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Fair Value (Tables)

9 Months Ended

Sep. 30, 2011

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

		Erie Insurance Group
		September 30, 2011
		Fair value measurements using:
(in millions)		Total		Quoted prices in active markets for identical assets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Indemnity
Available-for-sale securities:
States & political subdivisions		$ 224		$ 0		$ 224		$ 0
Corporate debt securities		260		0		260		0
Other debt securities		9		0		9		0
Commercial mortgage-backed securities (CMBS)		20		0		20		0
Collateralized debt obligations (CDO)		4		0		0		4
Total fixed maturities		517		0		513		4
Nonredeemable preferred stock		22		7		15		0
Total available-for-sale securities		539		7		528		4
Trading securities:
Common stock		26		26		0		0
Total trading securities		26		26		0		0
Total – Indemnity		$ 565		$ 33		$ 528		$ 4
Exchange
Available-for-sale securities:
U.S. government & agencies		$ 37		$ 6		$ 31		$ 0
States & political subdivisions		1,417		0		1,413		4
Foreign government securities		21		0		21		0
Corporate debt securities		5,446		15		5,419		12
Other debt securities		68		0		63		5
Residential mortgage-backed securities (RMBS)		203		0		203		0
Commercial mortgage-backed securities (CMBS)		70		0		70		0
Collateralized debt obligations (CDO)		69		0		40		29
Total fixed maturities		7,331		21		7,260		50
Nonredeemable preferred stock		591		181		404		6
Total available-for-sale securities		7,922		202		7,664		56
Trading securities:
Common stock		2,085		2,072		0		13
Total trading securities		2,085		2,072		0		13
Total – Exchange		$10,007		$2,274		$7,664		$69
Total – Erie Insurance Group		$10,572		$2,307		$8,192		$73

		Erie Insurance Group
		December 31, 2010
		Fair value measurements using:

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

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

		Erie Insurance Group
(in millions)		Beginning balance at June 30, 2011		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales		Transfers in and (out) of Level 3 (2)		Ending balance at September 30, 2011
Indemnity
Available-for-sale securities:
Collateralized debt obligations (CDO)		$ 4		$0		$ 0		$0		$0		$0		$ 4
Total fixed maturities		4		0		0		0		0		0		4
Total available-for-sale securities		4		0		0		0		0		0		4
Trading securities:
Common stock		0		0		0		0		0		0		0
Total trading securities		0		0		0		0		0		0		0
Total Level 3 assets – Indemnity		$ 4		$0		$ 0		$0		$0		$0		$ 4
Exchange
Available-for-sale securities:
States & political subdivisions		$ 4		$0		$ 0		$0		$0		$0		$ 4
Corporate debt securities		11		0		0		1		0		0		12
Other debt securities		5		0		0		0		0		0		5
Collateralized debt obligations (CDO)		30		0		(1	)	0		0		0		29
Total fixed maturities		50		0		(1	)	1		0		0		50
Nonredeemable preferred stock		7		0		(1	)	0		0		0		6
Total available-for-sale securities		57		0		(2	)	1		0		0		56
Trading securities:
Common stock		13		0		0		0		0		0		13
Total trading securities		13		0		0		0		0		0		13
Total Level 3 assets – Exchange		$70		$0		$(2	)	$1		$0		$0		$69
Total Level 3 assets – Erie Insurance Group		$74		$0		$(2	)	$1		$0		$0		$73

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There were no unrealized gains or losses included in earnings for the three months ended September 30, 2011 on Level 3 securities.

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

		Erie Insurance Group
(in millions)		Beginning balance at December 31, 2010		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales		Transfers in and (out) of Level 3 (2)		Ending balance at September 30, 2011
Indemnity
Available-for-sale securities:
Collateralized debt obligations (CDO)		$ 4		$0		$ 0		$0		$ 0		$0		$ 4
Total fixed maturities		4		0		0		0		0		0		4
Total available-for-sale securities		4		0		0		0		0		0		4
Trading securities:
Common stock		0		0		0		0		0		0		0
Total trading securities		0		0		0		0		0		0		0
Total Level 3 assets – Indemnity		$ 4		$0		$ 0		$0		$ 0		$0		$ 4
Exchange
Available-for-sale securities:
States & political subdivisions		$ 4		$0		$ 0		$0		$ 0		$0		$ 4
Corporate debt securities		11		0		0		1		0		0		12
Other debt securities		10		0		0		0		(5)		0		5
Collateralized debt obligations (CDO)		30		1		(1)		0		(1)		0		29
Total fixed maturities		55		1		(1)		1		(6)		0		50
Nonredeemable preferred stock		7		0		(1)		0		0		0		6
Total available-for-sale securities		62		1		(2)		1		(6)		0		56
Trading securities:
Common stock		12		1		0		0		0		0		13
Total trading securities		12		1		0		0		0		0		13
Total Level 3 assets – Exchange		$74		$2		$(2)		$1		$(6)		$0		$69
Total Level 3 assets – Erie Insurance Group		$78		$2		$(2)		$1		$(6)		$0		$73

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There was $1 million in unrealized gains included in earnings for the nine months ended September 30, 2011 on Level 3 securities.

