|
25
|
|
|
1,093
|
|
||||
Total available-for-sale securities
|
|
$
|
754,636
|
|
|
$
|
7,722
|
|
|
$
|
3,645
|
|
|
$
|
758,713
|
|
|
|
At June 30, 2018
|
||||||
|
|
Amortized
|
|
Estimated
|
||||
(in thousands)
|
|
cost
|
|
fair value
|
||||
Due in one year or less
|
|
$
|
94,467
|
|
|
$
|
94,408
|
|
Due after one year through five years
|
|
241,546
|
|
|
242,016
|
|
||
Due after five years through ten years
|
|
249,068
|
|
|
246,058
|
|
||
Due after ten years
|
|
123,814
|
|
|
122,946
|
|
||
Total available-for-sale securities
|
|
$
|
708,895
|
|
|
$
|
705,428
|
|
|
|
At June 30, 2018
|
|||||||||||||||||||||||||
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||||||||
(dollars in thousands)
|
|
Fair
value
|
|
Unrealized losses
|
|
Fair
value
|
|
Unrealized losses
|
|
Fair
value
|
|
Unrealized losses
|
|
No. of holdings
|
|||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. treasury
|
|
$
|
34,969
|
|
|
$
|
278
|
|
|
$
|
1,474
|
|
|
$
|
49
|
|
|
$
|
36,443
|
|
|
$
|
327
|
|
|
5
|
|
States & political subdivisions
|
|
99,153
|
|
|
1,763
|
|
|
13,871
|
|
|
687
|
|
|
113,024
|
|
|
2,450
|
|
|
57
|
|
||||||
Foreign government securities
|
|
499
|
|
|
1
|
|
|
0
|
|
|
0
|
|
|
499
|
|
|
1
|
|
|
1
|
|
||||||
Corporate debt securities
|
|
194,322
|
|
|
3,740
|
|
|
28,430
|
|
|
556
|
|
|
222,752
|
|
|
4,296
|
|
|
516
|
|
||||||
Residential mortgage-backed securities
|
|
4,526
|
|
|
98
|
|
|
5,416
|
|
|
146
|
|
|
9,942
|
|
|
244
|
|
|
12
|
|
||||||
Commercial mortgage-backed securities
|
|
15,500
|
|
|
301
|
|
|
8,930
|
|
|
306
|
|
|
24,430
|
|
|
607
|
|
|
22
|
|
||||||
Collateralized debt obligations
|
|
28,250
|
|
|
136
|
|
|
0
|
|
|
0
|
|
|
28,250
|
|
|
136
|
|
|
20
|
|
||||||
Other debt securities
|
|
210
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
210
|
|
|
0
|
|
|
1
|
|
||||||
Total available-for-sale securities
|
|
$
|
377,429
|
|
|
$
|
6,317
|
|
|
$
|
58,121
|
|
|
$
|
1,744
|
|
|
$
|
435,550
|
|
|
$
|
8,061
|
|
|
634
|
|
Quality breakdown of available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment grade
|
|
$
|
269,062
|
|
|
$
|
3,554
|
|
|
$
|
54,423
|
|
|
$
|
1,577
|
|
|
$
|
323,485
|
|
|
$
|
5,131
|
|
|
187
|
|
Non-investment grade
|
|
108,367
|
|
|
2,763
|
|
|
3,698
|
|
|
167
|
|
|
112,065
|
|
|
2,930
|
|
|
447
|
|
||||||
Total available-for-sale securities
|
|
$
|
377,429
|
|
|
$
|
6,317
|
|
|
$
|
58,121
|
|
|
$
|
1,744
|
|
|
$
|
435,550
|
|
|
$
|
8,061
|
|
|
634
|
|
|
|
At December 31, 2017
|
|||||||||||||||||||||||||
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||||||||
(dollars in thousands)
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
No. of
holdings
|
|||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. treasury
|
|
$
|
10,237
|
|
|
$
|
110
|
|
|
$
|
1,497
|
|
|
$
|
29
|
|
|
$
|
11,734
|
|
|
$
|
139
|
|
|
4
|
|
States & political subdivisions
|
|
52,553
|
|
|
288
|
|
|
14,361
|
|
|
332
|
|
|
66,914
|
|
|
620
|
|
|
33
|
|
||||||
Corporate debt securities
|
|
171,154
|
|
|
1,585
|
|
|
31,113
|
|
|
339
|
|
|
202,267
|
|
|
1,924
|
|
|
331
|
|
||||||
Residential mortgage-backed securities
|
|
4,156
|
|
|
29
|
|
|
7,064
|
|
|
95
|
|
|
11,220
|
|
|
124
|
|
|
11
|
|
||||||
Commercial mortgage-backed securities
|
|
10,836
|
|
|
85
|
|
|
11,984
|
|
|
612
|
|
|
22,820
|
|
|
697
|
|
|
19
|
|
||||||
Collateralized debt obligations
|
|
21,598
|
|
|
41
|
|
|
0
|
|
|
0
|
|
|
21,598
|
|
|
41
|
|
|
12
