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Fair Value (Tables)

3 Months Ended

Mar. 31, 2012

Schedule of 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
		March 31, 2012
		Fair value measurements using:
(in millions)		Total		Quoted prices in active markets for identical assets Level 1		Observable inputs Level 2		Unobservable inputs Level 3
Indemnity
Available-for-sale securities:
States & political subdivisions		$ 217		$ 0		$ 217		$ 0
Corporate debt securities		258		0		257		1
Commercial mortgage-backed securities (CMBS)		10		0		10		0
Collateralized debt obligations (CDO)		4		0		0		4
Other debt securities		5		0		5		0
Total fixed maturities		494		0		489		5
Nonredeemable preferred stock		26		11		15		0
Total available-for-sale securities		520		11		504		5
Trading securities:
Common stock		29		29		0		0
Total trading securities		29		29		0		0
Total – Indemnity		$ 549		$ 40		$ 504		$ 5
Exchange
Available-for-sale securities:
U.S. government & agencies		$ 20		$ 6		$ 14		$ 0
States & political subdivisions		1,361		0		1,356		5
Foreign government securities		15		0		15		0
Corporate debt securities		5,711		20		5,665		26
Residential mortgage-backed securities (RMBS)		179		0		179		0
Commercial mortgage-backed securities (CMBS)		71		0		71		0
Collateralized debt obligations (CDO)		65		0		38		27
Other debt securities		61		0		56		5
Total fixed maturities		7,483		26		7,394		63
Nonredeemable preferred stock		621		226		389		6
Total available-for-sale securities		8,104		252		7,783		69
Trading securities:
Common stock		2,596		2,582		0		14
Total trading securities		2,596		2,582		0		14
Total – Exchange		$10,700		$2,834		$7,783		$83
Total – Erie Insurance Group		$11,249		$2,874		$8,287		$88

		Erie Insurance Group
		December 31, 2011
		Fair value measurements using:
(in millions)		Total		Quoted prices in active markets for identical assets Level 1		Observable inputs Level 2		Unobservable inputs Level 3
Indemnity
Available-for-sale securities:
States & political subdivisions		$ 221		$ 0		$ 221		$ 0
Corporate debt securities		303		0		303		0
Commercial mortgage-backed securities (CMBS)		13		0		13		0
Collateralized debt obligations (CDO)		4		0		0		4
Other debt securities		7		0		7		0
Total fixed maturities		548		0		544		4
Nonredeemable preferred stock		25		10		15		0
Total available-for-sale securities		573		10		559		4
Trading securities:
Common stock		27		27		0		0
Total trading securities		27		27		0		0
Total – Indemnity		$ 600		$ 37		$ 559		$ 4
Exchange
Available-for-sale securities:
U.S. government & agencies		$ 17		$ 6		$ 11		$ 0
States & political subdivisions		1,379		0		1,375		4
Foreign government securities		15		0		15		0
Corporate debt securities		5,499		20		5,467		12
Residential mortgage-backed securities (RMBS)		189		0		189		0
Commercial mortgage-backed securities (CMBS)		66		0		66		0
Collateralized debt obligations (CDO)		65		0		36		29
Other debt securities		62		0		57		5
Total fixed maturities		7,292		26		7,216		50
Nonredeemable preferred stock		564		188		371		5
Total available-for-sale securities		7,856		214		7,587		55
Trading securities:
Common stock		2,308		2,296		0		12
Total trading securities		2,308		2,296		0		12
Total – Exchange		$10,164		$2,510		$7,587		$67
Total – Erie Insurance Group		$10,764		$2,547		$8,146		$71

Schedule of 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 December 31, 2011		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales		Transfers in and (out) of Level 3 (2)		Ending balance at March 31, 2012
Indemnity
Available-for-sale securities:
Corporate debt securities		$ 0		$0		$0		$0		$ 0		$ 1		$ 1
Collateralized debt obligations (CDO)		4		0		0		0		0		0		4
Total fixed maturities		4		0		0		0		0		1		5
Total available-for-sale securities		4		0		0		0		0		1		5
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		$ 1		$ 5
Exchange
Available-for-sale securities:
States & political subdivisions		$ 4		$0		$1		$0		$ 0		$ 0		$ 5
Corporate debt securities		12		0		0		0		0		14		26
Collateralized debt obligations (CDO)		29		0		0		0		(4	)	2		27
Other debt securities		5		0		0		0		0		0		5
Total fixed maturities		50		0		1		0		(4	)	16		63
Nonredeemable preferred stock		5		0		1		0		0		0		6
Total available-for-sale securities		55		0		2		0		(4	)	16		69
Trading securities:
Common stock		12		2		0		0		0		0		14
Total trading securities		12		2		0		0		0		0		14
Total Level 3 assets – Exchange		$67		$2		$2		$0		$(4	)	$16		$83
Total Level 3 assets – Erie Insurance Group		$71		$2		$2		$0		$(4	)	$17		$88

