|
ERIE INDEMNITY COMPANY
|
|
|
(Exact name of registrant as specified in its charter)
|
|
|
Pennsylvania
|
|
25-0466020
|
|
|
(State or other jurisdiction of
|
|
(IRS 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)
|
|
Class A common stock,
|
stated value $0.0292 per share
|
|
ERIE
|
|
NASDAQ Stock Market, LLC
|
(Title of each class)
|
|
(Trading Symbol)
|
|
(Name of each exchange on which registered)
|
Large accelerated filer
|
☒
|
|
Accelerated filer
|
☐
|
|
Non-accelerated filer
|
☐
|
|
|
|
|
|
|
|
|
|
|
Smaller reporting company
|
☐
|
|
Emerging growth company
|
☐
|
|
|
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating revenue
|
|
|
|
|
|
|
|
|
|
||||||
Management fee revenue - policy issuance and renewal services, net
|
$
|
480,513
|
|
|
$
|
454,572
|
|
|
$
|
911,496
|
|
|
$
|
860,550
|
|
Management fee revenue - administrative services, net
|
14,195
|
|
|
13,299
|
|
|
28,146
|
|
|
26,373
|
|
||||
Administrative services reimbursement revenue
|
146,095
|
|
|
146,507
|
|
|
288,575
|
|
|
292,470
|
|
||||
Service agreement revenue
|
6,907
|
|
|
7,080
|
|
|
13,599
|
|
|
14,225
|
|
||||
Total operating revenue
|
647,710
|
|
|
621,458
|
|
|
1,241,816
|
|
|
1,193,618
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses
|
|
|
|
|
|
|
|
||||||||
Cost of operations - policy issuance and renewal services
|
405,005
|
|
|
379,628
|
|
|
770,509
|
|
|
728,258
|
|
||||
Cost of operations - administrative services
|
146,095
|
|
|
146,507
|
|
|
288,575
|
|
|
292,470
|
|
||||
Total operating expenses
|
551,100
|
|
|
526,135
|
|
|
1,059,084
|
|
|
1,020,728
|
|
||||
Operating income
|
96,610
|
|
|
95,323
|
|
|
182,732
|
|
|
172,890
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Investment income
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
8,030
|
|
|
7,104
|
|
|
16,547
|
|
|
13,924
|
|
||||
Net realized investment gains (losses)
|
1,302
|
|
|
(32
|
)
|
|
3,805
|
|
|
(497
|
)
|
||||
Net impairment losses recognized in earnings
|
(84
|
)
|
|
(646
|
)
|
|
(162
|
)
|
|
(646
|
)
|
||||
Equity in earnings (losses) of limited partnerships
|
404
|
|
|
(219
|
)
|
|
(743
|
)
|
|
(411
|
)
|
||||
Total investment income
|
9,652
|
|
|
6,207
|
|
|
19,447
|
|
|
12,370
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
272
|
|
|
602
|
|
|
721
|
|
|
1,155
|
|
||||
Other income
|
48
|
|
|
58
|
|
|
95
|
|
|
102
|
|
||||
Income before income taxes
|
106,038
|
|
|
100,986
|
|
|
201,553
|
|
|
184,207
|
|
||||
Income tax expense
|
18,284
|
|
|
21,280
|
|
|
38,488
|
|
|
38,743
|
|
||||
Net income
|
$
|
87,754
|
|
|
$
|
79,706
|
|
|
$
|
163,065
|
|
|
$
|
145,464
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net income per share
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock – basic
|
$
|
1.88
|
|
|
$
|
1.71
|
|
|
$
|
3.50
|
|
|
$
|
3.12
|
|
Class A common stock – diluted
|
$
|
1.68
|
|
|
$
|
1.52
|
|
|
$
|
3.12
|
|
|
$
|
2.78
|
|
Class B common stock – basic
|
$
|
283
|
|
|
$
|
257
|
|
|
$
|
525
|
|
|
$
|
469
|
|
Class B common stock – diluted
|
$
|
283
|
|
|
$
|
257
|
|
|
$
|
525
|
|
|
$
|
468
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – Basic
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
46,188,994
|
|
|
46,188,705
|
|
|
46,188,668
|
|
|
46,188,309
|
|
||||
Class B common stock
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding – Diluted
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
52,314,700
|
|
|
52,312,849
|
|
|
52,313,371
|
|
|
52,311,741
|
|
||||
Class B common stock
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
|
2,542
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends declared per share
|
|
|
|
|
|
|
|
|
|
||||||
Class A common stock
|
$
|
0.90
|
|
|
$
|
0.84
|
|
|
$
|
1.80
|
|
|
$
|
1.68
|
|
Class B common stock
|
$
|
135.00
|
|
|
$
|
126.00
|
|
|
$
|
270.00
|
|
|
$
|
252.00
|
|
|
Three months ended
|
|
Six months ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income
|
$
|
87,754
|
|
|
$
|
79,706
|
|
|
$
|
163,065
|
|
|
$
|
145,464
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrealized holding gains (losses) on available-for-sale securities
|
2,579
|
|
|
(551
|
)
|
|
8,057
|
|
|
(5,978
|
)
|
||||
Amortization of prior service costs and net actuarial loss on pension and other postretirement plans
|
1,231
|
|
|
0
|
|
|
2,463
|
|
|
0
|
|
||||
Total other comprehensive income (loss), net of tax
|
3,810
|
|
|
(551
|
)
|
|
10,520
|
|
|
(5,978
|
)
|
||||
Comprehensive income
|
$
|
91,564
|
|
|
$
|
79,155
|
|
|
$
|
173,585
|
|
|
$
|
139,486
|
|
|
|
June 30,
|
|
December 31,
|
||||
|
|
2019
|
|
2018
|
||||
Assets
|
|
(Unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
338,262
|
|
|
$
|
266,417
|
|
Available-for-sale securities
|
|
61,210
|
|
|
402,339
|
|
||
Receivables from Erie Insurance Exchange and affiliates
|
|
483,319
|
|
|
449,873
|
|
||
Prepaid expenses and other current assets
|
|
42,300
|
|
|
36,892
|
|
||
Federal income taxes recoverable
|
|
7,791
|
|
|
8,162
|
|
||
Accrued investment income
|
|
4,365
|
|
|
5,263
|
|
||
Total current assets
|
|
937,247
|
|
|
1,168,946
|
|
||
|
|
|
|
|
||||
Available-for-sale securities
|
|
627,898
|
|
|
346,184
|
|
||
Equity securities
|
|
12,445
|
|
|
11,853
|
|
||
Limited partnership investments
|
|
30,344
|
|
|
34,821
|
|
||
Fixed assets, net
|
|
173,055
|
|
|
130,832
|
|
||
Deferred income taxes, net
|
|
19,090
|
|
|
24,101
|
|
||
Other assets
|
|
89,568
|
|
|
61,590
|
|
||
Total assets
|
|
$
|
1,889,647
|
|
|
$
|
1,778,327
|
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Commissions payable
|
|
$
|
267,403
|
|
|
$
|
241,573
|
|
Agent bonuses
|
|
51,357
|
|
|
103,462
|
|
||
Accounts payable and accrued liabilities
|
|
124,794
|
|
|
111,291
|
|
||
Dividends payable
|
|
41,913
|
|
|
41,910
|
|
||
Contract liability
|
|
35,374
|
|
|
33,854
|
|
||
Deferred executive compensation
|
|
12,605
|
|
|
13,107
|
|
||
Current portion of long-term borrowings
|
|
1,914
|
|
|
1,870
|
|
||
Total current liabilities
|
|
535,360
|
|
|
547,067
|
|
||
|
|
|
|
|
||||
Defined benefit pension plans
|
|
129,674
|
|
|
116,866
|
|
||
Long-term borrowings
|
|
96,860
|
|
|
97,860
|
|
||
Contract liability
|
|
18,339
|
|
|
17,873
|
|
||
Deferred executive compensation
|
|
13,199
|
|
|
13,075
|
|
||
Other long-term liabilities
|
|
32,761
|
|
|
11,914
|
|
||
Total liabilities
|
|
826,193
|
|
|
804,655
|
|
||
|
|
|
|
|
||||
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
|
|
16,483
|
|
|
16,459
|
|
||
Accumulated other comprehensive loss
|
|
(119,764
|
)
|
|
(130,284
|
)
|
||
Retained earnings
|
|
2,310,655
|
|
|
2,231,417
|
|
||
Total contributed capital and retained earnings
|
|
2,209,544
|
|
|
2,119,762
|
|
||
Treasury stock, at cost; 22,110,132 shares held
|
|
(1,158,300
|
)
|
|
(1,157,625
|
)
|
||
Deferred compensation
|
|
12,210
|
|
|
11,535
|
|
||
Total shareholders’ equity
|
|
1,063,454
|
|
|
973,672
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
1,889,647
|
|
|
$
|
1,778,327
|
|
|
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, 2018
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,459
|
|
$
|
(130,284
|
)
|
$
|
2,231,417
|
|
$
|
(1,157,625
|
)
|
$
|
11,535
|
|
$
|
973,672
|
|
Net income
|
|
|
|
|
75,311
|
|
|
|
75,311
|
|
||||||||||||||
Other comprehensive income
|
|
|
|
6,710
|
|
|
|
|
6,710
|
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $0.90 per share
|
|
|
|
|
(41,570
|
)
|
|
|
(41,570
|
)
|
||||||||||||||
Class B $135.00 per share
|
|
|
|
|
(343
|
)
|
|
|
(343
|
)
|
||||||||||||||
Net purchase of treasury stock (1)
|
|
|
24
|
|
|
|
0
|
|
|
24
|
|
|||||||||||||
Deferred compensation
|
|
|
|
|
|
(1,154
|
)
|
1,154
|
|
0
|
|
|||||||||||||
Balance, March 31, 2019
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,483
|
|
$
|
(123,574
|
)
|
$
|
2,264,815
|
|
$
|
(1,158,779
|
)
|
$
|
12,689
|
|
$
|
1,013,804
|
|
Net income
|
|
|
|
|
87,754
|
|
|
|
87,754
|
|
||||||||||||||
Other comprehensive income
|
|
|
|
3,810
|
|
|
|
|
3,810
|
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $0.90 per share
|
|
|
|
|
(41,570
|
)
|
|
|
(41,570
|
)
|
||||||||||||||
Class B $135.00 per share
|
|
|
|
|
(344
|
)
|
|
|
(344
|
)
|
||||||||||||||
Net purchase of treasury stock (1)
|
|
|
0
|
|
|
|