|
|
||||||
Other debt securities
|
|
1,499
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,499
|
|
|
0
|
|
|
1
|
|
||||||
Total fixed maturities
|
|
272,033
|
|
|
2,138
|
|
|
66,019
|
|
|
1,407
|
|
|
338,052
|
|
|
3,545
|
|
|
411
|
|
||||||
Nonredeemable preferred stock - financial services sector
|
|
9,644
|
|
|
75
|
|
|
0
|
|
|
0
|
|
|
9,644
|
|
|
75
|
|
|
5
|
|
||||||
Nonredeemable preferred stock - utilities sector
|
|
1,093
|
|
|
25
|
|
|
0
|
|
|
0
|
|
|
1,093
|
|
|
25
|
|
|
1
|
|
||||||
Total available-for-sale securities
|
|
$
|
282,770
|
|
|
$
|
2,238
|
|
|
$
|
66,019
|
|
|
$
|
1,407
|
|
|
$
|
348,789
|
|
|
$
|
3,645
|
|
|
417
|
|
Quality breakdown of fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment grade
|
|
$
|
214,586
|
|
|
$
|
1,064
|
|
|
$
|
62,193
|
|
|
$
|
985
|
|
|
$
|
276,779
|
|
|
$
|
2,049
|
|
|
158
|
|
Non-investment grade
|
|
57,447
|
|
|
1,074
|
|
|
3,826
|
|
|
422
|
|
|
61,273
|
|
|
1,496
|
|
|
253
|
|
||||||
Total fixed maturities
|
|
$
|
272,033
|
|
|
$
|
2,138
|
|
|
$
|
66,019
|
|
|
$
|
1,407
|
|
|
$
|
338,052
|
|
|
$
|
3,545
|
|
|
411
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Fixed maturities
(1)
|
|
$
|
6,263
|
|
|
$
|
6,220
|
|
|
$
|
12,373
|
|
|
$
|
12,124
|
|
Equity securities
|
|
142
|
|
|
17
|
|
|
284
|
|
|
49
|
|
||||
Cash equivalents and other
|
|
1,026
|
|
|
395
|
|
|
2,034
|
|
|
916
|
|
||||
Total investment income
|
|
7,431
|
|
|
6,632
|
|
|
14,691
|
|
|
13,089
|
|
||||
Less: investment expenses
|
|
327
|
|
|
393
|
|
|
767
|
|
|
869
|
|
||||
Investment income, net of expenses
|
|
$
|
7,104
|
|
|
$
|
6,239
|
|
|
$
|
13,924
|
|
|
$
|
12,220
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross realized gains
|
|
$
|
235
|
|
|
$
|
507
|
|
|
$
|
575
|
|
|
$
|
1,087
|
|
Gross realized losses
|
|
(301
|
)
|
|
(381
|
)
|
|
(986
|
)
|
|
(539
|
)
|
||||
Net realized (losses) gains on available-for-sale securities
|
|
(66
|
)
|
|
126
|
|
|
(411
|
)
|
|
548
|
|
||||
Equity securities
|
|
(68
|
)
|
|
—
|
|
|
(188
|
)
|
|
—
|
|
||||
Miscellaneous
|
|
102
|
|
|
(2
|
)
|
|
102
|
|
|
92
|
|
||||
Net realized investment (losses) gains
|
|
$
|
(32
|
)
|
|
$
|
124
|
|
|
$
|
(497
|
)
|
|
$
|
640
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Equity securities:
(1)
|
|
|
|
|
|
|
|
|
||||||||
Total net realized losses
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
(188
|
)
|
|
$
|
—
|
|
Less: net losses realized on securities sold
|
|
0
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
||||
Net unrealized losses recognized during the period on securities held at reporting date
|
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
(154
|
)
|
|
$
|
—
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Equity in (losses) earnings of limited partnerships accounted for under the equity method
|
|
$
|
(216
|
)
|
|
$
|
149
|
|
|
$
|
(21
|
)
|
|
$
|
399
|
|
Change in fair value of limited partnerships accounted for under the fair value option
|
|
(3
|
)
|
|
0
|
|
|
(390
|
)
|
|
(37
|
)
|
||||
Equity in (losses) earnings of limited partnerships
|
|
$
|
(219
|
)
|
|
$
|
149
|
|
|
$
|
(411
|
)
|
|
$
|
362
|
|
(in thousands)
|
|
At June 30, 2018
|
|
At December 31, 2017
|
||||
Private equity
|
|
$
|
30,501
|
|
|
$
|
31,663
|
|
Mezzanine debt
|
|
2,916
|
|
|
3,516
|
|
||
Real estate
|
|
2,482
|
|
|
5,127
|
|
||
Real estate - fair value option
|
|
3,752
|
|
|
4,816
|
|
||
