Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012



(in millions)	Erie Insurance Group
	2012			2011			2010
Indemnity
Current income tax expense	$	84		$	85		$	37
Deferred income tax (benefit) expense	(3		)	0			67
Total provision for income taxes – Indemnity	81			85			104
Exchange
Current income tax expense (benefit)	78			110			(43		)
Deferred income tax expense (benefit)	121			(105		)	278
Total provision for income taxes – Exchange	199			5			235
Total provision for income taxes – Erie Insurance Group	$	280		$	90		$	339

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
	2012			2011			2010
Indemnity
Income tax at statutory rates	$	84		$	89		$	93
Tax-exempt interest	(2		)	(3		)	(3		)
Dividends received deduction	(1		)	(1		)	(1		)
Deferred tax valuation allowance	0			0			(2		)
Erie Family Life earnings (losses) (1)	0			(1		)	15
Other, net	0			1			2
Provision for income taxes – Indemnity	81			85			104
Exchange
Income tax at statutory rates	230			37			259
Tax-exempt interest	(13		)	(15		)	(16		)
Dividends received deduction	(14		)	(13		)	(11		)
Deferred tax valuation allowance	0			0			(4		)
Goodwill impairments	0			0			8
Return to provision adjustments	(3		)	(5		)	0
Other, net	(1		)	1			(1		)
Provision for income taxes – Exchange	199			5			235
Provision for income taxes – Erie Insurance Group	$	280		$	90		$	339

(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
	2012		2011
Indemnity
Deferred tax assets:
Net allowance for service fees and premium cancellations	$	3	$	3
Other employee benefits	9		9
Pension and other postretirement benefits	65		45
Other	3		1
Total deferred tax assets	80		58
Deferred tax liabilities:
Unrealized gains on investments	6		6
Limited partnerships	13		10
Depreciation	15		13
Prepaid expenses	5		7
Capitalized internally developed software	3		1
Other	1		2
Total deferred tax liabilities	43		39
Net deferred income tax asset – Indemnity	$	37	$	19



(in millions)	Erie Insurance Group (continued)
	2012			2011
Exchange
Deferred tax assets:
Loss reserve discount	$	78		$	81
Liability for future life and annuity policy benefits	7			12
Unearned premiums	179			165
Write-downs of impaired securities	19			29
Other	22			27
Total deferred tax assets	305			314
Deferred tax liabilities:
Deferred policy acquisition costs	165			159
Unrealized gains on investments	443			272
Limited partnerships	43			12
Other	19			18
Total deferred tax liabilities	670			461
Net deferred tax liability – Exchange	$	(365	)	$	(147	)
Net deferred income tax liability – Erie Insurance Group	$	(328	)	$	(128	)