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

		Erie Insurance Group
(in millions)		Beginning balance at June 30, 2010		Included in earnings (1)		Included in other comprehensive income		Purchases, sales and adjustments		Transfers in and (out) of Level 3 (2)		Ending balance at September 30, 2010
Indemnity
Available-for-sale securities:
Corporate debt securities		$ 2		$0		$0		$ 0		$ 0		$ 2
Collateralized debt obligations (CDO)		8		0		0		0		(1)		7
Total fixed maturities		10		0		0		0		(1)		9
Nonredeemable preferred stock		1		0		0		1		0		2
Total available-for-sale securities		11		0		0		1		(1)		11
Trading securities:
Common stock		0		0		0		0		0		0
Total trading securities		0		0		0		0		0		0
Total Level 3 assets – Indemnity		$11		$0		$0		$ 1		$ (1)		$11
Exchange
Available-for-sale securities:
Corporate debt securities		$ 9		$0		$0		$ 0		$ 0		$ 9
Other debt securities		5		0		0		0		0		5
Collateralized debt obligations (CDO)		53		0		0		(1)		(10)		42
Total fixed maturities		67		0		0		(1)		(10)		56
Nonredeemable preferred stock		4		0		0		1		0		5
Total available-for-sale securities		71		0		0		0		(10)		61
Trading securities:
Common stock		10		1		0		0		0		11
Total trading securities		10		1		0		0		0		11
Total Level 3 assets – Exchange		$81		$1		$0		$ 0		$(10)		$72
Total Level 3 assets – Erie Insurance Group		$92		$1		$0		$ 1		$(11)		$83

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There was $1 million in unrealized gains included in earnings for the nine months ended September 30, 2010 on Level 3 securities.

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

		Erie Insurance Group
(in millions)		Beginning balance at December 31, 2009		Included in earnings (1)		Included in other comprehensive income		Purchases, sales and adjustments		Transfers in and (out) of Level 3 (2)		Ending balance at September 30, 2010
Indemnity
Available-for-sale securities:
Corporate debt securities		$ 2		$0		$0		$0		$ 0		$ 2
Collateralized debt obligations (CDO)		8		0		0		0		(1)		7
Total fixed maturities		10		0		0		0		(1)		9
Nonredeemable preferred stock		1		0		0		1		0		2
Total available-for-sale securities		11		0		0		1		(1)		11
Trading securities:
Common stock		0		0		0		0		0		0
Total trading securities		0		0		0		0		0		0
Total Level 3 assets – Indemnity		$11		$0		$0		$1		$ (1)		$11
Exchange
Available-for-sale securities:
Corporate debt securities		$17		$0		$0		$0		$ (8)		$ 9
Other debt securities		5		0		0		0		0		5
Collateralized debt obligations (CDO)		49		2		4		0		(13)		42
Total fixed maturities		71		2		4		0		(21)		56
Nonredeemable preferred stock		4		0		1		0		0		5
Total available-for-sale securities		75		2		5		0		(21)		61
Trading securities:
Common stock		9		2		0		0		0		11
Total trading securities		9		2		0		0		0		11
Total Level 3 assets – Exchange		$84		$4		$5		$0		$(21)		$72
Total Level 3 assets – Erie Insurance Group		$95		$4		$5		$1		$(22)		$83

(1) Includes losses as a result of other-than-temporary impairments and accrual of discount and amortization of premium. These amounts are reported in the Consolidated Statements of Operations. There was $2 million in unrealized gains included in earnings for the nine months ended September 30, 2010 on Level 3 securities.

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

Number and values of securities adjusted based on pricing service valuations

The following table displays the number and values of these adjustments at September 30, 2011:

		Erie Insurance Group
(dollars in millions)		Number of holdings		Value of securities using pricing service		Value of securities used in the financial statements
Exchange		7		$26.8		$26.1
Total – Erie Insurance Group		7		$26.8		$26.1

Fair value of the consolidated fixed maturity, preferred stock, and common stock securities by pricing source

		Erie Insurance Group
(in millions)		September 30, 2011
		Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturity securities:
Priced via pricing services		$ 512		$ 0		$ 512		$ 0
Priced via market comparables/non-binding broker quote (1)		1		0		1		0
Priced via internal modeling (2)		4		0		0		4
Total fixed maturity securities		517		0		513		4
Preferred stock securities:
Priced via pricing services		20		7		13		0
Priced via market comparables/non-binding broker quote (1)		2		0		2		0
Priced via internal modeling (2)		0		0		0		0
Total preferred stock securities		22		7		15		0
Common stock securities:
Priced via pricing services		26		26		0		0
Priced via market comparables/non-binding broker quote (1)		0		0		0		0
Priced via internal modeling (2)		0		0		0		0
Total common stock securities		26		26		0		0
Total available-for-sale and trading securities – Indemnity		$ 565		$ 33		$ 528		$ 4
Exchange
Fixed maturity securities:
Priced via pricing services		$ 7,192		$ 21		$7,171		$ 0
Priced via market comparables/non-binding broker quote (1)		89		0		89		0
Priced via internal modeling (2)		50		0		0		50
Total fixed maturity securities		7,331		21		7,260		50
Preferred stock securities:
Priced via pricing services		560		181		373		6
Priced via market comparables/non-binding broker quote (1)		31		0		31		0
Priced via internal modeling (2)		0		0		0		0
Total preferred stock securities		591		181		404		6
Common stock securities:
Priced via pricing services		2,072		2,072		0		0
Priced via market comparables/non-binding broker quote (1)		0		0		0		0
Priced via internal modeling (2)		13		0		0		13
Total common stock securities		2,085		2,072		0		13
Total available-for-sale and trading securities – Exchange		$10,007		$2,274		$7,664		$69
Total available-for-sale and trading securities – Erie Insurance Group		$10,572		$2,307		$8,192		$73

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

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

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

+ References+ Details

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

+ References+ Details