Total limited partnership investments
|
|
$
|
39,651
|
|
|
$
|
45,122
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Service cost for benefits earned
|
|
$
|
9,513
|
|
|
$
|
7,776
|
|
|
$
|
19,026
|
|
|
$
|
15,553
|
|
Interest cost on benefits obligation
|
|
8,845
|
|
|
8,568
|
|
|
17,691
|
|
|
17,137
|
|
||||
Expected return on plan assets
|
|
(12,814
|
)
|
|
(10,316
|
)
|
|
(25,629
|
)
|
|
(20,633
|
)
|
||||
Prior service cost amortization
|
|
338
|
|
|
218
|
|
|
676
|
|
|
436
|
|
||||
Net actuarial loss amortization
|
|
3,202
|
|
|
2,325
|
|
|
6,404
|
|
|
4,650
|
|
||||
Pension plan cost
(1)
|
|
$
|
9,084
|
|
|
$
|
8,571
|
|
|
$
|
18,168
|
|
|
$
|
17,143
|
|
(1)
|
The components of pension plan costs other than the service cost component are included in the line item "Other income (expense)" in the Statements of Operations after reimbursements from the Exchange and its subsidiaries.
|
|
|
Three months ended
|
|
Three months ended
|
||||||||||||||||
|
|
June 30, 2018
|
|
June 30, 2017
|
||||||||||||||||
(in thousands)
|
|
Before Tax
|
Income Tax
(1)
|
Net
|
|
Before Tax
|
Income Tax
(1)
|
Net
|
||||||||||||
Investment securities:
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(3,460
|
)
|
$
|
(727
|
)
|
$
|
(2,733
|
)
|
|
$
|
6,293
|
|
$
|
2,202
|
|
$
|
4,091
|
|
OCI (loss) before reclassifications
|
|
(1,409
|
)
|
(296
|
)
|
(1,113
|
)
|
|
1,746
|
|
611
|
|
1,135
|
|
||||||
Realized investment losses (gains)
|
|
66
|
|
14
|
|
52
|
|
|
(126
|
)
|
(44
|
)
|
(82
|
)
|
||||||
Impairment losses
|
|
646
|
|
136
|
|
510
|
|
|
61
|
|
22
|
|
39
|
|
||||||
OCI (loss)
|
|
(697
|
)
|
(146
|
)
|
(551
|
)
|
|
1,681
|
|
589
|
|
1,092
|
|
||||||
AOCI (loss), end of period
|
|
$
|
(4,157
|
)
|
$
|
(873
|
)
|
$
|
(3,284
|
)
|
|
$
|
7,974
|
|
$
|
2,791
|
|
$
|
5,183
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension and other postretirement plans:
(2)
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
|
$
|
(190,695
|
)
|
$
|
(66,744
|
)
|
$
|
(123,951
|
)
|
AOCI (loss), end of period
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
|
$
|
(190,695
|
)
|
$
|
(66,744
|
)
|
$
|
(123,951
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(204,414
|
)
|
$
|
(42,928
|
)
|
$
|
(161,486
|
)
|
|
$
|
(184,402
|
)
|
$
|
(64,542
|
)
|
$
|
(119,860
|
)
|
Investment securities
|
|
(697
|
)
|
(146
|
)
|
(551
|
)
|
|
1,681
|
|
589
|
|
1,092
|
|
||||||
Pension and other postretirement plans
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
0
|
|
0
|
|
||||||
OCI (loss)
|
|
(697
|
)
|
(146
|
)
|
(551
|
)
|
|
1,681
|
|
589
|
|
1,092
|
|
||||||
AOCI (loss), end of period
|
|
$
|
(205,111
|
)
|
$
|
(43,074
|
)
|
$
|
(162,037
|
)
|
|
$
|
(182,721
|
)
|
$
|
(63,953
|
)
|
$
|
(118,768
|
)
|
|
|
Six months ended
|
|
Six months ended
|
||||||||||||||||
|
|
June 30, 2018
|
|
June 30, 2017
|
||||||||||||||||
(in thousands)
|
|
Before Tax
|
Income Tax
(1)
|
Net
|
|
Before Tax
|
Income Tax
(1)
|
Net
|
||||||||||||
Investment securities:
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI, beginning of period
|
|
$
|
3,410
|
|
$
|
716
|
|
$
|
2,694
|
|
|
$
|
3,954
|
|
$
|
1,384
|
|
$
|
2,570
|
|
OCI (loss) before reclassifications
|
|
(8,539
|
)
|
(1,793
|
)
|
(6,746
|
)
|
|
4,386
|
|
1,535
|
|
2,851
|
|
||||||
Realized investment losses (gains)
|
|
411
|
|
86
|
|
325
|
|
|
(548
|
)
|
(192
|
)
|
(356
|
)
|
||||||
Impairment losses
|
|
646
|
|
136
|
|
510
|
|
|
182
|
|
