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Fair Value (Tables)

6 Months Ended

Jun. 30, 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
		June 30, 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		$ 203			$ 0			$ 203		$ 0
Corporate debt securities		285			0			284		1
Commercial mortgage-backed securities (CMBS)		7			0			7		0
Collateralized debt obligations (CDO)		4			0			0		4
Other debt securities		11			0			11		0
Total fixed maturities		510			0			505		5
Nonredeemable preferred stock		26			10			16		0
Total available-for-sale securities		536			10			521		5
Trading securities:
Common stock		28			28			0		0
Total trading securities		28			28			0		0
Total – Indemnity		$ 564			$ 38			$ 521		$ 5
Exchange
Available-for-sale securities:
U.S. government & agencies		$ 17			$ 5			$ 12		$ 0
States & political subdivisions		1,394			0			1,390		4
Foreign government securities		16			0			16		0
Corporate debt securities		5,762			21			5,718		23
Residential mortgage-backed securities (RMBS)		191			0			191		0
Commercial mortgage-backed securities (CMBS)		76			0			76		0
Collateralized debt obligations (CDO)		65			0			38		27
Other debt securities		48			0			43		5
Total fixed maturities		7,569			26			7,484		59
Nonredeemable preferred stock		605			239			361		5
Total available-for-sale securities		8,174			265			7,845		64
Trading securities:
Common stock		2,490			2,476			0		14
Total trading securities		2,490			2,476			0		14
Total – Exchange		$10,664			$2,741			$7,845		$78
Total – Erie Insurance Group		$11,228			$2,779			$8,366		$83

		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 March 31, 2012			Included in earnings (1)			Included in other comprehensive income			Purchases			Sales		Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2012
Indemnity
Available-for-sale securities:
Corporate debt securities		$ 1			$ 0			$ 0			$0			$0		$0			$ 1
Collateralized debt obligations (CDO)		4			0			0			0			0		0			4
Total fixed maturities		5			0			0			0			0		0			5
Total available-for-sale securities		5			0			0			0			0		0			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		$ 5			$ 0			$ 0			$0			$0		$0			$ 5
Exchange
Available-for-sale securities:
States & political subdivisions		$ 5			$ 0			$(1	)		$0			$0		$0			$ 4
Corporate debt securities		26			0			0			1			(4	)	0			23
Collateralized debt obligations (CDO)		27			0			0			0			0		0			27
Other debt securities		5			0			0			0			0		0			5
Total fixed maturities		63			0			(1	)		1			(4	)	0			59
Nonredeemable preferred stock		6			(1	)		0			0			0		0			5
Total available-for-sale securities		69			(1	)		(1	)		1			(4	)	0			64
Trading securities:
Common stock		14			0			0			0			0		0			14
Total trading securities		14			0			0			0			0		0			14
Total Level 3 assets – Exchange		$83			$(1	)		$(1	)		$1			$(4	)	$0			$78
Total Level 3 assets – Erie Insurance Group		$88			$(1	)		$(1	)		$1			$(4	)	$0			$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 were no unrealized gains included in earnings for the three months ended June 30, 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, 2011			Included in earnings (1)		Included in other comprehensive income			Purchases			Sales		Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 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		$0			$0			$0		$ 0			$ 4
Corporate debt securities		12			0		0			1			(4	)	14			23
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		0			1			(8	)	16			59
Nonredeemable preferred stock		5			0		0			0			0		0			5
Total available-for-sale securities		55			0		0			1			(8	)	16			64
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		$0			$1			$(8	)	$16			$78
Total Level 3 assets – Erie Insurance Group		$71			$2		$0			$1			$(8	)	$17			$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 six months ended June 30, 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 March 31, 2011		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales		Transfers in and (out) of Level 3 (2)		Ending balance at June 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		0		0		0		11
Collateralized debt obligations (CDO)		30		0		0		0		0		0		30
Other debt securities		5		0		0		0		0		0		5
Total fixed maturities		50		0		0		0		0		0		50
Nonredeemable preferred stock		8		0		(1)		0		0		0		7
Total available-for-sale securities		58		0		(1)		0		0		0		57
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		$71		$0		$(1)		$0		$0		$0		$70
Total Level 3 assets – Erie Insurance Group		$75		$0		$(1)		$0		$0		$0		$74

