10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

Commission file number 0-24000

ERIE INDEMNITY COMPANY

(Exact name of registrant as specified in its charter)

PENNSYLVANIA	25-0466020
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

100 Erie Insurance Place, Erie, Pennsylvania	16530
(Address of principal executive offices)	(Zip Code)

(814) 870-2000

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  X   No ___

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X   No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  X   No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  X    Accelerated Filer ___ Non-Accelerated Filer ___ Smaller Reporting Company ___

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes     No   X

The number of shares outstanding of the registrant’s Class A Common Stock as of the latest practicable date, with no par value and a stated value of $0.0292 per share, was 46,189,068 at July 18, 2014.

The number of shares outstanding of the registrant’s Class B Common Stock as of the latest practicable date, with no par value and a stated value of $70 per share, was 2,542 at July 18, 2014.

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations – Three and six months ended June 30, 2014 and 2013
	Consolidated Statements of Comprehensive Income – Three and six months ended June 30, 2014 and 2013
	Consolidated Statements of Financial Position – June 30, 2014 and December 31, 2013
	Consolidated Statements of Cash Flows – Six months ended June 30, 2014 and 2013
	Notes to Consolidated Financial Statements – June 30, 2014
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.	Exhibits
	SIGNATURES

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars in millions, except per share data)

	Three months ended					Six months ended
	June 30,					June 30,
	2014		2013			2014		2013
Revenues
Premiums earned	$	1,319	$	1,215		$	2,607	$	2,390
Net investment income	111		104			220		207
Net realized investment gains	133		61			189		310
Net impairment losses recognized in earnings	0		(1		)	0		(1		)
Equity in earnings of limited partnerships	27		39			77		75
Other income	8		8			16		16
Total revenues	1,598		1,426			3,109		2,997
Benefits and expenses
Insurance losses and loss expenses	1,126		861			2,160		1,703
Policy acquisition and underwriting expenses	325		302			646		595
Total benefits and expenses	1,451		1,163			2,806		2,298
Income from operations before income taxes and noncontrolling interest	147		263			303		699
Provision for income taxes	44		86			91		232
Net income	$	103	$	177		$	212	$	467
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	54		133			117		386
Net income attributable to Indemnity	$	49	$	44		$	95	$	81
Earnings Per Share
Net income attributable to Indemnity per share
Class A common stock – basic	$	1.05	$	0.95		$	2.04	$	1.73
Class A common stock – diluted	$	0.94	$	0.84		$	1.82	$	1.54
Class B common stock – basic and diluted	$	158	$	142		$	307	$	259
Weighted average shares outstanding attributable to Indemnity – Basic
Class A common stock	46,214,153		46,693,333			46,307,659		46,733,925
Class B common stock	2,542		2,542			2,542		2,542
Weighted average shares outstanding attributable to Indemnity – Diluted
Class A common stock	52,411,414		52,886,259			52,504,920		52,926,851
Class B common stock	2,542		2,542			2,542		2,542
Dividends declared per share
Class A common stock	$	0.6350	$	0.5925		$	1.2700	$	1.1850
Class B common stock	$	95.2500	$	88.8750		$	190.5000	$	177.7500

See accompanying notes to Consolidated Financial Statements. See Note 12. "Indemnity Accumulated Other Comprehensive Loss," for amounts reclassified out of accumulated other comprehensive income (loss) into the Consolidated Statements of Operations.  See Note 15. “Indemnity Supplemental Information,” for supplemental statements of operations information.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in millions)

	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
Net income	$	103		$	177		$	212		$	467
Other comprehensive income (loss)
Change in unrealized holding gains (losses) on available-for-sale securities, net of tax (expense) benefit of $(37), $105, $(80), and $111 respectively	68			(194		)	148			(206		)
Reclassification adjustment for gross gains included in net income, net of tax benefit of $2, $2, $7, and $7, respectively	(3		)	(3		)	(11		)	(13		)
Other comprehensive income (loss)	65			(197		)	137			(219		)
Comprehensive income (loss)	$	168		$	(20	)	$	349		$	248
Less: Comprehensive income (loss) attributable to noncontrolling interest in consolidated entity – Exchange	118			(60		)	250			172
Total comprehensive income – Indemnity	$	50		$	40		$	99		$	76

See accompanying notes to Consolidated Financial Statements. See Note 12. "Indemnity Accumulated Other Comprehensive Loss," for supplemental statements of comprehensive income (loss) information.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(dollars in millions, except per share data)