64
|
|
118
|
|
||||||
Cumulative effect of adopting ASU 2016-01
(3)
|
|
(85
|
)
|
(18
|
)
|
(67
|
)
|
|
—
|
|
—
|
|
—
|
|
||||||
OCI (loss)
|
|
(7,567
|
)
|
(1,589
|
)
|
(5,978
|
)
|
|
4,020
|
|
1,407
|
|
2,613
|
|
||||||
AOCI (loss), end of period
|
|
$
|
(4,157
|
)
|
$
|
(873
|
)
|
$
|
(3,284
|
)
|
|
$
|
7,974
|
|
$
|
2,791
|
|
$
|
5,183
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension and other postretirement plans:
(2)
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
|
$
|
(190,695
|
)
|
$
|
(66,744
|
)
|
$
|
(123,951
|
)
|
AOCI (loss), end of period
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
|
$
|
(190,695
|
)
|
$
|
(66,744
|
)
|
$
|
(123,951
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(197,544
|
)
|
$
|
(41,485
|
)
|
$
|
(156,059
|
)
|
|
$
|
(186,741
|
)
|
$
|
(65,360
|
)
|
$
|
(121,381
|
)
|
Investment securities
|
|
(7,567
|
)
|
(1,589
|
)
|
(5,978
|
)
|
|
4,020
|
|
1,407
|
|
2,613
|
|
||||||
Pension and other postretirement plans
|
|
0
|
|
0
|
|
0
|
|
|
0
|
|
0
|
|
0
|
|
||||||
OCI (loss)
|
|
(7,567
|
)
|
(1,589
|
)
|
(5,978
|
)
|
|
4,020
|
|
1,407
|
|
2,613
|
|
||||||
AOCI (loss), end of period
|
|
$
|
(205,111
|
)
|
$
|
(43,074
|
)
|
$
|
(162,037
|
)
|
|
$
|
(182,721
|
)
|
$
|
(63,953
|
)
|
$
|
(118,768
|
)
|
(1)
|
Deferred taxes were recognized at the corporate rate of
21%
for the three and six months ended June 30, 2018 and
35%
for the three and six months ended June 30, 2017.
|
(2)
|
There are
no
comprehensive income items or amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.
|
(3)
|
ASU 2016-01 required a reclassification of unrealized losses of equity securities from AOCI to retained earnings at January 1, 2018. See Note 2, "Significant Accounting Policies".
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
dependence upon our relationship with the Exchange and the management fee under the agreement with the subscribers at the Exchange;
|
•
|
dependence upon our relationship with the Exchange and the growth of the Exchange, including:
|
◦
|
general business and economic conditions;
|
◦
|
factors affecting insurance industry competition;
|
◦
|
dependence upon the independent agency system; and
|
◦
|
ability to maintain our reputation for customer service;
|
•
|
dependence upon our relationship with the Exchange and the financial condition of the Exchange, including:
|
◦
|
the Exchange's ability to maintain acceptable financial strength ratings;
|
◦
|
factors affecting the quality and liquidity of the Exchange's investment portfolio;
|
◦
|
changes in government regulation of the insurance industry;
|
◦
|
emerging claims and coverage issues in the industry; and
|
◦
|
severe weather conditions or other catastrophic losses, including terrorism;
|
•
|
costs of providing policy issuance and renewal services to the Exchange under the subscriber's agreement;
|
•
|
credit risk from the Exchange;
|
•
|
ability to attract and retain talented management and employees;
|
•
|
ability to ensure system availability and effectively manage technology initiatives;
|
•
|
difficulties with technology or data security breaches, including cyber attacks;
|
•
|
ability to maintain uninterrupted business operations;
|
•
|
factors affecting the quality and liquidity of our investment portfolio;
|
•
|
our ability to meet liquidity needs and access capital; and
|
•
|
outcome of pending and potential litigation.