(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 three months ended March 31, 2012 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 March 31, 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		0		0		0		11
Collateralized debt obligations (CDO)		30		0		0		0		0		0		30
Other debt securities		10		0		0		0		(5	)	0		5
Total fixed maturities		55		0		0		0		(5	)	0		50
Nonredeemable preferred stock		7		0		1		0		0		0		8
Total available-for-sale securities		62		0		1		0		(5	)	0		58
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		$1		$1		$0		$(5	)	$0		$71
Total Level 3 assets – Erie Insurance Group		$78		$1		$1		$0		$(5	)	$0		$75

(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 three months ended March 31, 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.

Schedule of Quantitative and Qualitative Disclosures about Unobservable Inputs

		Erie Insurance Group
		March 31, 2012
(dollars in millions)		Fair value		No. of holdings		Valuation techniques		Unobservable input		Range		weighted average
Indemnity

Corporate debt securities		$ 1		1		Consensus pricing		Non-binding broker quote		115.86

Collateralized debt obligations (CDO)		4		2		Present value		Projected maturity date		Jun 2014 – Feb 2015
								Repayment at maturity		45-100%		90.6%
								Discount rate		7.5-15.0%		10.8%
								Projected LIBOR rate		0.48%
Total – Indemnity		$ 5		3

Exchange

States & political subdivisions		5		1		Comparable pricing		Comparable security yield		0.48%
								Added yield due to lack of marketability		1.00%

Corporate debt securities		15		3		Consensus pricing		Non-binding broker quote		102.00 – 117.00

		1		2		Held at cost		Private securities with no observable market		100.00

		10		2		Comparable pricing		Comparable private transaction EBITDA multiples		7.5 – 17.1x		7.5x
								Average comparable publicly traded EBITDA multiple		7.8x		7.5x

Collateralized debt obligations (CDO)		24		6		Present value		Projected maturity date		Dec 2012 – Dec 2035
								Repayment at maturity		45-100%		94.4%
								Discount rate		7.0-15%		9.2%
								Projected LIBOR rate		0.48%

		3		4		Consensus pricing		Non-binding broker quote		3.00 – 85.00		64.70

Other debt securities		5		1		Held at cost		Private securities with no observable market		100.00

Nonredeemable preferred stock		6		1		Comparable pricing		Comparable security yield		7.68%

Common stock		14		3		Comparable pricing		Comparable private transaction EBITDA multiples		7.5 – 17.1x		7.5x
								Average comparable publicly traded EBITDA multiple		7.8x		7.5x
								Discount for lack of marketability		5 – 30%		30%
Total – Exchange		$83		23

Total – Erie Insurance Group		$88

Schedule of fair value measurements on a recurring basis of the consolidated available-for-sale and trading securities by pricing source

		Erie Insurance Group
(in millions)		March 31, 2012
			Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services			$ 489		$ 0		$ 489		$ 0
Priced via market comparables/non-binding broker quotes (1)			1		0		0		1
Priced via unobservable inputs			4		0		0		4
Total fixed maturities			494		0		489		5
Nonredeemable preferred stock:
Priced via pricing services			24		11		13		0
Priced via market comparables/non-binding broker quotes(1)			2		0		2		0
Priced via unobservable inputs			0		0		0		0
Total nonredeemable preferred stock			26		11		15		0
Common stock:
Priced via pricing services			29		29		0		0
Priced via market comparables/non-binding broker quotes (1)			0		0		0		0
Priced unobservable inputs			0		0		0		0
Total common stock			29		29		0		0
Total available-for-sale and trading securities – Indemnity			$ 549		$ 40		$ 504		$ 5
Exchange
Fixed maturities:
Priced via pricing services			$ 7,324		$ 26		$7,298		$ 0
Priced via market comparables/non-binding broker quotes (1)			114		0		96		18
Priced via unobservable inputs			45		0		0		45
Total fixed maturities			7,483		26		7,394		63
Nonredeemable preferred stock:
Priced via pricing services			600		226		374		0
Priced via market comparables/non-binding broker quotes(1)			15		0		15		0
Priced via unobservable inputs			6		0		0		6
Total nonredeemable preferred stock			621		226		389		6
Common stock:
Priced via pricing services			2,582		2,582		0		0
Priced via market comparables/non-binding broker quotes(1)			0		0		0		0
Priced via unobservable inputs			14		0		0		14
Total common stock			2,596		2,582		0		14
Total available-for-sale and trading securities – Exchange			$10,700		$2,834		$7,783		$83
Total available-for-sale and trading securities – Erie Insurance Group			$11,249		$2,874		$8,287		$88

(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.

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