0
|
|
|
0
|
|
|||||||||||||
Deferred compensation
|
|
|
|
|
|
(443
|
)
|
443
|
|
0
|
|
|||||||||||||
Rabbi trust distribution (2)
|
|
|
|
|
|
922
|
|
(922
|
)
|
0
|
|
|||||||||||||
Balance, June 30, 2019
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,483
|
|
$
|
(119,764
|
)
|
$
|
2,310,655
|
|
$
|
(1,158,300
|
)
|
$
|
12,210
|
|
$
|
1,063,454
|
|
|
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, 2017
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,470
|
|
$
|
(156,059
|
)
|
$
|
2,140,853
|
|
$
|
(1,155,668
|
)
|
$
|
9,578
|
|
$
|
857,344
|
|
Cumulative effect adjustments (3)
|
|
|
|
|
(38,392
|
)
|
|
|
(38,392
|
)
|
||||||||||||||
Net income
|
|
|
|
|
65,758
|
|
|
|
65,758
|
|
||||||||||||||
Other comprehensive loss
|
|
|
|
(5,427
|
)
|
|
|
|
(5,427
|
)
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $0.84 per share
|
|
|
|
|
(38,799
|
)
|
|
|
(38,799
|
)
|
||||||||||||||
Class B $126.00 per share
|
|
|
|
|
(320
|
)
|
|
|
(320
|
)
|
||||||||||||||
Net purchase of treasury stock (1)
|
|
|
(9
|
)
|
|
|
0
|
|
|
(9
|
)
|
|||||||||||||
Deferred compensation
|
|
|
|
|
|
(1,663
|
)
|
1,663
|
|
0
|
|
|||||||||||||
Balance, March 31, 2018
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,461
|
|
$
|
(161,486
|
)
|
$
|
2,129,100
|
|
$
|
(1,157,331
|
)
|
$
|
11,241
|
|
$
|
840,155
|
|
Net income
|
|
|
|
|
79,706
|
|
|
|
79,706
|
|
||||||||||||||
Other comprehensive loss
|
|
|
|
(551
|
)
|
|
|
|
(551
|
)
|
||||||||||||||
Dividends declared:
|
|
|
|
|
|
|
|
|
||||||||||||||||
Class A $0.84 per share
|
|
|
|
|
(38,799
|
)
|
|
|
(38,799
|
)
|
||||||||||||||
Class B $126.00 per share
|
|
|
|
|
(321
|
)
|
|
|
(321
|
)
|
||||||||||||||
Net purchase of treasury stock (1)
|
|
|
(2
|
)
|
|
|
0
|
|
|
(2
|
)
|
|||||||||||||
Deferred compensation
|
|
|
|
|
|
(276
|
)
|
276
|
|
0
|
|
|||||||||||||
Rabbi trust distribution (2)
|
|
|
|
|
|
608
|
|
(608
|
)
|
0
|
|
|||||||||||||
Balance, June 30, 2018
|
$
|
1,992
|
|
$
|
178
|
|
$
|
16,459
|
|
$
|
(162,037
|
)
|
$
|
2,169,686
|
|
$
|
(1,156,999
|
)
|
$
|
10,909
|
|
$
|
880,188
|
|
|
|
Six months ended
|
||||||
|
|
June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
Cash flows from operating activities
|
|
|
|
|
||||
Management fee received
|
|
$
|
902,958
|
|
|
$
|
859,694
|
|
Administrative services reimbursements received
|
|
296,390
|
|
|
298,056
|
|
||
Service agreement fee received
|
|
13,599
|
|
|
14,225
|
|
||
Net investment income received
|
|
16,799
|
|
|
17,279
|
|
||
Limited partnership distributions
|
|
1,292
|
|
|
3,037
|
|
||
Commissions paid to agents
|
|
(434,599
|
)
|
|
(413,880
|
)
|
||
Agents bonuses paid
|
|
(108,540
|
)
|
|
(126,594
|
)
|
||
Salaries and wages paid
|
|
(101,765
|
)
|
|
(102,601
|
)
|
||
Pension contributions and employee benefits paid
|
|
(22,085
|
)
|
|
(99,334
|
)
|
||
General operating expenses paid
|
|
(117,915
|
)
|
|
(111,381
|
)
|
||
Administrative services expenses paid
|
|
(291,136
|
)
|
|
(295,635
|
)
|
||
Income taxes paid
|
|
(39,863
|
)
|
|
(208
|
)
|
||
Interest paid
|
|
(719
|
)
|
|
(1,065
|
)
|
||
Net cash provided by operating activities
|
|
114,416
|
|
|
41,593
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
||||
Purchase of investments:
|
|
|
|
|
||||
Available-for-sale securities
|
|
(615,384
|
)
|
|
(114,848
|
)
|
||
Equity securities
|
|
0
|
|
|
(1,035
|
)
|
||
Limited partnerships
|
|
(9
|
)
|
|
(215
|
)
|
||
Other investments
|
|
(124
|
)
|
|
0
|
|
||
Proceeds from investments:
|
|
|
|
|
||||
Available-for-sale securities sales
|
|
430,596
|
|
|
76,387
|
|
||
Available-for-sale securities maturities/calls
|
|
261,902
|
|
|
69,674
|
|
||
Equity securities
|
|
0
|
|
|
1,157
|
|
||
Limited partnerships
|
|
2,450
|
|
|
2,682
|
|
||
Purchase of fixed assets
|
|
(34,260
|
)
|
|
(18,121
|
)
|
||
Distributions on agent loans
|
|
(6,947
|
)
|
|
(24,440
|
)
|
||
Collections on agent loans
|
|
3,991
|
|
|
3,106
|
|
||
Net cash provided by (used in) investing activities
|
|
42,215
|
|
|
(5,653
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
||||
Dividends paid to shareholders
|
|
(83,824
|
)
|
|
(78,235
|
)
|
||
Net (payments) proceeds from long-term borrowings
|
|
(962
|
)
|
|
24,986
|
|
||
Net cash used in financing activities
|
|
(84,786
|
)
|
|
(53,249
|
)
|
||
|
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
|
71,845
|
|
|
(17,309
|
)
|
||
Cash and cash equivalents, beginning of period
|
|
266,417
|
|
|
215,721
|
|
||
Cash and cash equivalents, end of period
|
|
$
|
338,262
|
|
|
$
|
198,412
|
|
|
|
|
|
|
||||
Supplemental disclosure of noncash transactions
|
|
|
|
|
||||
Operating lease assets obtained in exchange for new operating lease liabilities
|
|
$
|
33,136
|
|
|
$
|
—
|
|
Liability incurred to purchase fixed assets
|
|
$
|
14,980
|
|
|
$
|
—
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||
(in thousands)
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Management fee revenue - policy issuance and renewal services, net
|
$
|
480,513
|
|
$
|
454,572
|
|
|
$
|
911,496
|
|
$
|
860,550
|
|
|
|
|
|
|
|
||||||||
Management fee revenue - administrative services, net
|
14,195
|
|
13,299
|
|
|
28,146
|
|
26,373
|
|
||||
Administrative services reimbursement revenue
|
146,095
|
|
146,507
|
|
|
288,575
|
|
292,470
|
|
||||
Total administrative services
|
$
|
160,290
|
|
$
|
159,806
|
|
|
$
|
316,721
|
|
$
|
318,843
|
|
|
|
Three months ended June 30,
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||
(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
|
|
$
|
87,036
|
|
|
46,188,994
|
|
|
$
|
1.88
|
|
|
$
|
79,053
|
|
|
46,188,705
|
|
|
$
|
1.71
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
24,906
|
|
|
—
|
|
|
0
|
|
|
23,344
|
|
|
—
|
|
||||
Assumed conversion of Class B shares
|
|
718
|
|
|
6,100,800
|
|
|
—
|
|
|
653
|
|
|
6,100,800
|
|
|
—
|
|
||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
87,754
|
|
|
52,314,700
|
|
|
$
|
1.68
|
|
|
$
|
79,706
|
|
|
52,312,849
|
|
|
$
|
1.52
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
718
|
|
|
2,542
|
|
|
$
|
283
|
|
|
$
|
653
|
|
|
2,542
|
|
|
$
|
257
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
718
|
|
|
2,542
|
|
|
$
|
283
|
|
|
$
|
653
|
|
|
2,542
|
|
|
$
|
257
|
|
|
|
Six months ended June 30,
|
||||||||||||||||||||
|
|
2019
|
|
2018
|
||||||||||||||||||
(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
|
|
$
|
161,730
|
|
|
46,188,668
|
|
|
$
|
3.50
|
|
|
$
|
144,273
|
|
|
46,188,309
|
|
|
$
|
3.12
|
|
Dilutive effect of stock-based awards
|
|
0
|
|
|
23,903
|
|
|
—
|
|
|
0
|
|
|
22,632
|
|
|
—
|
|
||||
Assumed conversion of Class B shares
|
|
1,335
|
|
|
6,100,800
|
|
|
—
|
|
|
1,191
|
|
|
6,100,800
|
|
|
—
|
|
||||
Class A – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class A stockholders on Class A equivalent shares
|
|
$
|
163,065
|
|
|
52,313,371
|
|
|
$
|
3.12
|
|
|
$
|
145,464
|
|
|
52,311,741
|
|
|
$
|
2.78
|
|
Class B – Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income available to Class B stockholders
|
|
$
|
1,335
|
|
|
2,542
|
|
|
$
|
525
|
|
|
$
|
1,191
|
|
|
2,542
|
|
|
$
|
469
|
|
Class B – Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Income available to Class B stockholders
|
|
$
|
1,335
|
|
|
2,542
|
|
|
$
|
525
|
|
|
$
|
1,191
|
|
|
2,542
|
|
|
$
|
468
|
|
•
|
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, 2019
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury (1)
|
|
$
|
151,094
|
|
|
$
|
0
|
|
|
$
|
151,094
|
|
|
$
|
0
|
|
States & political subdivisions (1)
|
|
3,360
|
|
|
0
|
|
|
3,360
|
|
|
0
|
|
||||
Corporate debt securities (1)
|
|
356,656
|
|
|
0
|
|
|
350,283
|
|
|
6,373
|
|
||||
Residential mortgage-backed securities
|
|
66,186
|
|
|
0
|
|
|
66,186
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
46,142
|
|
|
0
|
|
|
43,591
|
|
|
2,551
|
|
||||
Collateralized debt obligations
|
|
57,345
|
|
|
0
|
|
|
57,345
|
|
|
0
|
|
||||
Other debt securities
|
|
8,325
|
|
|
0
|
|
|
8,325
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
689,108
|
|
|
0
|
|
|
680,184
|
|
|
8,924
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Nonredeemable preferred stock - financial services sector
|
|
12,445
|
|
|
2,003
|
|
|
10,442
|
|
|
0
|