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
||||||||||||
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
|
|
|
||||||||||||||
Operating income
|
|
$
|
95,323
|
|
|
$
|
83,448
|
|
|
14.2
|
|
%
|
|
$
|
172,890
|
|
|
$
|
150,388
|
|
|
15.0
|
|
%
|
Total investment income
|
|
6,207
|
|
|
6,451
|
|
|
(3.8
|
)
|
|
|
12,370
|
|
|
13,040
|
|
|
(5.1
|
)
|
|
||||
Interest expense, net
|
|
602
|
|
|
257
|
|
|
NM
|
|
|
|
1,155
|
|
|
423
|
|
|
NM
|
|
|
||||
Other income (expense)
|
|
58
|
|
|
(407
|
)
|
|
NM
|
|
|
|
102
|
|
|
(816
|
)
|
|
NM
|
|
|
||||
Income before income taxes
|
|
100,986
|
|
|
89,235
|
|
|
13.2
|
|
|
|
184,207
|
|
|
162,189
|
|
|
13.6
|
|
|
||||
Income tax expense
|
|
21,280
|
|
|
30,708
|
|
|
(30.7
|
)
|
|
|
38,743
|
|
|
55,786
|
|
|
(30.6
|
)
|
|
||||
Net income
|
|
$
|
79,706
|
|
|
$
|
58,527
|
|
|
36.2
|
|
%
|
|
$
|
145,464
|
|
|
$
|
106,403
|
|
|
36.7
|
|
%
|
Net income per share - diluted
|
|
$
|
1.52
|
|
|
$
|
1.12
|
|
|
36.2
|
|
%
|
|
$
|
2.78
|
|
|
$
|
2.03
|
|
|
36.8
|
|
%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||
(dollars in thousands)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||
Policy issuance and renewal services
|
|
|
|
|
|
|
|
|
|
||||||||
Direct and assumed premiums written by the Exchange
|
$
|
1,887,999
|
|
$
|
1,772,877
|
|
6.5
|
%
|
|
$
|
3,570,793
|
|
$
|
3,345,908
|
|
6.7
|
%
|
Management fee rate
|
24.2
|
%
|
25.0
|
%
|
|
|
|
24.2
|
%
|
25.0
|
%
|
|
|
||||
Management fee revenue
|
456,896
|
|
443,219
|
|
3.1
|
|
|
864,132
|
|
836,477
|
|
3.3
|
|
||||
Change in allowance for management fee returned on cancelled policies
(1)
|
(2,324
|
)
|
(1,900
|
)
|
NM
|
|
|
(3,582
|
)
|
(3,100
|
)
|
NM
|
|
||||
Management fee revenue - policy issuance and renewal services, net
(2)
|
$
|
454,572
|
|
$
|
441,319
|
|
3.0
|
%
|
|
$
|
860,550
|
|
$
|
833,377
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
||||||||
Administrative services
|
|
|
|
|
|
|
|
|
|
||||||||
Direct and assumed premiums written by the Exchange
|
$
|
1,887,999
|
|
$
|
—
|
|
N/A
|
%
|
|
$
|
3,570,793
|
|
$
|
—
|
|
N/A
|
%
|
Management fee rate
|
0.8
|
%
|
—
|
|
|
|
|
0.8
|
%
|
—
|
|
|
|
||||
Management fee revenue
|
15,104
|
|
—
|
|
N/A
|
|
|
28,566
|
|
—
|
|
N/A
|
|
||||
Change in contract liability
(3)
|
(1,791
|
)
|
N/A
|
|
N/A
|
|
|
(2,165
|
)
|
N/A
|
|
N/A
|
|
||||
Change in allowance for management fee returned on cancelled policies
(1)
|
(14
|
)
|
N/A
|
|
N/A
|
|
|
(28
|
)
|
N/A
|
|
N/A
|
|
||||
Management fee revenue - administrative services, net
|
13,299
|
|
—
|
|
N/A
|
|
|
26,373
|
|
—
|
|
N/A
|
|
||||
Administrative services reimbursement revenue
|
146,507
|
|
—
|
|
N/A
|
|
|
292,470
|
|
—
|
|
N/A
|
|
||||
Total revenue from administrative services
|
$
|
159,806
|
|
$
|
—
|
|
N/A
|
%
|
|
$
|
318,843
|
|
$
|
—
|
|
N/A
|
%
|
(1)
|
Management fees are returned to the Exchange when policies are cancelled mid-term and unearned premiums are refunded. We record an estimated allowance for management fees returned on mid-term policy cancellations. This estimated allowance has been allocated between the two performance obligations consistent with the revenue allocation proportion.
|
(2)
|
The allocation of management fee revenue between the two performance obligations beginning January 1, 2018, caused the growth in management fee revenue - policy issuance and renewal services to not correspond directly with the growth in direct and assumed premiums written by the Exchange in the second quarter and six months ended June 30, 2018 compared to same respective periods in 2017.