	June 30, 2014			December 31, 2013
Assets	(Unaudited)
Investments – Indemnity
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost of $484 and $518, respectively)	$	497		$	526
Equity securities (cost of $25 and $50, respectively)	26			50
Limited partnerships (cost of $114 and $123, respectively)	141			146
Other invested assets	1			1
Investments – Exchange
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost of $8,149 and $7,801, respectively)	8,701			8,162
Equity securities (cost of $842 and $778, respectively)	914			819
Trading securities, at fair value (cost of $2,314 and $2,198, respectively)	3,377			3,202
Limited partnerships (cost of $754 and $790, respectively)	931			940
Other invested assets	20			20
Total investments	14,608			13,866
Cash and cash equivalents (Exchange portion of $237 and $403, respectively)	300			452
Premiums receivable from policyholders – Exchange	1,287			1,167
Reinsurance recoverable – Exchange	168			172
Deferred income taxes – Indemnity	1			2
Deferred acquisition costs – Exchange	579			566
Other assets (Exchange portion of $405 and $337, respectively)	517			451
Total assets	$	17,460		$	16,676
Liabilities and shareholders’ equity
Liabilities
Indemnity liabilities
Other liabilities	$	451		$	476
Exchange liabilities
Losses and loss expense reserves	3,964			3,747
Life policy and deposit contract reserves	1,789			1,758
Unearned premiums	2,788			2,598
Deferred income taxes	557			450
Other liabilities	90			97
Total liabilities	9,639			9,126
Indemnity shareholders’ equity
Class A common stock, stated value $0.0292 per share; 74,996,930 shares authorized; 68,299,200 shares issued; 46,189,068 and 46,461,125 shares outstanding, respectively	2			2
Class B common stock, convertible at a rate of 2,400 Class A shares for one Class B share, stated value $70 per share; 3,070 shares authorized; 2,542 shares issued and outstanding	0			0
Additional paid-in-capital	16			16
Accumulated other comprehensive loss	(55		)	(59		)
Retained earnings	1,938			1,902
Total contributed capital and retained earnings	1,901			1,861
Treasury stock, at cost, 22,110,132 and 21,838,075 shares, respectively	(1,146		)	(1,127		)
Total Indemnity shareholders’ equity	755			734
Noncontrolling interest in consolidated entity – Exchange	7,066			6,816
Total equity	7,821			7,550
Total liabilities, shareholders’ equity, and noncontrolling interest	$	17,460		$	16,676

See accompanying notes to Consolidated Financial Statements.  See Note 15. “Indemnity Supplemental Information,” for supplemental consolidating statements of financial position information.

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ERIE INDEMNITY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Six months ended
	June 30,
	2014			2013
Cash flows from operating activities
Premiums collected	$	2,679		$	2,450
Net investment income received	235			222
Limited partnership distributions	64			79
Service agreement fee received	15			15
Commissions and bonuses paid to agents	(397		)	(356		)
Losses paid	(1,630		)	(1,359		)
Loss expenses paid	(251		)	(227		)
Other underwriting and acquisition costs paid	(372		)	(345		)
Income taxes paid	(98		)	(149		)
Net cash provided by operating activities	245			330
Cash flows from investing activities
Purchase of investments:
Fixed maturities	(1,090		)	(1,240		)
Preferred stock	(168		)	(54		)
Common stock	(550		)	(700		)
Limited partnerships	(46		)	(52		)
Sales/maturities of investments:
Fixed maturity sales	371			330
Fixed maturity calls/maturities	413			617
Preferred stock	119			42
Common stock	565			654
Sale of and returns on limited partnerships	70			86
Net purchase of property and equipment	(17		)	(19		)
Net collections on agent loans	1			1
Net cash used in investing activities	(332		)	(335		)
Cash flows from financing activities
Annuity deposits and interest	45			47
Annuity surrenders and withdrawals	(39		)	(39		)
Universal life deposits and interest	14			12
Universal life surrenders	(6		)	(5		)
Purchase of treasury stock	(20		)	(17		)
Dividends paid to shareholders	(59		)	(28		)
Net cash used in financing activities	(65		)	(30		)
Net decrease in cash and cash equivalents	(152		)	(35		)
Cash and cash equivalents at beginning of period	452			400
Cash and cash equivalents at end of period	$	300		$	365

See accompanying notes to Consolidated Financial Statements. See Note 15. “Indemnity Supplemental Information,” for supplemental cash flow information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.  Nature of Operations

Erie Indemnity Company (“Indemnity”) is a publicly held Pennsylvania business corporation that has been the managing attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange (“Exchange”) since 1925.  The Exchange is a subscriber-owned, Pennsylvania-domiciled reciprocal insurer that writes property and casualty insurance.

Indemnity’s primary function is to perform certain services for the Exchange relating to the sales, underwriting and issuance of policies on behalf of the Exchange.  This is done in accordance with a subscriber’s agreement (a limited power of attorney) executed by each subscriber (policyholder), which appoints Indemnity as their common attorney-in-fact to transact business on their behalf and to manage the affairs of the Exchange.  Pursuant to the subscriber’s agreement and for its services as attorney-in-fact, Indemnity earns a management fee calculated as a percentage of the direct premiums written by the Exchange and the other members of the Property and Casualty Group (defined below), which are assumed by the Exchange under an intercompany pooling arrangement.

Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance by acting as the common attorney-in-fact and decision maker for the subscribers (policyholders) at the Exchange.

The Exchange, together with its wholly owned subsidiaries, Erie Insurance Company (“EIC”), Erie Insurance Company of New York (“ENY”), Erie Insurance Property and Casualty Company (“EPC”), and Flagship City Insurance Company (“Flagship”), operate as a property and casualty insurer and are collectively referred to as the “Property and Casualty Group”.  The Property and Casualty Group operates in 11 Midwestern, Mid-Atlantic and Southeastern states and the District of Columbia.