|
||||
Total equity securities
|
|
12,445
|
|
|
2,003
|
|
|
10,442
|
|
|
0
|
|
||||
Total
|
|
$
|
701,553
|
|
|
$
|
2,003
|
|
|
$
|
690,626
|
|
|
$
|
8,924
|
|
|
|
At December 31, 2018
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury (1)
|
|
$
|
208,412
|
|
|
$
|
0
|
|
|
$
|
208,412
|
|
|
$
|
0
|
|
States & political subdivisions (1)
|
|
159,023
|
|
|
0
|
|
|
159,023
|
|
|
0
|
|
||||
Corporate debt securities
|
|
249,947
|
|
|
0
|
|
|
237,370
|
|
|
12,577
|
|
||||
Residential mortgage-backed securities
|
|
4,609
|
|
|
0
|
|
|
4,609
|
|
|
0
|
|
||||
Commercial mortgage-backed securities
|
|
46,515
|
|
|
0
|
|
|
46,515
|
|
|
0
|
|
||||
Collateralized debt obligations
|
|
64,239
|
|
|
0
|
|
|
64,239
|
|
|
0
|
|
||||
Other debt securities
|
|
15,778
|
|
|
0
|
|
|
15,778
|
|
|
0
|
|
||||
Total available-for-sale securities
|
|
748,523
|
|
|
0
|
|
|
735,946
|
|
|
12,577
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Nonredeemable preferred stock - financial services sector
|
|
11,853
|
|
|
1,809
|
|
|
10,044
|
|
|
0
|
|
||||
Total equity securities
|
|
11,853
|
|
|
1,809
|
|
|
10,044
|
|
|
0
|
|
||||
Other limited partnership investments (2)
|
|
3,206
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
763,582
|
|
|
$
|
1,809
|
|
|
$
|
745,990
|
|
|
$
|
12,577
|
|
(1)
|
In the fourth quarter of 2018, we began selling off our municipal bonds as part of a portfolio rebalancing. We have currently invested proceeds from these sales primarily in U.S. Treasuries and corporate debt securities.
|
(2)
|
The limited partnership investment measured at fair value represents one real estate fund included on the balance sheet as a limited partnership investment reported under the fair value option using the net asset value (NAV) practical expedient, which is not required to be categorized in the fair value hierarchy. The fair value of this investment is based on our proportionate share of the NAV from the most recent partners' capital statements received from the general partner, which is generally one quarter prior to our balance sheet date. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. Liquidation of this fund was completed in January 2019 and a final distribution totaling $3.2 million was received. There were no unfunded commitments related to the investment at December 31, 2018. During the year ended December 31, 2018, no contributions were made and distributions totaling $1.2 million were received from this investment.
|
|
|
At June 30, 2019
|
||||||||||||||
(in thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
Priced via pricing services
|
|
$
|
688,958
|
|
|
$
|
0
|
|
|
$
|
680,184
|
|
|
$
|
8,774
|
|
Priced via internal modeling
|
|
150
|
|
|
0
|
|
|
0
|
|
|
150
|
|
||||
Total available-for-sale securities
|
|
689,108
|
|
|
0
|
|
|
680,184
|
|
|
8,924
|
|
||||
Equity securities priced via pricing services
|
|
12,445
|
|
|
2,003
|
|
|
10,442
|
|
|
0
|
|
||||
Total
|
|
$
|
701,553
|
|
|
$
|
2,003
|
|
|
$
|
690,626
|
|
|
$
|
8,924
|
|
|
|
At June 30, 2019
|
|||||||
(dollars in thousands)
|
|
Fair
value
|
Valuation techniques
|
Unobservable input
|
Range
(basis points) |
Weighted
average (basis points) |
Impact of increase in input on estimated fair value
|
||
|
|
|
|
|
|
|
|
||
Corporate debt securities - bank loans
|
|
$
|
6,093
|
|
Syndicated loan model
|
Market residual yield (1)
|
-130 - +730
|
+54
|
Decrease
|
Commercial mortgage-backed securities
|
|
1,866
|
|
Relative value pricing model
|
Credit spread (2)
|
+44 - +52
|
+48
|
Decrease
|
(1)
|
Values for bank loans classified as Level 3 are determined by our pricing vendor based on model yield curves adjusted for observable inputs. The market residual yield represents a net adjustment to the model yield curve for unobservable input factors.
|
(2)
|
Values for commercial mortgage-backed securities classified as Level 3 include adjustments to the base spread over the appropriate U.S. Treasury yield assuming no prepayments until penalty provisions have expired.
|
(in thousands) |
|
Beginning balance at March 31, 2019
|
|
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, 2019
|
||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
$
|
11,523
|
|
|
$
|
(20
|
)
|
|
$
|
23
|
|
|
$
|
0
|
|
|
$
|
(5,841
|
)
|
|
$
|
2,581
|
|
|
$
|
(1,893
|
)
|
|
$
|
6,373
|
|
Residential mortgage-backed securities
|
|
915
|
|
|
4
|
|
|
15
|
|
|
0
|
|
|
(26
|
)
|
|
0
|
|
|
(908
|
)
|
|
0
|
|
||||||||
Commercial mortgage-backed securities
|
|
1,182
|
|
|
15
|
|
|
(8
|
)
|
|
0
|
|
|
(1,065
|
)
|
|
2,551
|
|
|
(124
|
)
|
|
2,551
|
|
||||||||
Total Level 3 available-for-sale securities
|
|
$
|
13,620
|
|
|
$
|
(1
|
)
|
|
$
|
30
|
|
|
$
|
0
|
|
|
$
|
(6,932
|
)
|
|
$
|
5,132
|
|
|
$
|
(2,925
|
)
|
|
$
|
8,924
|
|
(in thousands)
|
|
Beginning balance at December 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, 2019
|
||||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate debt securities
|
|
$
|
12,577
|
|
|
$
|
(9
|
)
|
|
$
|
291
|
|
|
$
|
734
|
|
|
$
|
(6,272
|
)
|
|
$
|
7,394
|
|
|
$
|
(8,342
|
)
|
|
$
|
6,373
|
|
Residential mortgage-backed securities
|
|
0
|
|
|
4
|
|
|
15
|
|
|
921
|
|
|
(32
|
)
|
|
0
|
|
|
(908
|
)
|
|
0
|
|
||||||||
Commercial mortgage-backed securities
|
|
0
|
|
|
13
|
|
|
(8
|
)
|
|
478
|
|
|
(1,065
|
)
|
|
3,257
|
|
|
(124
|
)
|
|
2,551
|
|
||||||||
Total Level 3 available-for-sale securities
|
|
$
|
12,577
|
|
|
$
|
8
|
|
|
$
|
298
|
|
|
$
|
2,133
|
|
|
$
|
(7,369
|
)
|
|
$
|
10,651
|
|
|
$
|
(9,374
|
)
|
|
$
|
8,924
|
|
(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
|
|
(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.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
$
|
(18
|
)
|
|
$
|
(53
|
)
|
|
$
|
158
|
|
|
$
|
(28
|
)
|
Commercial mortgage-backed securities
|
29
|
|
|
—
|
|
|
26
|
|
|
—
|
|
||||
Net unrealized gains (losses) on Level 3 securities held at reporting date
|
$
|
11
|
|
|
$
|
(53
|
)
|
|
$
|
184
|
|
|
$
|
(28
|
)
|
|
|
At June 30, 2019
|
|
At December 31, 2018
|
||||||||||||
(in thousands)
|
|
Carrying value
|
|
Fair value
|
|
Carrying value
|
|
Fair value
|
||||||||
Agent loans
|
|
$
|
60,962
|
|
|
$
|
61,321
|
|
|
$
|
58,006
|
|
|
$
|
54,110
|
|
Long-term borrowings
|
|
99,038
|
|
|
100,129
|
|
|
99,730
|
|
|
94,057
|
|
|
|
At June 30, 2019
|
||||||||||||||
(in thousands)
|
|
Amortized
cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury (1)
|
|
$
|
150,171
|
|
|
$
|
923
|
|
|
$
|
0
|
|
|
$
|
151,094
|
|
States & political subdivisions (1)
|
|
3,354
|
|
|
6
|
|
|
0
|
|
|
3,360
|
|
||||
Corporate debt securities (1)
|
|
356,899
|
|
|
1,706
|
|
|
1,949
|
|
|
356,656
|
|
||||
Residential mortgage-backed securities
|
|
65,910
|
|
|
297
|
|
|
21
|
|
|
66,186
|
|
||||
Commercial mortgage-backed securities
|
|
45,527
|
|
|
625
|
|
|
10
|
|
|
46,142
|
|
||||
Collateralized debt obligations
|
|
57,710
|
|
|
16
|
|
|
381
|
|
|
57,345
|
|
||||
Other debt securities
|
|
8,209
|
|
|
116
|
|
|
0
|
|
|
8,325
|
|
||||
Total available-for-sale securities
|
|
$
|
687,780
|
|
|
$
|
3,689
|
|
|
$
|
2,361
|
|
|
$
|
689,108
|
|
|
|
At December 31, 2018
|
||||||||||||||
(in thousands)
|
|
Amortized
cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Estimated fair value
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury (1)
|
|
$
|
208,610
|
|
|
$
|
18
|
|
|
$
|
216
|
|
|
$
|
208,412
|
|
States & political subdivisions (1)
|
|
157,003
|
|
|
2,020
|
|
|
0
|
|
|
159,023
|
|
||||
Corporate debt securities
|
|
259,362
|
|
|
139
|
|
|
9,554
|
|
|
249,947
|
|
||||
Residential mortgage-backed securities
|
|
4,603
|
|
|
38
|
|
|
32
|
|
|
4,609
|
|
||||
Commercial mortgage-backed securities
|
|
47,022
|
|
|
80
|
|
|
587
|
|
|
46,515
|
|
||||
Collateralized debt obligations
|
|
65,039
|
|
|
30
|
|
|
830
|
|
|
64,239
|
|
||||
Other debt securities
|
|
15,756
|
|
|
33
|
|
|
11
|
|
|
15,778
|
|
||||
Total available-for-sale securities
|
|
$
|
757,395
|
|
|
$
|
2,358
|
|
|
$
|
11,230
|
|
|
$
|
748,523
|
|
(1)
|
In the fourth quarter of 2018, we began selling off our municipal bonds as part of a portfolio rebalancing. We have currently invested proceeds from these sales primarily in U.S. Treasuries and corporate debt securities.