|
(3)
|
With the adoption of ASC 606 effective January 1, 2018, management fee revenue - administrative services is recognized over time as the services are performed. See Part I, Item 1. "Financial Statements - Note 2, Significant Accounting Policies and Note 3, Revenue, of Notes to Financial Statements" contained within this report.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||||
(dollars in thousands)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||||
Management fee revenue - policy issuance and renewal services, net
|
$
|
454,572
|
|
$
|
441,319
|
|
3.0
|
|
%
|
|
$
|
860,550
|
|
$
|
833,377
|
|
3.3
|
|
%
|
Service agreement revenue
|
7,080
|
|
7,245
|
|
(2.3
|
)
|
|
|
14,225
|
|
14,503
|
|
(1.9
|
)
|
|
||||
|
461,652
|
|
448,564
|
|
2.9
|
|
|
|
874,775
|
|
847,880
|
|
3.2
|
|
|
||||
Cost of policy issuance and renewal services
|
379,628
|
|
365,116
|
|
4.0
|
|
|
|
728,258
|
|
697,492
|
|
4.4
|
|
|
||||
Operating income - policy issuance and renewal services
|
$
|
82,024
|
|
$
|
83,448
|
|
(1.7
|
)
|
%
|
|
$
|
146,517
|
|
$
|
150,388
|
|
(2.6
|
)
|
%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||
(dollars in thousands)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
(Unaudited)
|
|
|
(Unaudited)
|
|
||||||||||||
Commissions:
|
|
|
|
|
|
|
|
||||||||||
Total commissions
|
$
|
261,573
|
|
$
|
251,383
|
|
4.1
|
%
|
|
$
|
495,667
|
|
$
|
471,861
|
|
5.0
|
%
|
Non-commission expense:
|
|
|
|
|
|
|
|
||||||||||
Underwriting and policy processing
|
$
|
38,732
|
|
$
|
36,642
|
|
5.7
|
%
|
|
$
|
77,326
|
|
$
|
72,055
|
|
7.3
|
%
|
Information technology
|
34,900
|
|
35,387
|
|
(1.4
|
)
|
|
68,849
|
|
70,162
|
|
(1.9
|
)
|
||||
Sales and advertising
|
16,463
|
|
17,073
|
|
(3.6
|
)
|
|
31,235
|
|
30,653
|
|
1.9
|
|
||||
Customer service
|
8,247
|
|
6,943
|
|
18.8
|
|
|
16,492
|
|
13,578
|
|
21.5
|
|
||||
Administrative and other
|
19,713
|
|
17,688
|
|
11.4
|
|
|
38,689
|
|
39,183
|
|
(1.3
|
)
|
||||
Total non-commission expense
|
118,055
|
|
113,733
|
|
3.8
|
|
|
232,591
|
|
225,631
|
|
3.1
|
|
||||
Total cost of policy issuance and renewal services
|
$
|
379,628
|
|
$
|
365,116
|
|
4.0
|
%
|
|
$
|
728,258
|
|
$
|
697,492
|
|
4.4
|
%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||
(dollars in thousands)
|
2018
|
2017
|
% Change
|
|
2018
|
2017
|
% Change
|
||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||
Management fee revenue - administrative services, net
|
$
|
13,299
|
|
$
|
—
|
|
N/A
|
%
|
|
$
|
26,373
|
|
$
|
—
|
|
N/A
|
%
|
Administrative services reimbursement revenue
|
146,507
|
|
—
|
|
N/A
|
|
|
292,470
|
|
—
|
|
N/A
|
|
||||
Total revenue allocated to administrative services
|
159,806
|
|
—
|
|
N/A
|
|
|
318,843
|
|
—
|
|
N/A
|
|
||||
Administrative services expenses
|
|
|
|
|
|
|
|
|
|
||||||||
Claims handling services
|
127,544
|
|
—
|
|
N/A
|
|
|
255,649
|
|
—
|
|
N/A
|
|
||||
Investment management services
|
8,485
|
|
—
|
|
N/A
|
|
|
16,773
|
|
—
|
|
N/A
|
|
||||
Life management services
|
10,478
|
|
—
|
|
N/A
|
|
|
20,048
|
|
—
|
|
N/A
|
|
||||
Operating income - administrative services
|
$
|
13,299
|
|
$
|
—
|
|
N/A
|
%
|
|
$
|
26,373
|
|
$
|
—
|
|
N/A
|
%
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Securities sold:
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Fixed maturities
|
|
$
|
(66
|
)
|
|
$
|
271
|
|
|
$
|
(411
|
)
|
|
$
|
693
|
|
Equity securities
|
|
0
|
|
|
(145
|
)
|
|
(59
|
)
|
|
(145
|
)
|
||||
Equity securities decreases in fair value
(1)
|
|
(68
|
)
|
|
0
|
|
|
(129
|
)
|
|
0
|
|
||||
Miscellaneous
|
|
102
|
|
|
(2
|
)
|
|
102
|
|
|
92
|
|
||||
Net realized investment (losses) gains
(2)
|
|
$
|
(32
|
)
|
|
$
|
124
|
|
|
$
|
(497
|
)
|
|
$
|
640
|
|
(1)
|
The fair value of our equity portfolio is based upon exchange traded prices provided by a nationally recognized pricing service.
|
(2)
|
See Part I, Item 1. "Financial Statements - Note 6, Investments, of Notes to Financial Statements" contained within this report for additional disclosures regarding net realized investment (losses) gains.
