Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Taxes

Schedule of provision for income taxes

(in millions)	Erie Insurance Group
	2011		2010		2009
Indemnity
Current income tax expense	$  85		$  37		$56
Deferred income tax expense (benefit)	0		67		(7	)
Total provision for income taxes – Indemnity	85		104		49
Exchange
Current income tax expense (benefit)	110		(43	)	7
Deferred income tax (benefit) expense	(105	)	278		22
Total provision for income taxes – Exchange	5		235		29
Total provision for income taxes – Erie Insurance Group	$  90		$339		$78

Schedule of reconciliation of the provision for income taxes, with amounts determined by applying the statutory federal income tax rates to pre-tax income

(in millions)	Erie Insurance Group
	2011		2010		2009
Indemnity
Income tax at statutory rates	$89		$  93		$ 53
Tax-exempt interest	(3	)	(3	)	(3	)
Dividends received deduction	(1	)	(1	)	(1	)
Deferred tax valuation allowance	0		(2	)	0
Erie Family Life (losses) earnings (1)	(1	)	15		0
Other, net	1		2		0
Provision for income taxes – Indemnity	85		104		49
Exchange
Income tax at statutory rates	37		259		130
Tax-exempt interest	(15	)	(16	)	(17	)
Dividends received deduction	(13	)	(11	)	(11	)
Deferred tax valuation allowance	0		(4	)	(71	)
Goodwill impairments	0		8		0
Prior year adjustments	(5	)	0		0
Other, net	1		(1	)	(2	)
Provision for income taxes – Exchange	5		235		29
Provision for income taxes – Erie Insurance Group	$90		$339		$ 78

(1)In 2010 Indemnity’s tax rate on its share of EFL earnings was adjusted from 7% to 35% due to Indemnity’s decision to sell its 21.6% ownership interest in EFL to the Exchange, which closed on March 31, 2011, rather than receiving its share of EFL’s earnings in the form of future dividends, which would have been eligible for an 80% dividends received deduction.

Schedule of temporary differences and carry-forwards, which give rise to consolidated deferred tax assets and liabilities

(in millions)	Erie Insurance Group
	2011	2010
Indemnity
Deferred tax assets:
Net allowance for service fees and premium cancellations	$  3	$   3
Other employee benefits	9	8
Pension and other postretirement benefits	45	21
Write-downs of impaired securities	1	2
Capital loss carryover	0	7
Other	0	1
Total deferred tax assets	58	42
Deferred tax liabilities:
Unrealized gains on investments	6	7
Equity interest in EFL	0	22
Limited partnerships	10	20
Depreciation	13	7
Prepaid expenses	7	5
Capitalized internally developed software	1	5
Other	2	2
Total deferred tax liabilities	39	68
Net deferred income tax asset (liability) – Indemnity	$19	$(26	)

(in millions)	Erie Insurance Group (continued)
	2011		2010
Exchange
Deferred tax assets:
Loss reserve discount	$    81		$    83
Liability for future life and annuity policy benefits	12		13
Unearned premiums	165		156
Write-downs of impaired securities	29		42
Wash sales	6		8
Capital loss carryover	7		9
Other	14		8
Total deferred tax assets	314		319
Deferred tax liabilities:
Deferred policy acquisition costs	159		153
Unrealized gains on investments	272		356
Limited partnerships	12		49
Net allowance for service fees and premium cancellations	3		3
Other	15		15
Total deferred tax liabilities	461		576
Net deferred tax liability – Exchange	$(147	)	$(257	)
Net deferred tax liability – Erie Insurance Group	$(128	)	$(283	)