Erie Family Life Insurance Company (“EFL”), a wholly owned subsidiary of the Exchange, operates as a life insurer that underwrites and sells individual and group life insurance policies and fixed annuities.

Indemnity plans to expand the property and casualty and life insurance operations of the Erie Insurance Group into the Commonwealth of Kentucky by the first quarter of 2015 or earlier if possible.

All property and casualty and life insurance operations are owned by the Exchange and Indemnity functions solely as the management company.

The consolidated financial statements of Erie Indemnity Company reflect the results of Indemnity and its variable interest entity, the Exchange, which we refer to collectively as the “Erie Insurance Group” (“we,” “us,” “our”).

“Indemnity shareholder interest” refers to the interest in Erie Indemnity Company owned by the Class A and Class B shareholders.  “Noncontrolling interest” refers to the interest in the Erie Insurance Exchange held for the subscribers (policyholders).

Note 2.  Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Indemnity together with its affiliate companies in which Indemnity holds a majority voting or economic interest.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position, results of operations, and cash flows for the interim periods have been included.  Operating results for the six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014.  The accompanying consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014.

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Principles of consolidation

We consolidate the Exchange as a variable interest entity for which Indemnity is the primary beneficiary.  All intercompany accounts and transactions have been eliminated in consolidation.  The required presentation of noncontrolling interests is reflected in the consolidated financial statements.  Noncontrolling interests represent the ownership interests of the Exchange, all of which are held by parties other than Indemnity (i.e. the Exchange’s subscribers (policyholders)).  Noncontrolling interests also include the Exchange subscribers’ ownership interest in EFL.

Presentation of assets and liabilities – While the assets of the Exchange are presented separately in the Consolidated Statements of Financial Position, the Exchange’s assets can only be used to satisfy the Exchange’s liabilities or for other unrestricted activities.  Accounting Standards Codification (“ASC”) 810, Consolidation, does not require separate presentation of the Exchange’s assets; however, because the shareholders of Indemnity have no rights to the assets of the Exchange and, conversely, the Exchange has no rights to the assets of Indemnity, we have presented the invested assets of the Exchange separately on the Consolidated Statements of Financial Position along with the remaining consolidated assets reflecting the Exchange’s portion parenthetically.  Liabilities are required under ASC 810, Consolidation, to be presented separately for the Exchange on the Consolidated Statements of Financial Position as the Exchange’s creditors do not have recourse to the general credit of Indemnity.

Rights of shareholders of Indemnity and subscribers (policyholders) of the Exchange – The shareholders of Indemnity, through the management fee, have a controlling financial interest in the Exchange; however, they have no other rights to or obligations arising from assets and liabilities of the Exchange.  The shareholders of Indemnity own its equity but have no rights or interest in the Exchange’s (noncontrolling interest) income or equity.  The noncontrolling interest equity represents the Exchange’s equity held for the interest of its subscribers (policyholders), who have no rights or interest in the Indemnity shareholder interest income or equity.

All intercompany assets, liabilities, revenues, and expenses between Indemnity and the Exchange have been eliminated in the Consolidated Financial Statements.

Pending accounting pronouncements

In January 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-01, Accounting for Investments in Qualified Affordable Housing Projects.  This guidance permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met.  Generally, investors in qualified affordable housing project investments expect to receive substantially all of their return through the receipt of tax credits and other tax benefits.  ASU No. 2014-01 allows for the recording of the investment performance net of taxes as a component of income tax expense to more fairly represent the economics of the investments and provide users with a better understanding of the returns from such investments.  The qualifications to make this accounting election were also made less restrictive.  ASU No. 2014-01 is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted.  While we are currently evaluating whether to make the accounting election and whether the election would be made for early adoption, such election is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 clarifies the principles for recognizing revenue and provides a common revenue standard for GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Insurance contracts are not within the scope of this guidance. ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early application is not permitted. We do not expect the adoption of ASU No. 2014-09 related to the management fee and service agreement revenue to have a material impact on our consolidated financial statements.

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Note 3.  IndemnityEarnings Per Share

Class A and Class B basic earnings per share and Class B diluted earnings per share are calculated under the two-class method. The two-class method allocates earnings to each class of stock based upon its dividend rights.  Class B shares are convertible into Class A shares at a conversion ratio of 2,400 to 1. See Note 11. “Indemnity Capital Stock”.

Class A diluted earnings per share are calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the effect of any potential common shares. Potential common shares include outstanding vested and not yet vested awards related to our outside directors’ stock compensation plan and any employee stock based awards.