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Private equity
|
|
$
|
(270
|
)
|
|
$
|
(323
|
)
|
|
$
|
66
|
|
|
$
|
228
|
|
Mezzanine debt
|
|
27
|
|
|
33
|
|
|
105
|
|
|
(113
|
)
|
||||
Real estate
|
|
24
|
|
|
439
|
|
|
(582
|
)
|
|
247
|
|
||||
Total equity in (losses) earnings of limited partnerships
|
|
$
|
(219
|
)
|
|
$
|
149
|
|
|
$
|
(411
|
)
|
|
$
|
362
|
|
|
|
Carrying value at
|
|
|
|
Carrying value at
|
|
|
||||||
(dollars in thousands)
|
|
June 30, 2018
|
|
% to total
|
|
December 31, 2017
|
|
% to total
|
||||||
|
|
(Unaudited)
|
|
|
|
|
|
|
||||||
Fixed maturities
|
|
$
|
705,428
|
|
|
93
|
%
|
|
$
|
745,961
|
|
|
93
|
%
|
Equity securities:
|
|
|
|
|
|
|
|
|
||||||
Preferred stock
|
|
12,488
|
|
|
2
|
|
|
12,752
|
|
|
2
|
|
||
Limited partnerships:
|
|
|
|
|
|
|
|
|
||||||
Private equity
|
|
30,501
|
|
|
4
|
|
|
31,663
|
|
|
4
|
|
||
Mezzanine debt
|
|
2,916
|
|
|
0
|
|
|
3,516
|
|
|
0
|
|
||
Real estate
|
|
6,234
|
|
|
1
|
|
|
9,943
|
|
|
1
|
|
||
Real estate mortgage loans
(1)
|
|
95
|
|
|
0
|
|
|
136
|
|
|
0
|
|
||
Total investments
|
|
$
|
757,662
|
|
|
100
|
%
|
|
$
|
803,971
|
|
|
100
|
%
|
|
|
At June 30, 2018
|
||||||||||||||||||||||
(in thousands)
|
|
(Unaudited)
|
||||||||||||||||||||||
Industry Sector
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
Non- investment
grade
|
|
Fair
value
|
||||||||||||
Basic materials
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
15,308
|
|
|
$
|
15,308
|
|
Communications
|
|
0
|
|
|
1,963
|
|
|
1,998
|
|
|
3,784
|
|
|
26,050
|
|
|
33,795
|
|
||||||
Consumer
|
|
0
|
|
|
1,028
|
|
|
2,461
|
|
|
27,324
|
|
|
43,820
|
|
|
74,633
|
|
||||||
Diversified
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
710
|
|
|
710
|
|
||||||
Energy
|
|
0
|
|
|
995
|
|
|
0
|
|
|
4,006
|
|
|
15,792
|
|
|
20,793
|
|
||||||
Financial
|
|
0
|
|
|
3,964
|
|
|
22,262
|
|
|
32,427
|
|
|
18,295
|
|
|
76,948
|
|
||||||
Government-municipal
|
|
100,546
|
|
|
144,029
|
|
|
13,916
|
|
|
0
|
|
|
0
|
|
|
258,491
|
|
||||||
Healthcare
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500
|
|
|
500
|
|
||||||
Industrial
|
|
0
|
|
|
0
|
|
|
4,916
|
|
|
1,018
|
|
|
23,822
|
|
|
29,756
|
|
||||||
Structured securities
(2)
|
|
59,139
|
|
|
41,335
|
|
|
13,895
|
|
|
7,285
|
|
|
6,336
|
|
|
127,990
|
|
||||||
Technology
|
|
0
|
|
|
996
|
|
|
2,029
|
|
|
6,482
|
|
|
13,540
|
|
|
23,047
|
|
||||||
U.S. treasury
|
|
0
|
|
|
36,442
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
36,442
|
|
||||||
Utilities
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3,986
|
|
|
3,029
|
|
|
7,015
|
|
||||||
Total
|
|
$
|
159,685
|
|
|
$
|
230,752
|
|
|
$
|
61,477
|
|
|
$
|
86,312
|
|
|
$
|
167,202
|
|
|
$
|
705,428
|
|
(1)
|
Ratings are supplied by S&P, Moody’s, and Fitch. The table is based upon the lowest rating for each security.