|
|
|
At June 30, 2019
|
||||||
|
|
Amortized
|
|
Estimated
|
||||
(in thousands)
|
|
cost
|
|
fair value
|
||||
Due in one year or less
|
|
$
|
62,962
|
|
|
$
|
63,031
|
|
Due after one year through five years
|
|
358,056
|
|
|
358,508
|
|
||
Due after five years through ten years
|
|
127,215
|
|
|
127,364
|
|
||
Due after ten years
|
|
139,547
|
|
|
140,205
|
|
||
Total available-for-sale securities
|
|
$
|
687,780
|
|
|
$
|
689,108
|
|
|
|
At June 30, 2019
|
|||||||||||||||||||||||||
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Corporate debt securities
|
|
104,809
|
|
|
844
|
|
|
58,666
|
|
|
1,105
|
|
|
163,475
|
|
|
1,949
|
|
|
334
|
|
||||||
Residential mortgage-backed securities
|
|
15,710
|
|
|
21
|
|
|
0
|
|
|
0
|
|
|
15,710
|
|
|
21
|
|
|
2
|
|
||||||
Commercial mortgage-backed securities
|
|
6,965
|
|
|
6
|
|
|
547
|
|
|
4
|
|
|
7,512
|
|
|
10
|
|
|
7
|
|
||||||
Collateralized debt obligations
|
|
40,402
|
|
|
165
|
|
|
14,842
|
|
|
216
|
|
|
55,244
|
|
|
381
|
|
|
41
|
|
||||||
Total available-for-sale securities
|
|
$
|
167,886
|
|
|
$
|
1,036
|
|
|
$
|
74,055
|
|
|
$
|
1,325
|
|
|
$
|
241,941
|
|
|
$
|
2,361
|
|
|
384
|
|
Quality breakdown of available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment grade
|
|
$
|
136,432
|
|
|
$
|
296
|
|
|
$
|
59,023
|
|
|
$
|
354
|
|
|
$
|
195,455
|
|
|
$
|
650
|
|
|
111
|
|
Non-investment grade
|
|
31,454
|
|
|
740
|
|
|
15,032
|
|
|
971
|
|
|
46,486
|
|
|
1,711
|
|
|
273
|
|
||||||
Total available-for-sale securities
|
|
$
|
167,886
|
|
|
$
|
1,036
|
|
|
$
|
74,055
|
|
|
$
|
1,325
|
|
|
$
|
241,941
|
|
|
$
|
2,361
|
|
|
384
|
|
|
|
At December 31, 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
|
|
$
|
129,474
|
|
|
$
|
19
|
|
|
$
|
11,656
|
|
|
$
|
197
|
|
|
$
|
141,130
|
|
|
$
|
216
|
|
|
7
|
|
Corporate debt securities
|
|
157,300
|
|
|
6,866
|
|
|
86,586
|
|
|
2,688
|
|
|
243,886
|
|
|
9,554
|
|
|
635
|
|
||||||
Residential mortgage-backed securities
|
|
777
|
|
|
6
|
|
|
1,618
|
|
|
26
|
|
|
2,395
|
|
|
32
|
|
|
3
|
|
||||||
Commercial mortgage-backed securities
|
|
17,624
|
|
|
175
|
|
|
16,997
|
|
|
412
|
|
|
34,621
|
|
|
587
|
|
|
30
|
|
||||||
Collateralized debt obligations
|
|
55,246
|
|
|
826
|
|
|
1,248
|
|
|
4
|
|
|
56,494
|
|
|
830
|
|
|
39
|
|
||||||
Other debt securities
|
|
8,213
|
|
|
11
|
|
|
0
|
|
|
0
|
|
|
8,213
|
|
|
11
|
|
|
7
|
|
||||||
Total available-for-sale securities
|
|
$
|
368,634
|
|
|
$
|
7,903
|
|
|
$
|
118,105
|
|
|
$
|
3,327
|
|
|
$
|
486,739
|
|
|
$
|
11,230
|
|
|
721
|
|
Quality breakdown of available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investment grade
|
|
$
|
242,821
|
|
|
$
|
1,295
|
|
|
$
|
98,118
|
|
|
$
|
1,641
|
|
|
$
|
340,939
|
|
|
$
|
2,936
|
|
|
147
|
|
Non-investment grade
|
|
125,813
|
|
|
6,608
|
|
|
19,987
|
|
|
1,686
|
|
|
145,800
|
|
|
8,294
|
|
|
574
|
|
||||||
Total available-for-sale securities
|
|
$
|
368,634
|
|
|
$
|
7,903
|
|
|
$
|
118,105
|
|
|
$
|
3,327
|
|
|
$
|
486,739
|
|
|
$
|
11,230
|
|
|
721
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Fixed maturities (1)
|
|
$
|
5,488
|
|
|
$
|
6,263
|
|
|
$
|
11,649
|
|
|
$
|
12,373
|
|
Equity securities
|
|
141
|
|
|
142
|
|
|
282
|
|
|
284
|
|
||||
Cash equivalents and other
|
|
2,660
|
|
|
1,026
|
|
|
5,125
|
|
|
2,034
|
|
||||
Total investment income
|
|
8,289
|
|
|
7,431
|
|
|
17,056
|
|
|
14,691
|
|
||||
Less: investment expenses
|
|
259
|
|
|
327
|
|
|
509
|
|
|
767
|
|
||||
Investment income, net of expenses
|
|
$
|
8,030
|
|
|
$
|
7,104
|
|
|
$
|
16,547
|
|
|
$
|
13,924
|
|
(1)
|
Includes interest earned on note receivable from Erie Family Life Insurance Company of $0.4 million and $0.8 million for the three and six months ended June 30, 2018, respectively. The note was repaid in full in December 2018.
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross realized gains
|
|
$
|
2,062
|
|
|
$
|
235
|
|
|
$
|
4,320
|
|
|
$
|
575
|
|
Gross realized losses
|
|
(823
|
)
|
|
(301
|
)
|
|
(1,163
|
)
|
|
(986
|
)
|
||||
Net realized gains (losses) on available-for-sale securities
|
|
1,239
|
|
|
(66
|
)
|
|
3,157
|
|
|
(411
|
)
|
||||
Equity securities
|
|
63
|
|
|
(68
|
)
|
|
648
|
|
|
(188
|
)
|
||||
Miscellaneous
|
|
0
|
|
|
102
|
|
|
0
|
|
|
102
|
|
||||
Net realized investment gains (losses)
|
|
$
|
1,302
|
|
|
$
|
(32
|
)
|
|
$
|
3,805
|
|
|
$
|
(497
|
)
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
||||||||
Net gains (losses) recognized during the period
|
|
$
|
63
|
|
|
$
|
(68
|
)
|
|
$
|
648
|
|
|
$
|
(188
|
)
|
Less: net losses recognized on securities sold
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(34
|
)
|
||||
Net unrealized gains (losses) recognized on securities held at reporting date
|
|
$
|
63
|
|
|
$
|
(68
|
)
|
|
$
|
648
|
|
|
$
|
(154
|
)
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Equity in earnings (losses) of limited partnerships - equity method
|
|
$
|
404
|
|
|
$
|
(216
|
)
|
|
$
|
(743
|
)
|
|
$
|
(21
|
)
|
Change in fair value of limited partnerships - fair value option
|
|
0
|
|
|
(3
|
)
|
|
0
|
|
|
(390
|
)
|
||||
Equity in earnings (losses) of limited partnerships
|
|
$
|
404
|
|
|
$
|
(219
|
)
|
|
$
|
(743
|
)
|
|
$
|
(411
|
)
|
(in thousands)
|
|
At June 30, 2019
|
|
At December 31, 2018
|
||||
Private equity
|
|
$
|
26,793
|
|
|
$
|
28,271
|
|
Mezzanine debt
|
|
1,053
|
|
|
1,152
|
|
||
Real estate
|
|
2,498
|
|
|
2,192
|
|
||
Real estate - fair value option
|
|
0
|
|
|
3,206
|
|
||
Total limited partnership investments
|
|
$
|
30,344
|
|
|
$
|
34,821
|
|
|
|
|
|
|
|
(in thousands)
|
|
June 30, 2019
|
||
Operating lease assets
|
|
$
|
26,587
|
|
|
|
|
||
Operating lease liabilities - current
|
|
$
|
11,736
|
|
Operating lease liabilities - long-term
|
|
14,539
|
|
|
Total operating lease liabilities
|
|
$
|
26,275
|
|
(in thousands)
|
|
|
|
Year
|
|
Principal payments
|
|
2019
|
$
|
946
|
|
2020
|
|
1,955
|
|
2021
|
|
2,042
|
|
2022
|
|
2,132
|
|
2023
|
|
2,227
|
|
Thereafter
|
|
89,737
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Service cost for benefits earned
|
|
$
|
8,464
|
|
|
$
|
9,513
|
|
|
$
|
16,927
|
|
|
$
|
19,026
|
|
Interest cost on benefits obligation
|
|
9,826
|
|
|
8,845
|
|
|
19,653
|
|
|
17,691
|
|
||||
Expected return on plan assets
|
|
(11,871
|
)
|
|
(12,814
|
)
|
|
(23,742
|
)
|
|
(25,629
|
)
|
||||
Prior service cost amortization
|
|
348
|
|
|
338
|
|
|
697
|
|
|
676
|
|
||||
Net actuarial loss amortization
|
|
1,278
|
|
|
3,202
|
|
|
2,556
|
|
|
6,404
|
|
||||
Pension plan cost (1)
|
|
$
|
8,045
|
|
|
$
|
9,084
|
|
|
$
|
16,091
|
|
|
$
|
18,168
|
|
(1)
|
The components of pension plan costs other than the service cost component are included in the line item "Other income" in the Statements of Operations after reimbursements from the Exchange and its subsidiaries.