A reconciliation of the numerators and denominators used in the basic and diluted per-share computations is presented as follows for each class of Indemnity common stock:

	Indemnity Shareholder Interest
(dollars in millions, except per share data)	Three months ended June 30,
	2014					2013
	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per- share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	49	46,214,153	$	1.05	$	44	46,693,333	$	0.95
Dilutive effect of stock-based awards	0		96,461	—		0		92,126	—
Assumed conversion of Class B shares	0		6,100,800	—		0		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	49	52,411,414	$	0.94	$	44	52,886,259	$	0.84
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$	0	2,542	$	158	$	0	2,542	$	142

	Indemnity Shareholder Interest
(dollars in millions, except per share data)	Six months ended June 30,
	2014					2013
	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per- share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	94	46,307,659	$	2.04	$	80	46,733,925	$	1.73
Dilutive effect of stock-based awards	0		96,461	—		0		92,126	—
Assumed conversion of Class B shares	1		6,100,800	—		1		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	95	52,504,920	$	1.82	$	81	52,926,851	$	1.54
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$	1	2,542	$	307	$	1	2,542	$	259

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Note 4.  Variable Interest Entity

Erie Insurance Exchange

The Exchange is a reciprocal insurance exchange domiciled in Pennsylvania, for which Indemnity serves as attorney-in-fact.  Indemnity holds a variable interest in the Exchange due to the absence of decision-making capabilities by the equity owners (subscribers/policyholders) of the Exchange and due to the significance of the management fee the Exchange pays to Indemnity as its decision maker.  As a result, Indemnity is deemed to have a controlling financial interest in the Exchange and is considered to be its primary beneficiary.

Consolidation of the Exchange’s financial results is required given the significance of the management fee to the Exchange and because Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance.  The Exchange’s anticipated economic performance is the product of its underwriting results combined with its investment results.  The fees paid to Indemnity under the subscriber’s agreement impact the anticipated economic performance attributable to the Exchange’s results.  Indemnity earns a management fee from the Exchange for the services it provides as attorney-in-fact.  Indemnity’s management fee revenues are based upon all premiums written or assumed by the Exchange.  Indemnity’s Board of Directors determines the management fee rate to be paid by the Exchange to Indemnity.  This rate cannot exceed 25% of the direct and assumed written premiums of the Exchange, as defined by the subscriber’s agreement signed by each policyholder.  Management fee revenues and management fee expenses are eliminated upon consolidation.

The shareholders of Indemnity have no rights to the assets of the Exchange and no obligations arising from the liabilities of the Exchange.  Indemnity has no obligation related to any underwriting and/or investment losses experienced by the Exchange.  Indemnity would, however, be adversely impacted if the Exchange incurred significant underwriting and/or investment losses.  If the surplus of the Exchange were to decline significantly from its current level, its financial strength ratings could be reduced and, as a consequence, the Exchange could find it more difficult to retain its existing business and attract new business.  A decline in the business of the Exchange would have an adverse effect on the amount of the management fees Indemnity receives.  In addition, a decline in the surplus of the Exchange from its current level may impact the management fee rate received by Indemnity.  Indemnity also has an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for its management fee. If any of these events occurred, Indemnity’s financial position, financial performance, and/or cash flows could be adversely impacted.

All property and casualty and life insurance operations are owned by the Exchange, and Indemnity functions solely as the management company.

Indemnity has not provided financial or other support to the Exchange for any of the reporting periods presented.  At June 30, 2014, there are no explicit or implicit arrangements that would require Indemnity to provide future financial support to the Exchange.  Indemnity is not liable if the Exchange was to be in violation of its debt covenants or was unable to meet its obligation for unfunded commitments to limited partnerships.

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Note 5. Segment Information

Our reportable segments include management operations, property and casualty insurance operations, life insurance operations, and investment operations.  Accounting policies for segments are the same as those described in the summary of significant accounting policies.  See Item 8. “Financial Statements and Supplementary Data, Note 2. Significant Accounting Policies,” in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014.  Assets are not allocated to the segments, but rather, are reviewed in total for purposes of decision-making.  No single customer or agent provides 10% or more of revenues.

Management operations

Our management operations segment consists of Indemnity serving as attorney-in-fact for the Exchange.  Indemnity operates in this capacity solely for the Exchange.  We evaluate profitability of our management operations segment principally on the gross margin from management operations.  Indemnity earns a management fee from the Exchange for providing sales, underwriting, and policy issuance services.  Management fee revenue, which is eliminated upon consolidation, is calculated as a percentage not to exceed 25% of all the direct premiums written by the Exchange and the other members of the Property and Casualty Group, which are assumed by the Exchange under an intercompany pooling arrangement.  The Property and Casualty Group issues policies with annual terms only.  Management fees are recorded upon policy issuance or renewal, as substantially all of the services required to be performed by Indemnity have been satisfied at that time.  Certain activities are performed and related costs are incurred by us subsequent to policy issuance in connection with the services provided to the Exchange; however, these activities are inconsequential and perfunctory.  Although these management fee revenues and expenses are eliminated upon consolidation, the amount of the fee directly impacts the allocation of our consolidated net income between the noncontrolling interest, which bears the management fee expense and represents the interests of the Exchange subscribers (policyholders), and Indemnity’s interest, which earns the management fee revenue and represents the Indemnity shareholder interest in net income.