|
(2)
|
Structured securities include residential mortgage-backed securities, commercial mortgage-backed securities, collateralized debt obligations, and asset-backed securities.
|
|
|
|
(in thousands)
|
|
2018
|
|
2017
|
||||
|
|
(Unaudited)
|
||||||
Net cash provided by operating activities
|
|
$
|
41,593
|
|
|
$
|
39,491
|
|
Net cash used in investing activities
|
|
(5,653
|
)
|
|
(35,946
|
)
|
||
Net cash used in financing activities
|
|
(53,249
|
)
|
|
(47,908
|
)
|
||
Net decrease in cash and cash equivalents
|
|
$
|
(17,309
|
)
|
|
$
|
(44,363
|
)
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 6.
|
EXHIBITS
|
Exhibit
|
|
|
Number
|
|
Description of Exhibit
|
|
|
|
10.1*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32*
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document.
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
Erie Indemnity Company
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
July 26, 2018
|
By:
|
/s/ Timothy G. NeCastro
|
|
|
|
|
Timothy G. NeCastro, President & CEO
|
|
|
|
|
|
|
|
|
By:
|
/s/ Gregory J. Gutting
|
|
|
|
|
Gregory J. Gutting, Executive Vice President & CFO
|
|
1.
|
Two new sections shall be added to Article One of the Plan and such new sections, designated as Section 1.9A and 1.9B, respectively, shall read as follows:
|
1.9A
|
“Discretionary Non-elective Contribution” means the Employer contribution made pursuant to Section 3.4A.
|
1.9B
|
“DNEC Eligible Participant” means:
|
(a)
|
Each Covered Employee who is eligible to make Elective Deferrals under the Plan on April 26, 2018 or who otherwise would be eligible to make Elective Deferrals under the Plan on such date except for the six month suspension period identified in Section 7.3(c); and
|
(b)
|
Unless otherwise required by the application of guidance promulgated by the Secretary of the Treasury or his delegate, each former Covered Employee who incurred a severance from employment on or after March 21, 2018 and before April 26, 2018 under the early retirement or normal retirement provisions of the Erie Insurance Group Retirement Plan for Employees and who, immediately prior to such severance from employment, was eligible to make Elective Deferrals under the Plan.
|
2.
|
Section 1.23 of the Plan is hereby amended in its entirety and shall now read as follows:
|
1.23
|
“Participant” means any Covered Employee who participates in the Plan as provided in Section 3.1 and/or Section 3.4A (an “active” Participant) or as provided in Section 4.1, and further, shall include any current or former Covered Employee who has suspended his Elective Deferrals or has terminated or retired if such individual has a vested Total Account balance maintained on his behalf under the Plan.
|
3.
|
Section 1.37(f) of the Plan is hereby amended in its entirety and shall now read as follows:
|
(f)
|
“Safe Harbor Matching Account” the portion of the Participant’s Total Account consisting of Safe Harbor Matching Contributions, any Discretionary Non-elective Contributions, plus (minus) any investment earnings (losses) on such contributions and less any distributions or withdrawals made from this account in accordance with Articles Six and Seven, respectively
.
|
4.
|
A new paragraph (d) shall be added to Section 2.1, and such new paragraph shall read as follows:
|
(d)
|
Independent of the preceding provisions of this Section 2.1, a Covered Employee may participate in the Plan pursuant to the provisions of Section 3.4A.
|
5.
|
A new section shall be added to Article Three of the Plan and such new section, designated as Section 3.4A, shall read as follows:
|
3.4A
|
Discretionary Non-elective Contribution
|
|
ERIE INDEMNITY COMPANY
|
|
|
ATTEST:
|
|
|
|
/s/ Brian W. Bolash
|
By:
/s/
Dionne Wallace Oakley
|
|
Title:
EVP, HR & Strategy
|
|
|
|
|
|
|
|
|
Date:
|
July 26, 2018
|
|
|
|
|
|
|
/s/ Timothy G. NeCastro
|
|
|
Timothy G. NeCastro
|
|
|
President & CEO
|
Date:
|
July 26, 2018
|
|
|
|
|
|
|
/s/ Gregory J. Gutting
|
|
|
Gregory J. Gutting
|
|
|
Executive Vice President & CFO
|
(1)
|
The
Quarterly
Report on Form
10-Q
of the Company for the
quarterly
period ended
June 30, 2018
(the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Timothy G. NeCastro
|
|
Timothy G. NeCastro
|
|
President & CEO
|
|
|
|
/s/ Gregory J. Gutting
|
|
Gregory J. Gutting
|
|
Executive Vice President & CFO
|
|
|
|
|
|
July 26, 2018
|
|