|
|
|
Three months ended
|
|
Three months ended
|
||||||||||||||||
|
|
June 30, 2019
|
|
June 30, 2018
|
||||||||||||||||
(in thousands)
|
|
Before Tax
|
Income Tax
|
Net
|
|
Before Tax
|
Income Tax
|
Net
|
||||||||||||
Investment securities:
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(2,235
|
)
|
$
|
(470
|
)
|
$
|
(1,765
|
)
|
|
$
|
(3,460
|
)
|
$
|
(727
|
)
|
$
|
(2,733
|
)
|
OCI (loss) before reclassifications
|
|
4,420
|
|
928
|
|
3,492
|
|
|
(1,409
|
)
|
(296
|
)
|
(1,113
|
)
|
||||||
Realized investment (gains) losses
|
|
(1,239
|
)
|
(260
|
)
|
(979
|
)
|
|
66
|
|
14
|
|
52
|
|
||||||
Impairment losses
|
|
84
|
|
18
|
|
66
|
|
|
646
|
|
136
|
|
510
|
|
||||||
OCI (loss)
|
|
3,265
|
|
686
|
|
2,579
|
|
|
(697
|
)
|
(146
|
)
|
(551
|
)
|
||||||
AOCI (loss), end of period
|
|
$
|
1,030
|
|
$
|
216
|
|
$
|
814
|
|
|
$
|
(4,157
|
)
|
$
|
(873
|
)
|
$
|
(3,284
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension and other postretirement plans:
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(154,190
|
)
|
$
|
(32,381
|
)
|
$
|
(121,809
|
)
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
Amortization of prior service costs (1)
|
|
348
|
|
73
|
|
275
|
|
|
0
|
|
0
|
|
0
|
|
||||||
Amortization of net actuarial loss (1)
|
|
1,210
|
|
254
|
|
956
|
|
|
0
|
|
0
|
|
0
|
|
||||||
OCI
|
|
1,558
|
|
327
|
|
1,231
|
|
|
0
|
|
0
|
|
0
|
|
||||||
AOCI (loss), end of period
|
|
$
|
(152,632
|
)
|
$
|
(32,054
|
)
|
$
|
(120,578
|
)
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(156,425
|
)
|
$
|
(32,851
|
)
|
$
|
(123,574
|
)
|
|
$
|
(204,414
|
)
|
$
|
(42,928
|
)
|
$
|
(161,486
|
)
|
Investment securities
|
|
3,265
|
|
686
|
|
2,579
|
|
|
(697
|
)
|
(146
|
)
|
(551
|
)
|
||||||
Pension and other postretirement plans
|
|
1,558
|
|
327
|
|
1,231
|
|
|
0
|
|
0
|
|
0
|
|
||||||
OCI (loss)
|
|
4,823
|
|
1,013
|
|
3,810
|
|
|
(697
|
)
|
(146
|
)
|
(551
|
)
|
||||||
AOCI (loss), end of period
|
|
$
|
(151,602
|
)
|
$
|
(31,838
|
)
|
$
|
(119,764
|
)
|
|
$
|
(205,111
|
)
|
$
|
(43,074
|
)
|
$
|
(162,037
|
)
|
|
|
Six months ended
|
|
Six months ended
|
||||||||||||||||
|
|
June 30, 2019
|
|
June 30, 2018
|
||||||||||||||||
(in thousands)
|
|
Before Tax
|
Income Tax
|
Net
|
|
Before Tax
|
Income Tax
|
Net
|
||||||||||||
Investment securities:
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(9,169
|
)
|
$
|
(1,926
|
)
|
$
|
(7,243
|
)
|
|
$
|
3,410
|
|
$
|
716
|
|
$
|
2,694
|
|
OCI (loss) before reclassifications
|
|
13,194
|
|
2,771
|
|
10,423
|
|
|
(8,539
|
)
|
(1,793
|
)
|
(6,746
|
)
|
||||||
Realized investment (gains) losses
|
|
(3,157
|
)
|
(663
|
)
|
(2,494
|
)
|
|
411
|
|
86
|
|
325
|
|
||||||
Impairment losses
|
|
162
|
|
34
|
|
128
|
|
|
646
|
|
136
|
|
510
|
|
||||||
Cumulative effect of adopting ASU 2016-01 (2)
|
|
—
|
|
—
|
|
—
|
|
|
(85
|
)
|
(18
|
)
|
(67
|
)
|
||||||
OCI (loss)
|
|
10,199
|
|
2,142
|
|
8,057
|
|
|
(7,567
|
)
|
(1,589
|
)
|
(5,978
|
)
|
||||||
AOCI (loss), end of period
|
|
$
|
1,030
|
|
$
|
216
|
|
$
|
814
|
|
|
$
|
(4,157
|
)
|
$
|
(873
|
)
|
$
|
(3,284
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pension and other postretirement plans:
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(155,749
|
)
|
$
|
(32,708
|
)
|
$
|
(123,041
|
)
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
Amortization of prior service costs (1)
|
|
697
|
|
146
|
|
551
|
|
|
0
|
|
0
|
|
0
|
|
||||||
Amortization of net actuarial loss (1)
|
|
2,420
|
|
508
|
|
1,912
|
|
|
0
|
|
0
|
|
0
|
|
||||||
OCI
|
|
3,117
|
|
654
|
|
2,463
|
|
|
0
|
|
0
|
|
0
|
|
||||||
AOCI (loss), end of period
|
|
$
|
(152,632
|
)
|
$
|
(32,054
|
)
|
$
|
(120,578
|
)
|
|
$
|
(200,954
|
)
|
$
|
(42,201
|
)
|
$
|
(158,753
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
||||||||||||
AOCI (loss), beginning of period
|
|
$
|
(164,918
|
)
|
$
|
(34,634
|
)
|
$
|
(130,284
|
)
|
|
$
|
(197,544
|
)
|
$
|
(41,485
|
)
|
$
|
(156,059
|
)
|
Investment securities
|
|
10,199
|
|
2,142
|
|
8,057
|
|
|
(7,567
|
)
|
(1,589
|
)
|
(5,978
|
)
|
||||||
Pension and other postretirement plans
|
|
3,117
|
|
654
|
|
2,463
|
|
|
0
|
|
0
|
|
0
|
|
||||||
OCI (loss)
|
|
13,316
|
|
2,796
|
|
10,520
|
|
|
(7,567
|
)
|
(1,589
|
)
|
(5,978
|
)
|
||||||
AOCI (loss), end of period
|
|
$
|
(151,602
|
)
|
$
|
(31,838
|
)
|
$
|
(119,764
|
)
|
|
$
|
(205,111
|
)
|
$
|
(43,074
|
)
|
$
|
(162,037
|
)
|
(1)
|
Effective January 1, 2019, amounts reclassified from AOCI related to amortization of prior service costs and net actuarial loss were recorded during interim periods. Prior to 2019, amounts reclassified for these items were recorded on an annual basis. These components are included in the computation of net periodic pension cost. See Note 9, "Postretirement Benefits", for additional information.
|
(2)
|
ASU 2016-01 required a reclassification of unrealized losses of equity securities from AOCI to retained earnings at January 1, 2018.