Property and casualty insurance operations

Our property and casualty insurance operations segment includes personal and commercial lines.  Personal lines consist primarily of personal auto and homeowners and are marketed to individuals.  Commercial lines consist primarily of commercial multi-peril, commercial auto, and workers compensation and are marketed to small- and medium-sized businesses.  Our property and casualty policies are sold by independent agents.  Our property and casualty insurance underwriting operations are conducted through the Exchange and its subsidiaries and include assumed voluntary reinsurance from nonaffiliated domestic and foreign sources, assumed involuntary, and ceded reinsurance business.  The Exchange exited the assumed voluntary reinsurance business effective December 31, 2003, and therefore unaffiliated assumed voluntary reinsurance includes only run-off activity of the previously assumed voluntary reinsurance business.  We evaluate profitability of the property and casualty insurance operations principally based upon net underwriting results represented by the combined ratio.

Life insurance operations

Our life insurance operations segment includes traditional and universal life insurance products and fixed annuities marketed to individuals using the same independent agency force utilized by our property and casualty insurance operations.  We evaluate profitability of the life insurance segment principally based upon segment net income, including investments, which for segment purposes are reflected in the investment operations segment.  At the same time, we recognize that investment-related income is integral to the evaluation of the life insurance segment because of the long duration of life products.  For the second quarters of 2014 and 2013, investment activities on life insurance related assets generated revenues of $24 million and $26 million, respectively, resulting in EFL reporting income before income taxes of $10 million and $13 million, respectively, before intercompany eliminations. For the six months ended June 30, 2014 and June 30, 2013, investment activities on life insurance related assets generated revenues of $53 million and $52 million, respectively, resulting in EFL reporting income before income taxes of $23 million and $24 million, respectively, before intercompany eliminations.

Investment operations

The investment operations segment includes returns from our fixed maturity, equity security and limited partnership investment portfolios to support our underwriting business.  The Indemnity and Exchange portfolios are managed with the objective of maximizing after-tax returns on a risk-adjusted basis, while the EFL portfolio is managed to be closely aligned to its liabilities and to maintain a sufficient yield to meet profitability targets.  Management actively evaluates the portfolios for impairments. We record impairment writedowns on investments in instances where the fair value of the investment is substantially below cost, and we conclude that the decline in fair value is other-than-temporary.  Investment related income for the life operations is included in the investment segment results.

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The following tables summarize the components of the Consolidated Statements of Operations by reportable business segment:

	Erie Insurance Group
(in millions)	Three months ended June 30, 2014
	Management operations		Property and casualty insurance operations			Life insurance operations			Investment operations		Eliminations			Consolidated
Premiums earned/life policy revenue			$	1,298		$	22				$	(1	)	$	1,319
Net investment income									$	116	(5		)	111
Net realized investment gains									133					133
Net impairment losses recognized in earnings									0					0
Equity in earnings of limited partnerships									27					27
Management fee revenue	$	366									(366		)	—
Service agreement and other revenue	8					0								8
Total revenues	374		1,298			22			276		(372		)	1,598
Cost of management operations	306										(306		)	—
Insurance losses and loss expenses			1,101			27					(2		)	1,126
Policy acquisition and underwriting expenses			380			9					(64		)	325
Total benefits and expenses	306		1,481			36			—		(372		)	1,451
Income (loss) before income taxes	68		(183		)	(14		)	276		—			147
Provision for income taxes	24		(64		)	(5		)	89		—			44
Net income (loss)	$	44	$	(119	)	$	(9	)	$	187	—			$	103

	Erie Insurance Group
(in millions)	Three months ended June 30, 2013
	Management operations		Property and casualty insurance operations		Life insurance operations			Investment operations			Eliminations			Consolidated
Premiums earned/life policy revenue			$	1,196	$	20					$	(1	)	$	1,215
Net investment income								$	107		(3		)	104
Net realized investment gains								61						61
Net impairment losses recognized in earnings								(1		)				(1		)
Equity in earnings of limited partnerships								39						39
Management fee revenue	$	336									(336		)	—
Service agreement and other revenue	8				0									8
Total revenues	344		1,196		20			206			(340		)	1,426
Cost of management operations	285										(285		)	—
Insurance losses and loss expenses			837		26						(2		)	861
Policy acquisition and underwriting expenses			348		7						(53		)	302
Total benefits and expenses	285		1,185		33			—			(340		)	1,163
Income (loss) before income taxes	59		11		(13		)	206			—			263
Provision for income taxes	21		4		(5		)	66			—			86
Net income (loss)	$	38	$	7	$	(8	)	$	140		$	—		$	177

12

	Erie Insurance Group
(in millions)	Six months ended June 30, 2014
	Management operations		Property and casualty insurance operations			Life insurance operations			Investment operations		Eliminations			Consolidated
Premiums earned/life policy revenue			$	2,566		$	42				$	(1	)	$	2,607
Net investment income									$	228	(8		)	220
Net realized investment gains									189					189
Net impairment losses recognized in earnings									0					0
Equity in earnings of limited partnerships									77					77
Management fee revenue	$	685									(685		)	—
Service agreement and other revenue	15					1								16
Total revenues	700		2,566			43			494		(694		)	3,109
Cost of management operations	574										(574		)	—
Insurance losses and loss expenses			2,108			55					(3		)	2,160
Policy acquisition and underwriting expenses			745			18					(117		)	646
Total benefits and expenses	574		2,853			73			—		(694		)	2,806
Income (loss) before income taxes	126		(287		)	(30		)	494		—			303
Provision for income taxes	44		(100		)	(11		)	158		—			91
Net income (loss)	$	82	$	(187	)	$	(19	)	$	336	$	—		$	212