(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 included in earnings for the three months ended June 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 June 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		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		0		0		0		0		7
Total available-for-sale securities		62		0		0		0		(5	)	0		57
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		$0		$0		$(5	)	$0		$70
Total Level 3 assets – Erie Insurance Group		$78		$1		$0		$0		$(5	)	$0		$74

(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 six months ended June 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.

Schedule of Quantitative and Qualitative Disclosures about Unobservable Inputs

		Erie Insurance Group
		June 30, 2012
(dollars in millions)		Fair value		No. of holdings		Valuation techniques		Unobservable input		Range		weighted average
Indemnity

Corporate debt securities		$ 1		1		Market approach		Non-binding broker quote		115.77

Collateralized debt obligations (CDO)		4		2		Income approach		Projected maturity date Repayment at maturity		Jun 2014 – May 2015 42-100%		90.1%
								Discount rate		7.5-15.0%		10.8%
								Projected LIBOR rate		0.47%
Total Level 3 assets – Indemnity		$ 5		3

Exchange

States & political subdivisions		$ 4		1		Market approach		Comparable security yield		0.49%
								Added yield due to lack of marketability		1.00%

Corporate debt securities		23		7		Market approach		Non-binding broker quote		103.50 – 118.00		111.80
								Comparable transaction EBITDA multiples		7.3 –17.1x		7.5x
								Comparable security yield		6.00%

Collateralized debt obligations (CDO)		24		6		Income approach		Projected maturity date Repayment at maturity		Dec 2012 – Dec 2035 42-100%		94.2%
								Discount rate		7.0-15%		9.3%
								Projected LIBOR Rate		0.47%

		3		4		Market approach		Non-binding broker quote		3.00 – 84.00		64.08

Other debt securities		5		1		Income approach		Projected maturity date		Nov 2028
								Repayment at maturity		100%
								Discount rate		1.85%

Nonredeemable preferred stock		5		1		Market approach		Comparable security yield		7.51

Common stock		14		4		Market approach		Comparable transaction EBITDA multiples		7.3 – 17.1x		7.5x
								Discount for lack of marketability		5 – 30%		30%
Total Level 3 assets – Exchange		$78		24
Total Level 3 assets – Erie Insurance Group		$83		27
				–

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)		June 30, 2012
		Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services		$ 505		$ 0		$ 505		$ 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		510		0		505		5
Nonredeemable preferred stock:
Priced via pricing services		24		10		14		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		10		16		0
Common stock:
Priced via pricing services		28		28		0		0
Priced via market comparables/non-binding broker quotes (1)		0		0		0		0
Priced via unobservable inputs		0		0		0		0
Total common stock		28		28		0		0
Total available-for-sale and trading securities – Indemnity		$ 564		$ 38		$ 521		$ 5
Exchange
Fixed maturities:
Priced via pricing services		$ 7,423		$ 26		$7,397		$ 0
Priced via market comparables/non-binding broker quotes (1)		110		0		87		23
Priced via unobservable inputs		36		0		0		36
Total fixed maturities		7,569		26		7,484		59
Nonredeemable preferred stock:
Priced via pricing services		587		239		348		0
Priced via market comparables/non-binding broker quotes (1)		18		0		13		5
Priced via unobservable inputs		0		0		0		0
Total nonredeemable preferred stock		605		239		361		5
Common stock:
Priced via pricing services		2,476		2,476		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		2,490		2,476		0		14
Total available-for-sale and trading securities – Exchange		$10,664		$2,741		$7,845		$78
Total available-for-sale and trading securities – Erie Insurance Group		$11,228		$2,779		$8,366		$83

(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