|
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)
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
||||||||||||
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
|
|
|
||||||||||||||
Operating income
|
|
$
|
96,610
|
|
|
$
|
95,323
|
|
|
1.3
|
|
%
|
|
$
|
182,732
|
|
|
$
|
172,890
|
|
|
5.7
|
|
%
|
Total investment income
|
|
9,652
|
|
|
6,207
|
|
|
55.5
|
|
|
|
19,447
|
|
|
12,370
|
|
|
57.2
|
|
|
||||
Interest expense, net
|
|
272
|
|
|
602
|
|
|
(54.9
|
)
|
|
|
721
|
|
|
1,155
|
|
|
(37.6
|
)
|
|
||||
Other income
|
|
48
|
|
|
58
|
|
|
(17.9
|
)
|
|
|
95
|
|
|
102
|
|
|
(7.1
|
)
|
|
||||
Income before income taxes
|
|
106,038
|
|
|
100,986
|
|
|
5.0
|
|
|
|
201,553
|
|
|
184,207
|
|
|
9.4
|
|
|
||||
Income tax expense
|
|
18,284
|
|
|
21,280
|
|
|
(14.1
|
)
|
|
|
38,488
|
|
|
38,743
|
|
|
(0.7
|
)
|
|
||||
Net income
|
|
$
|
87,754
|
|
|
$
|
79,706
|
|
|
10.1
|
|
%
|
|
$
|
163,065
|
|
|
$
|
145,464
|
|
|
12.1
|
|
%
|
Net income per share - diluted
|
|
$
|
1.68
|
|
|
$
|
1.52
|
|
|
10.1
|
|
%
|
|
$
|
3.12
|
|
|
$
|
2.78
|
|
|
12.1
|
|
%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||||
(dollars in thousands)
|
2019
|
2018
|
% Change
|
|
2019
|
2018
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||||
Policy issuance and renewal services
|
|
|
|
|
|
|
|
|
|
||||||||||
Direct and affiliated assumed premiums written by the Exchange
|
$
|
1,993,593
|
|
$
|
1,887,999
|
|
5.6
|
|
%
|
|
$
|
3,778,113
|
|
$
|
3,570,793
|
|
5.8
|
|
%
|
Management fee rate
|
24.2
|
%
|
24.2
|
%
|
|
|
|
24.2
|
%
|
24.2
|
%
|
|
|
||||||
Management fee revenue
|
482,449
|
|
456,896
|
|
5.6
|
|
|
|
914,303
|
|
864,132
|
|
5.8
|
|
|
||||
Change in allowance for management fee returned on cancelled policies (1)
|
(1,936
|
)
|
(2,324
|
)
|
16.7
|
|
|
|
(2,807
|
)
|
(3,582
|
)
|
21.6
|
|
|
||||
Management fee revenue - policy issuance and renewal services, net
|
$
|
480,513
|
|
$
|
454,572
|
|
5.7
|
|
%
|
|
$
|
911,496
|
|
$
|
860,550
|
|
5.9
|
|
%
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Administrative services
|
|
|
|
|
|
|
|
|
|
||||||||||
Direct and affiliated assumed premiums written by the Exchange
|
$
|
1,993,593
|
|
$
|
1,887,999
|
|
5.6
|
|
%
|
|
$
|
3,778,113
|
|
$
|
3,570,793
|
|
5.8
|
|
%
|
Management fee rate
|
0.8
|
%
|
0.8
|
%
|
|
|
|
0.8
|
%
|
0.8
|
%
|
|
|
||||||
Management fee revenue
|
15,949
|
|
15,104
|
|
5.6
|
|
|
|
30,225
|
|
28,566
|
|
5.8
|
|
|
||||
Change in contract liability (2)
|
(1,742
|
)
|
(1,791
|
)
|
2.8
|
|
|
|
(2,052
|
)
|
(2,165
|
)
|
5.2
|
|
|
||||
Change in allowance for management fee returned on cancelled policies (1)
|
(12
|
)
|
(14
|
)
|
12.4
|
|
|
|
(27
|
)
|
(28
|
)
|
3.5
|
|
|
||||
Management fee revenue - administrative services, net
|
14,195
|
|
13,299
|
|
6.7
|
|
|
|
28,146
|
|
26,373
|
|
6.7
|
|
|
||||
Administrative services reimbursement revenue
|
146,095
|
|
146,507
|
|
(0.3
|
)
|
|
|
288,575
|
|
292,470
|
|
(1.3
|
)
|
|
||||
Total revenue from administrative services
|
$
|
160,290
|
|
$
|
159,806
|
|
0.3
|
|
%
|
|
$
|
316,721
|
|
$
|
318,843
|
|
(0.7
|
)
|
%
|
(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)
|
Management fee revenue - administrative services is recognized over time as the services are performed. See Part I, Item 1. "Financial Statements - 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)
|
2019
|
2018
|
% Change
|
|
2019
|
2018
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||||
Management fee revenue - policy issuance and renewal services, net
|
$
|
480,513
|
|
$
|
454,572
|
|
5.7
|
|
%
|
|
$
|
911,496
|
|
$
|
860,550
|
|
5.9
|
|
%
|
Service agreement revenue
|
6,907
|
|
7,080
|
|
(2.4
|
)
|
|
|
13,599
|
|
14,225
|
|
(4.4
|
)
|
|
||||
|
487,420
|
|
461,652
|
|
5.6
|
|
|
|
925,095
|
|
874,775
|
|
5.8
|
|
|
||||
Cost of policy issuance and renewal services
|
405,005
|
|
379,628
|
|
6.7
|
|
|
|
770,509
|
|
728,258
|
|
5.8
|
|
|
||||
Operating income - policy issuance and renewal services
|
$
|
82,415
|
|
$
|
82,024
|
|
0.5
|
|
%
|
|
$
|
154,586
|
|
$
|
146,517
|
|
5.5
|
|
%
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||||
(dollars in thousands)
|
2019
|
2018
|
% Change
|
|
2019
|
2018
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||||
Commissions:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total commissions
|
$
|
273,256
|
|
$
|
261,573
|
|
4.5
|
|
%
|
|
$
|
516,238
|
|
$
|
495,667
|
|
4.2
|
|
%
|
Non-commission expense: (1)
|
|
|
|
|
|
|
|
|
|
||||||||||
Underwriting and policy processing
|
$
|
39,760
|
|
$
|
37,813
|
|
5.2
|
|
%
|
|
$
|
78,445
|
|
$
|
76,407
|
|
2.7
|
|
%
|
Information technology
|
40,564
|
|
34,381
|
|
18.0
|
|
|
|
79,994
|
|
68,330
|
|
17.1
|
|
|
||||
Sales and advertising
|
12,392
|
|
12,981
|
|
(4.5
|
)
|
|
|
25,202
|
|
27,753
|
|
(9.2
|
)
|
|
||||
Customer service
|
8,020
|
|
6,536
|
|
22.7
|
|
|
|
16,336
|
|
14,781
|
|
10.5
|
|
|
||||
Administrative and other
|
31,013
|
|
26,344
|
|
17.7
|
|
|
|
54,294
|
|
45,320
|
|
19.8
|
|
|
||||
Total non-commission expense
|
131,749
|
|
118,055
|
|
11.6
|
|
|
|
254,271
|
|
232,591
|
|
9.3
|
|
|
||||
Total cost of policy issuance and renewal services
|
$
|
405,005
|
|
$
|
379,628
|
|
6.7
|
|
%
|
|
$
|
770,509
|
|
$
|
728,258
|
|
5.8
|
|
%
|
(1)
|
2018 amounts have been reclassified between categories to conform to the current period presentation.
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||||||
(dollars in thousands)
|
2019
|
2018
|
% Change
|
|
2019
|
2018
|
% Change
|
||||||||||||
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
||||||||||||
Management fee revenue - administrative services, net
|
$
|
14,195
|
|
$
|
13,299
|
|
6.7
|
|
%
|
|
$
|
28,146
|
|
$
|
26,373
|
|
6.7
|
|
%
|
Administrative services reimbursement revenue
|
146,095
|
|
146,507
|
|
(0.3
|
)
|
|
|
288,575
|
|
292,470
|
|
(1.3
|
)
|
|
||||
Total revenue allocated to administrative services
|
160,290
|
|
159,806
|
|
0.3
|
|
|
|
316,721
|
|
318,843
|
|
(0.7
|
)
|
|
||||
Administrative services expenses
|
|
|
|
|
|
|
|
|
|
||||||||||
Claims handling services
|
127,296
|
|
127,544
|
|
(0.2
|
)
|
|
|
251,495
|
|
255,649
|
|
(1.6
|
)
|
|
||||
Investment management services
|
8,402
|
|
8,485
|
|
(1.0
|
)
|
|
|
17,185
|
|
16,773
|
|
2.5
|
|
|
||||
Life management services
|
10,397
|
|
10,478
|
|
(0.8
|
)
|
|
|
19,895
|
|
20,048
|
|
(0.8
|
)
|
|
||||
Operating income - administrative services
|
$
|
14,195
|
|
$
|
13,299
|
|
6.7
|
|
%
|
|
$
|
28,146
|
|
$
|
26,373
|
|
6.7
|
|
%
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|||||||||||||||||
(dollars in thousands)
|
|
2019
|
2018
|
|
% Change
|
|
2019
|
2018
|
|
% Change
|
|||||||||||
|
|
(Unaudited)
|
|
|
|
|
(Unaudited)
|
|
|
|
|||||||||||
Net investment income
|
|
$
|
8,030
|
|
$
|
7,104
|
|
|
13.0
|
%
|
|
$
|
16,547
|
|
$
|
13,924
|
|
|
18.8
|
|
%
|
Net realized investment gains (losses)
|
|
1,302
|
|
(32
|
)
|
|
NM
|
|
|
3,805
|
|
(497
|
)
|
|
NM
|
|
|
||||
Net impairment losses recognized in earnings
|
|
(84
|
)
|
(646
|
)
|
|
87.1
|
|
|
(162
|
)
|
(646
|
)
|
|
75.0
|
|
|
||||
Equity in earnings (losses) of limited partnerships
|
|
404
|
|
(219
|
)
|
|
NM
|
|
|
(743
|
)
|
(411
|
)
|
|
(80.8
|
)
|
|
||||
Total investment income
|
|
$
|
9,652
|
|
$
|
6,207
|
|
|
55.5
|
%
|
|
$
|
19,447
|
|
$
|
12,370
|
|
|
57.2
|
|
%
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Securities sold:
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||||
Fixed maturities
|
|
$
|
1,239
|
|
|
$
|
(66
|
)
|
|
$
|
3,157
|
|
|
$
|
(411
|
)
|
Equity securities
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(59
|
)
|
||||
Equity securities change in fair value (1)
|
|
63
|
|
|
(68
|
)
|
|
648
|
|
|
(129
|
)
|
||||
Miscellaneous
|
|
0
|
|
|
102
|
|
|
0
|
|
|
102
|
|
||||
Net realized investment gains (losses) (2)
|
|
$
|
1,302
|
|
|
$
|
(32
|
)
|
|
$
|
3,805
|
|
|
$
|
(497
|
)
|
(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 gains (losses).