	Erie Insurance Group
(in millions)	Six months ended June 30, 2013
	Management operations		Property and casualty insurance operations		Life insurance operations			Investment operations			Eliminations			Consolidated
Premiums earned/life policy revenue			$	2,352	$	39					$	(1	)	$	2,390
Net investment income								$	213		(6		)	207
Net realized investment gains								310						310
Net impairment losses recognized in earnings								(1		)				(1		)
Equity in earnings of limited partnerships								75						75
Management fee revenue	$	632									(632		)	—
Service agreement and other revenue	15				1									16
Total revenues	647		2,352		40			597			(639		)	2,997
Cost of management operations	539										(539		)	—
Insurance losses and loss expenses			1,654		52						(3		)	1,703
Policy acquisition and underwriting expenses			676		16						(97		)	595
Total benefits and expenses	539		2,330		68			—			(639		)	2,298
Income (loss) before income taxes	108		22		(28		)	597			—			699
Provision for income taxes	38		8		(10		)	196			—			232
Net income (loss)	$	70	$	14	$	(18	)	$	401		$	—		$	467

13

Note 6. Fair Value

Our available-for-sale and trading securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.

Valuation techniques used to derive the fair value of our available-for-sale and trading securities are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources.  Unobservable inputs reflect our own assumptions regarding fair market value for these securities.  Although the majority of our prices are obtained from third party sources, we also perform an internal pricing review for securities with low trading volumes under current market conditions. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 – Unobservable inputs for the asset or liability.

Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service.  Our Level 1 category includes those securities valued using an exchange traded price provided by the pricing service.  The methodologies used by the pricing service that support a Level 2 classification of a financial instrument include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.  Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.

In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes.  In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.

We perform continuous reviews of the prices obtained from the pricing service.  This includes evaluating the methodology and inputs used by the pricing service to ensure that we determine the proper classification level of the financial instrument.  Price variances, including large periodic changes, are investigated and corroborated by market data.  We have reviewed the pricing methodologies of our pricing service as well as other observable inputs, such as data, and transaction volumes and believe that their prices adequately consider market activity in determining fair value.  Our review process continues to evolve based upon accounting guidance and requirements.

When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables.  When available, we obtain multiple quotes for the same security.  The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information.  Our evaluation includes the consideration of benchmark yields, reported trades, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.

For certain securities in an illiquid market, there may be no prices available from a pricing service and no comparable market quotes available.  In these situations, we value the security using an internally-developed, risk-adjusted discounted cash flow model.

14

The following table represents our consolidated fair value measurements on a recurring basis by asset class and level of input at June 30, 2014:

	Erie Insurance Group
	June 30, 2014
	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	$	241	$	0	$	241	$	0
Corporate debt securities	256		0		255		1
Collateralized debt obligations	0		0		0		0
Total fixed maturities	497		0		496		1
Nonredeemable preferred stock	14		2		12		0
Common stock	12		12		0		0
Total available-for-sale securities	523		14		508		1
Other investments (1)	18		0		0		18
Total – Indemnity	$	541	$	14	$	508	$	19
Exchange
Available-for-sale securities:
U.S. treasury	$	31	$	0	$	31	$	0
Government sponsored enterprises	4		0		4		0
States & political subdivisions	1,519		0		1,519		0
Foreign government securities	15		0		15		0
Corporate debt securities	6,866		0		6,841		25
Residential mortgage-backed securities	146		0		146		0
Commercial mortgage-backed securities	34		0		34		0
Collateralized debt obligations	14		0		14		0
Other debt securities	72		0		72		0
Total fixed maturities	8,701		0		8,676		25
Nonredeemable preferred stock	717		303		413		1
Common stock	197		197		0		0
Total available-for-sale securities	9,615		500		9,089		26
Trading securities:
Common stock	3,377		3,362		0		15
Total trading securities	3,377		3,362		0		15
Other investments (1)	102		0		0		102
Total – Exchange	$	13,094	$	3,862	$	9,089	$	143
Total – Erie Insurance Group	$	13,635	$	3,876	$	9,597	$	162

(1)Other investments measured at fair value represent four real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. These investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if they represent the NAV at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of June 30, 2014. During the six months ended June 30, 2014, Indemnity made no contributions and received distributions totaling $1.8 million, and the Exchange made no contributions and received distributions totaling $6.9 million for these investments. As of June 30, 2014, the amount of unfunded commitments related to the investments was $1.5 million for Indemnity and $4.5 million for the Exchange.