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|||||||
|
|
(Unaudited)
|
|
(Unaudited)
|
|||||||||||
Private equity
|
|
$
|
187
|
|
|
$
|
(270
|
)
|
|
$
|
(1,008
|
)
|
|
66
|
|
Mezzanine debt
|
|
(51
|
)
|
|
27
|
|
|
(56
|
)
|
|
105
|
|
|||
Real estate
|
|
268
|
|
|
24
|
|
|
321
|
|
|
(582
|
)
|
|||
Equity in earnings (losses) of limited partnerships
|
|
$
|
404
|
|
|
$
|
(219
|
)
|
|
$
|
(743
|
)
|
|
(411
|
)
|
|
|
Carrying value at
|
|
|
|
Carrying value at
|
|
|
||||||
(dollars in thousands)
|
|
June 30, 2019
|
|
% to total
|
|
December 31, 2018
|
|
% to total
|
||||||
|
|
(Unaudited)
|
|
|
|
|
|
|
||||||
Fixed maturities
|
|
$
|
689,108
|
|
|
87
|
%
|
|
$
|
748,523
|
|
|
88
|
%
|
Equity securities:
|
|
|
|
|
|
|
|
|
||||||
Preferred stock
|
|
12,445
|
|
|
2
|
|
|
11,853
|
|
|
1
|
|
||
Limited partnerships:
|
|
|
|
|
|
|
|
|
||||||
Private equity
|
|
26,793
|
|
|
3
|
|
|
28,271
|
|
|
3
|
|
||
Mezzanine debt
|
|
1,053
|
|
|
0
|
|
|
1,152
|
|
|
0
|
|
||
Real estate
|
|
2,498
|
|
|
0
|
|
|
5,398
|
|
|
1
|
|
||
Other investments (1)
|
|
61,478
|
|
|
8
|
|
|
58,394
|
|
|
7
|
|
||
Total investments
|
|
$
|
793,375
|
|
|
100
|
%
|
|
$
|
853,591
|
|
|
100
|
%
|
(1)
|
Other investments primarily include agent loans. Agent loans are included with other assets in the Statements of Financial Position.
|
|
|
At June 30, 2019
|
||||||||||||||||||||||
(in thousands)
|
|
(Unaudited)
|
||||||||||||||||||||||
Industry Sector
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
Non- investment
grade
|
|
Fair
value
|
||||||||||||
Basic materials
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,042
|
|
|
$
|
7,790
|
|
|
$
|
10,832
|
|
Communications
|
|
0
|
|
|
4,995
|
|
|
0
|
|
|
8,650
|
|
|
16,629
|
|
|
30,274
|
|
||||||
Consumer
|
|
0
|
|
|
3,096
|
|
|
10,264
|
|
|
44,387
|
|
|
28,815
|
|
|
86,562
|
|
||||||
Diversified
|
|
0
|
|
|
0
|
|
|
0
|
|
|
1,048
|
|
|
463
|
|
|
1,511
|
|
||||||
Energy
|
|
0
|
|
|
0
|
|
|
5,126
|
|
|
8,215
|
|
|
9,814
|
|
|
23,155
|
|
||||||
Financial
|
|
0
|
|
|
4,087
|
|
|
52,454
|
|
|
64,853
|
|
|
7,692
|
|
|
129,086
|
|
||||||
Government-municipal
|
|
359
|
|
|
3,001
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
3,360
|
|
||||||
Industrial
|
|
0
|
|
|
0
|
|
|
998
|
|
|
13,284
|
|
|
15,590
|
|
|
29,872
|
|
||||||
Structured securities (2)
|
|
75,864
|
|
|
92,057
|
|
|
8,806
|
|
|
1,271
|
|
|
0
|
|
|
177,998
|
|
||||||
Technology
|
|
0
|
|
|
2,996
|
|
|
6,163
|
|
|
12,673
|
|
|
7,379
|
|
|
29,211
|
|
||||||
U.S. Treasury
|
|
0
|
|
|
151,094
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
151,094
|
|
||||||
Utilities
|
|
0
|
|
|
0
|
|
|
2,740
|
|
|
11,155
|
|
|
2,258
|
|
|
16,153
|
|
||||||
Total
|
|
$
|
76,223
|
|
|
$
|
261,326
|
|
|
$
|
86,551
|
|
|
$
|
168,578
|
|
|
$
|
96,430
|
|
|
$
|
689,108
|
|
(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)
|
|
2019
|
|
2018
|
||||
|
|
(Unaudited)
|
||||||
Net cash provided by operating activities
|
|
$
|
114,416
|
|
|
$
|
41,593
|
|
Net cash provided by (used in) investing activities
|
|
42,215
|
|
|
(5,653
|
)
|
||
Net cash used in financing activities
|
|
(84,786
|
)
|
|
(53,249
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
71,845
|
|
|
$
|
(17,309
|
)
|
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*
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32*
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 25, 2019
|
By:
|
/s/ Timothy G. NeCastro
|
|
|
|
|
Timothy G. NeCastro, President & CEO
|
|
|
|
|
|
|
|
|
By:
|
/s/ Gregory J. Gutting
|
|
|
|
|
Gregory J. Gutting, Executive Vice President & CFO
|
|
d)
|
If a Participant makes 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 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.
|
|
|
ERIE INDEMNITY COMPANY
|
|
|
|
ATTEST:
|
|
|
|
|
|
/s/ Amy L. Chapman
|
|
By: /s/ Gregory J. Gutting
|
|
|
|
|
|
Title: EVP & Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
a)
|
A Separation from Service shall not be considered to have occurred if the individual’s employment relationship is treated by the Company or any Controlled Group Member 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.
|
b)
|
A Separation from Service shall also not be considered to have occurred if the individual’s employment relationship is treated by the Company or any Controlled
|
c)
|
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 the capacity other than an employee, if the individual continues to provide services to the Company or any Controlled Group Member 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).
|
d)
|
Otherwise, a Separation from Service is presumed to have occurred if the facts and circumstances indicate that (A) the Company or any Controlled Group Member 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).
|
a)
|
The percentage of any bonus to be deferred as provided in Section 4.2 for the calendar year to which the election applies;
|
b)
|
The Participant’s investment designation in accordance with Section 4.6;
|
c)
|
The method by which the amounts deferred for the calendar year to which the election applies (included Hypothetical Interest on such deferrals) are to be paid in accordance with a method of payment permitted under Section 5.2(a);
|
d)
|
The time as of which payment of the amounts deferred for the calendar year to which the election applies (included Hypothetical Interest on such deferrals) is to occur (in the event of a lump sum distribution) or commence (in the event of a form of distribution other than a lump sum) in accordance with a time of payment permitted under Section 5.2(b); and
|
e)
|
The Beneficiary to whom payment of all amounts credited to the Participant’s Deferred Compensation Account under this Appendix B will be made in the event of the Participant’s death (unless this Beneficiary has already been designated pursuant to Section 3.3 or otherwise).
|
a)
|
The percentage of his future Compensation to be deferred as provided in Section 4.3 for the calendar year to which the election applies;
|
b)
|
The Participant’s investment designation in accordance with Section 4.6;
|
c)
|
The method by which amounts the Participant defers for the calendar year to which the election applies and which are attributable to the Participant’s Supplemental Employee Contributions (included Hypothetical Interest on such deferrals) are to be paid in accordance with a method of payment permitted under Section 5.2(a);
|
d)
|
The time as of which payment of the amounts the Participant defers for the calendar year to which the election applies and which are attributable to the Participant’s Supplemental Employee Contributions (included Hypothetical Interest on such deferrals) is to occur (in the event of a lump sum distribution) or commence (in the event of a form of distribution other than a lump sum) in accordance with a time of payment permitted under Section 5.2(b);
|
e)
|
The method by which amounts represented by those credits to the Participant’s Deferred Compensation Account which are attributable to the Supplemental Company Contributions made on the Participant’s behalf (including Hypothetical
|
f)
|
The time as of which payment of the amounts represented by those credits to the Participant’s Deferred Compensation Account which are attributable to the Supplemental Company Contributions made on the Participant’s behalf (including Hypothetical Interest on such amounts) is to occur (in the event of a lump sum distribution) or commence (in the event of a form of distribution other than a lump sum) in accordance with a time of payment permitted under Section 5.2(b); and
|
g)
|
The Beneficiary to whom payment of all amounts credited to the Participant’s Deferred Compensation Account under this Appendix B will be made in the event of the Participant’s death (unless this Beneficiary has already been designated pursuant to Section 3.2 or otherwise).
|
a)
|
A Participant’s investment designation described in Sections 3.2(b) and 3.3(b);
|
b)
|
A Participant’s method of payment election described in Sections 3.2(c) and 3.3(c);
|
c)
|
A Participant’s time of payment election described in Sections 3.2(d) and 3.3(d); and
|
d)
|
A Participant’s Beneficiary designation described in Sections 3.2(e) and 3.3(g).
|
a)
|
Except as provided under paragraph (b) below, the effective date for participation in the Plan by an Employee who is eligible to participate under Section 3.1 shall be 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 year, the effective date for the deferral of any Participant bonus under Section 4.2 shall be the date such bonus would otherwise be payable to the Participant and the effective date for the deferral of a Participant’s Compensation under Section 4.3 shall be the last day of the first pay period that ends in the calendar year that immediately follows the calendar year in which the Administrator receives the Employee’s properly completed and executed Election Form.
|
b)
|
The effective date for participation in the Plan by a newly hired Employee or a newly promoted Employee who is eligible to participate under Section 3.1 shall be 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 and/or Section 3.3 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 and/or Section 3.3 shall apply only with respect to that portion of a bonus and/or that Compensation 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.
|
a)
|
Initial Deferral Election. An Employee who is eligible to participate in the Plan under the provisions of Section 3.1 may elect to defer an annual bonus and/or Compensation for a given calendar year by delivering a properly completed and executed Election Form to the Administrator as provided in Sections 3.2, 3.3, or 3.5. Except as provided in Section 3.5(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 calendar year for which the deferral election is effective and the annual bonus and/or Compensation is to be earned. Except as provided in paragraphs (c) or (d) below, any such deferral election shall be irrevocable as of the last day of the last full pay period ending in the calendar year that immediately precedes the calendar year to which the election applies. Such deferral election shall automatically terminate as to any annual bonus or Compensation attributable to services after such calendar year.
|
b)
|
Subsequent Deferral Elections. With respect to any calendar years beginning after the year an Employee first becomes eligible to participate under Section 3.1, the Employee may elect to defer an annual bonus and/or Compensation attributable to services performed in such year by delivering a properly completed and executed Election Form to the Administrator by the last day of the last full pay period ending in the calendar year which immediately precedes the calendar year for which the deferral election is to be effective and the annual bonus and/or Compensation is to be earned. Except as provided in paragraphs (c) or (d) below, any such deferral election shall be irrevocable as of the last day of the last full pay period ending in the calendar year that immediately precedes the calendar year to which the election applies. Such deferral election shall automatically terminate as to any annual bonus or Compensation attributable to services after such calendar year.
|
c)
|
If a Participant makes a withdrawal due to an unforeseeable emergency under Section 5.6 all remaining deferrals of annual bonus and/or Compensation under the Plan for the calendar year in which such a withdrawal is made shall be cancelled. Such Participant shall not be permitted to make any further deferral of annual bonus or Compensation until the Participant satisfies the procedures set forth in paragraph (b) above.
|
d)
|
Participant deferrals of annual bonus and/or Compensation 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)
|
An Employee who is eligible to participate under the provisions of this Section 4.3 may elect to defer receipt of up to 100% of his Compensation attributable to services performed after the election is delivered to the Administrator. Deferrals under this paragraph (a) shall be designated as Supplemental Employee Contributions and shall be made within such times and in accordance with such means as are designated by the Administrator. The election under this paragraph (a) shall be independent of and unaffected by any deferral election under the Qualified Plan.
|
b)
|
In the event that (i) the allocation of employer matching contributions under the Qualified Plan on behalf of a Participant is limited for any given Plan Year due to the limitation on elective contributions made on such Participant’s behalf under the Qualified Plan under Section 402(g) of the Code, and (ii) the Participant is making Supplemental Employee Contributions for the given year at or above such level required by the Administrator for the given year, the amount by which such employer matching contributions are limited, as determined by the Administrator in its discretion, shall be credited under the Plan as restored matching contributions and shall be designated as Supplemental Company Contributions.
|
c)
|
Compensation deferred under paragraph (a) above shall be credited to the Participant’s Deferred Compensation Account as of the date such Compensation would otherwise be payable to the Participant. Compensation deferred under paragraph (b) above shall be credited to Participant’s Deferred Compensation Account as of the date such compensation would otherwise have been treated as a contribution allocation under the Qualified Plan.
|
a)
|
A Participant (and any eligible Employee first electing to participate in the Plan) may designate, within such time and in accordance with such means as are designated by the Administrator, that portion of his future deferred compensation under Sections 4.2 and 4.3, and separately, that portion of any existing Deferred Compensation Account maintained on his behalf which shall be credited with Hypothetical Interest in reference to each of the hypothetical investment funds that may be offered by the Administrator, in the discretion of the Administrator. Such designations may specify, in 1% increments, the percentages to be credited in reference to each of the hypothetical investment funds offered. Such designations may remain in effect until the Participant submits a new designation within such times and in accordance with such means as are designated by the Administrator. New designations shall be effective as of a given date specified by the Administrator. In the event a Participant fails to make an effective designation under this paragraph (a), the Administrator, acting in its discretion, shall make such designation on behalf of the Participant.
|
b)
|
In accepting participation in the Plan, a Participant agrees on behalf of himself and his Beneficiary to assume all risk in connection with any decrease in value of the hypothetical investment funds in reference to which Hypothetical Interest is credited to the Participant’s Deferred Compensation Account. The Company, the Affiliates and the Administrator shall not be liable to any Participant or Beneficiary for the under-performance of any hypothetical investment fund offered under the Plan.
|
c)
|
The Administrator may, in its discretion, offer additional hypothetical investment funds to Participants and may cease to offer any such fund at such time as it deems appropriate. In the event the Administrator decides to discontinue offering a hypothetical investment fund under the Plan, those Participants on whose behalf Hypothetical Interest is then being credited on the basis of the discontinued hypothetical investment fund may be required, at the discretion of the Administrator, to have affected amounts consolidated with (or “mapped” to) a replacement hypothetical investment fund selected by the Administrator or may be required to designate, from such selection of hypothetical funds as may be offered by the
|
d)
|
Notwithstanding any provision of the Plan to the contrary, the eligibility of a Participant to make any designation under this Section 4.6 shall not be construed as to provide any Participant or other person with a beneficial ownership interest in any assets of the Company or an Affiliate. Title to and beneficial ownership of any assets which the Company or any Affiliate may earmark to pay the contingent deferred compensation hereunder shall at all times remain in the Company or Affiliate. The Participant, his Beneficiary and any heirs, successors or assigns shall not have any legal or equitable right, interest or control over or any property interest whatsoever in any specific assets of the Company or any Affiliate or related entity on account of having an interest under the Plan. Any and all of the Company’s assets, and any life insurance policies, annuity contracts or the proceeds therefrom which may be acquired by the Company shall be, and remain, the general unpledged, unrestricted assets of the Company. In no event shall the Company or any Affiliate be required to purchase any specific shares or interest in any investment fund.
|
5.1.
|
PAYMENT
|
5.2.
|
METHODS AND TIMES OF PAYMENT
|
a)
|
A Participant may elect any one of the following methods of payment with respect to each separate deferral election made in regard to any amounts attributable to the Participant’s bonus deferral in accordance with Section 4.2 and/or the Participant’s deferral of Supplemental Employee Contributions under Section 4.3(a). In accordance with the coordination of elections under Section 3.4, such elected method of payment shall apply to all such amounts deferred for the calendar year to which the election applies (including Hypothetical Interest on such deferrals):
|
(i)
|
A lump sum distribution;
|
(ii)
|
Payment in approximately equal annual installments for a period not to exceed 10 years; or
|
(iii)
|
Payment in approximately equal monthly installments for a period not to
exceed 10 years. |
b)
|
A Participant may elect, with respect to each separate deferral election made in regard to any amounts attributable to the Participant’s bonus deferral in accordance with Section 4.2 and/or the Participant’s deferral of Supplemental Employee Contributions under Section 4.3(a), to have such amounts distributed to him (or, in the case of an installment distribution, commence to be distributed to him) as of the month next following the month of the Participant’s Separation from Service, as of a given future month and year, or as of the earlier of these, as such Participant has elected in accordance with Section 3.2(d) and/or Section 3.3(d); provided, however, that any given future month/year for payment must be at least five years from the effective date of such deferral. In accordance with the coordination of elections under Section 3.4, such elected time of payment shall apply to all such amounts deferred for the calendar year to which the election applies (including Hypothetical Interest on such deferrals).
|
c)
|
In the event the Participant dies before receiving the entire distribution to which he is entitled under the Plan, the provisions of Section 5.8 shall apply.
|
5.3.
|
ACCELERATION OF PAYMENTS
|
a)
|
The Participant needs to avoid a violation of an applicable federal, state, local, or foreign ethics law or conflicts of interest law.
|
b)
|
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)
|
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 Compensation 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.
|
5.4.
|
DELAY OF PAYMENTS
|
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 payments are then made at the earliest date at which the Administrator reasonably contemplates that making the scheduled payments will not cause such a violation.
|
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.
|
5.5.
|
DELAY OF PAYMENTS TO SPECIFIED EMPLOYEES
|
5.6.
|
EMERGENCY CIRCUMSTANCES
|
5.7.
|
AMENDMENT TO PAYMENT ELECTION
|
a)
|
A Participant who is an Employee who has not incurred a Separation from Service may elect to defer the date at which payment of an amount otherwise payable under the Plan will occur (or commence) and may elect a change in his elected method of payment (or the default form of payment under Section 5.1) by submitting a properly completed and executed Amendment Form to the Administrator which indicates the period of additional deferral and/or the desired method of payment; provided that:
|
(i)
|
Such election shall not be effective until 12 months after it is submitted to the Administrator.
|
(ii)
|
Such election shall require that the payment with respect to which the election is made shall be delayed for a period of not less than five years from the date payment would have been made (or commence) absent the elected change.
|
(iii)
|
If the election pertains to a delay in the payment of a Vested Deferred Compensation Account from a specific year and month that the Participant previously elected in his Election Form or a subsequent Amendment Form (or to which the Participant has defaulted under Section 5.1) such election cannot
|
b)
|
A Participant may at any time elect to change his Beneficiary in accordance with Article Two of the Basic Plan document, subject to the provisions of Section 3.4.
|
5.8.
|
PAYMENT UPON DEATH OF PARTICIPANT
|
a)
|
In the event of a Participant’s death before payment is made (or commences) under this Article Five, the amount represented by the Participant’s Vested Deferred Compensation 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 5.3 or 5.4, 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)
|
In the event of a Participant’s death after payment commences under this Article Five, the amount represented by the remaining balance of the Participant’s Vested Deferred Compensation 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 5.3 or 5.4, no payment to a Beneficiary under this paragraph (b) shall be made before or after such identified payment date; provided, however, that if the Company makes a payment within the permitted payment period identified in paragraph (a) above 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.
|
Date:
|
July 25, 2019
|
|
|
|
|
|
|
/s/ Timothy G. NeCastro
|
|
|
Timothy G. NeCastro
|
|
|
President & CEO
|
Date:
|
July 25, 2019
|
|
|
|
|
|
|
/s/ Gregory J. Gutting
|
|
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Gregory J. Gutting
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Executive Vice President & CFO
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(1)
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The Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2019 (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)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Timothy G. NeCastro
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Timothy G. NeCastro
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President & CEO
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/s/ Gregory J. Gutting
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Gregory J. Gutting
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Executive Vice President & CFO
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July 25, 2019
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