15

Level 3 Assets – Quarterly Change:

	Erie Insurance Group
(in millions)	Beginning balance at March 31, 2014		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales			Transfers in and (out) of Level 3 (2)		Ending balance at June 30, 2014
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0	$	0	$	0		$	0	$	1
Collateralized debt obligations	0		0		0		0		0			0		0
Total fixed maturities	1		0		0		0		0			0		1
Total available-for-sale securities	1		0		0		0		0			0		1
Other investments	18		1		0		0		(1		)	0		18
Total Level 3 assets – Indemnity	$	19	$	1	$	0	$	0	$	(1	)	$	0	$	19
Exchange
Available-for-sale securities:
Corporate debt securities	$	26	$	0	$	0	$	0	$	(1	)	$	0	$	25
Collateralized debt obligations	0		0		0		0		0			0		0
Total fixed maturities	26		0		0		0		(1		)	0		25
Nonredeemable preferred stock	1		0		0		0		0			0		1
Total available-for-sale securities	27		0		0		0		(1		)	0		26
Trading securities:
Common stock	15		0		0		0		0			0		15
Total trading securities	15		0		0		0		0			0		15
Other investments	98		6		0		0		(2		)	0		102
Total Level 3 assets – Exchange	$	140	$	6	$	0	$	0	$	(3	)	$	0	$	143
Total Level 3 assets – Erie Insurance Group	$	159	$	7	$	0	$	0	$	(4	)	$	0	$	162

(1) These amounts are reported in the Consolidated Statement of Operations. There is $7 million included in equity in earnings of limited partnerships for the three months ended June 30, 2014 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.

We review the fair value hierarchy classifications each reporting period.  Transfers between hierarchy levels may occur due to changes in the available market observable inputs.  Transfers in and out of level classifications are reported as having occurred at the beginning of the quarter in which the transfers occurred.

For Indemnity, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 for the three months ended June 30, 2014.

For the Exchange, Level 1 to Level 2 transfers totaled $11 million due to trading activity levels for one preferred stock holding, and there were no transfers from Level 2 to Level 1 or between Level 2 and Level 3 for the three months ended June 30, 2014.

16

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group
(in millions)	Beginning balance at December 31, 2013		Included in earnings (1)		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2014
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	1		0		0			0		(1		)	0			0
Total fixed maturities	2		0		0			0		(1		)	0			1
Total available-for-sale securities	2		0		0			0		(1		)	0			1
Other investments	18		2		0			0		(2		)	0			18
Total Level 3 assets – Indemnity	$	20	$	2	$	0		$	0	$	(3	)	$	0		$	19
Exchange
Available-for-sale securities:
Corporate debt securities	$	26	$	0	$	0		$	0	$	(1	)	$	0		$	25
Collateralized debt obligations	5		1		(1		)	0		(3		)	(2		)	0
Total fixed maturities	31		1		(1		)	0		(4		)	(2		)	25
Nonredeemable preferred stock	0		0		0			1		0			0			1
Total available-for-sale securities	31		1		(1		)	1		(4		)	(2		)	26
Trading securities:
Common stock	15		0		0			0		0			0			15
Total trading securities	15		0		0			0		0			0			15
Other investments	98		11		0			0		(7		)	0			102
Total Level 3 assets – Exchange	$	144	$	12	$	(1	)	$	1	$	(11	)	$	(2	)	$	143
Total Level 3 assets – Erie Insurance Group	$	164	$	14	$	(1	)	$	1	$	(14	)	$	(2	)	$	162

(1) These amounts are reported in the Consolidated Statement of Operations. There is $1 million included in net realized investment gains (losses) and $13 million included in equity in earnings of limited partnerships for the six months ended June 30, 2014 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.

For Indemnity, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 for the six months ended June 30, 2014.

For the Exchange, Level 1 to Level 2 transfers totaled $14 million due to trading activity levels for two preferred stock holdings, and there were no transfers from Level 2 to Level 1 for the six months ended June 30, 2014. There were no Level 2 to Level 3 transfers, and Level 3 to Level 2 transfers totaled $2 million for one fixed maturity holding as a result of using observable market data to determine the fair value at June 30, 2014.

17

Quantitative and Qualitative Disclosures about Unobservable Inputs

	Erie Insurance Group
	June 30, 2014
(dollars in millions)	Fair value		No. of holdings	Valuation techniques	Unobservable input	Range	Weighted average
Indemnity
Corporate debt securities (1)	$	1	1	Market approach	Non-binding broker quote	114
Collateralized debt obligations (2)	0		1	Income approach	Projected maturity date	Dec 2014
					Repayment at maturity	1%
					Discount rate	15%
Other investments (4)	18		2
Total Level 3 assets – Indemnity	$	19	4
Exchange
Corporate debt securities (1)(3)	$	25	7	Market approach	Non-binding broker quote	109-117	111
					Comparable transaction EBITDA multiples	8.0 - 12.1x	8.0x
					Comparable security yield	6%
Collateralized debt obligations (2)	0		2	Income approach	Projected maturity date	Dec 2014 - Oct 2035
					Repayment at maturity	1 - 100%	64%
					Discount rate	15 - 18%	17%
Nonredeemable preferred stock (5)	1		1	Market approach	Comparable company price-to-sales ratio	12.0 - 22.0x	19.0x
Common stock (3)	15		4	Market approach	Comparable transaction EBITDA multiples	8.0 - 12.1x	8.0x
					Discount for lack of marketability	5 - 30%	10%
Other investments (4)	102		4
Total Level 3 assets – Exchange	$	143	18
Total Level 3 assets – Erie Insurance Group	$	162	22

(1) Corporate debt securities – The unobservable input used in the fair value measurement of certain corporate debt securities is the likelihood of repayment by the underlying entity when there is no market for trading these securities.  When available, we obtain non-binding broker quotes to value such securities. When a non-binding broker quote was the only input available, it was considered unobservable.

(2) Collateralized-debt-obligation securities – The unobservable inputs used in the fair value measurement of certain collateralized-debt-obligation securities are the repayment at maturity of underlying collateral available to pay note holders, the projected maturity of the underlying security, and a discount rate appropriate for the security.  Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.  Generally, a change in the assumption used for the performance of the underlying collateral is accompanied by an opposite change in the maturity and a directionally opposite change in the discount rate used to value the security. 

(3) Common stock investments and Corporate debt securities – The unobservable inputs used in the fair value measurement of direct private equity common stock investments and certain corporate debt securities are comparable private transaction earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples, the average EBITDA multiple for comparable publicly traded companies and the amount of discount applied to the price due to the illiquidity of the securities being valued.  Significant changes in any of those inputs in isolation could result in a significantly higher or lower fair value measurement.

(4) Other investments – Other investments represent certain limited partnerships that are recorded at fair value and are based upon net asset value (NAV) provided by the general partner where the unobservable inputs are not reasonably available to us.

(5) Nonredeemable preferred stock - The unobservable input used in the fair value measurement of a private nonredeemable preferred stock security is the price to sales ratio for comparable publicly traded companies. 

Securities valued using unobservable inputs shown above totaled $162 million at June 30, 2014. In total, Level 3 assets represent less than 1.2% of the total assets measured at fair value on a recurring basis for the Erie Insurance Group.

18

The following table represents our consolidated fair value measurements on a recurring basis by asset class and level of input at December 31, 2013:

	Erie Insurance Group
	December 31, 2013
	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	$	243	$	0	$	243	$	0
Corporate debt securities	282		0		281		1
Collateralized debt obligations	1		0		0		1
Total fixed maturities	526		0		524		2
Nonredeemable preferred stock	25		2		23		0
Common stock	25		25		0		0
Total available-for-sale securities	576		27		547		2
Other investments (1)	18		0		0		18
Total – Indemnity	$	594	$	27	$	547	$	20
Exchange
Available-for-sale securities:
U.S. government & agencies	$	172	$	0	$	172	$	0
States & political subdivisions	1,470		0		1,470		0
Foreign government securities	15		0		15		0
Corporate debt securities	6,211		0		6,185		26
Residential mortgage-backed securities	156		0		156		0
Commercial mortgage-backed securities	47		0		47		0
Collateralized debt obligations	16		0		11		5
Other debt securities	75		0		75		0
Total fixed maturities	8,162		0		8,131		31
Nonredeemable preferred stock	621		242		379		0
Common stock	198		198		0		0
Total available-for-sale securities	8,981		440		8,510		31
Trading securities:
Common stock	3,202		3,187		0		15
Total trading securities	3,202		3,187		0		15
Other investments (1)	98		0		0		98
Total – Exchange	$	12,281	$	3,627	$	8,510	$	144
Total – Erie Insurance Group	$	12,875	$	3,654	$	9,057	$	164

(1)Other investments measured at fair value represent four real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. These investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if they represent the NAV at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of December 31, 2013. During the year ended December 31, 2013, Indemnity made no contributions and received distributions totaling $2.4 million, and the Exchange made no contributions and received distributions totaling $21.7 million for these investments. As of December 31, 2013, the amount of unfunded commitments related to the investments was $1.5 million for Indemnity and $4.5 million for the Exchange.

19

Level 3 Assets – Quarterly Change:

	Erie Insurance Group
(in millions)	Beginning balance at March 31, 2013		Included in earnings (1)		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2013
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	2		0		0			0		(1		)	0			1
Total fixed maturities	3		0		0			0		(1		)	0			2
Total available-for-sale securities	3		0		0			0		(1		)	0			2
Other investments	20		0		0			0		0			0			20
Total Level 3 assets – Indemnity	$	23	$	0	$	0		$	0	$	(1	)	$	0		$	22
Exchange
Available-for-sale securities:
Corporate debt securities	58		0		(1		)	1		(2		)	(23		)	33
Commercial mortgage-backed securities	5		0		0			0		(1		)	0			4
Collateralized debt obligations	14		1		(1		)	0		(2		)	0			12
Total fixed maturities	77		1		(2		)	1		(5		)	(23		)	49
Nonredeemable preferred stock	12		2		(1		)	0		(6		)	0			7
Total available-for-sale securities	89		3		(3		)	1		(11		)	(23		)	56
Trading securities:
Common stock	7		0		0			0		0			0			7
Total trading securities	7		0		0			0		0			0			7
Other investments	112		2		0			0		(1		)	0			113
Total Level 3 assets – Exchange	$	208	$	5	$	(3	)	$	1	$	(12	)	$	(23	)	$	176
Total Level 3 assets – Erie Insurance Group	$	231	$	5	$	(3	)	$	1	$	(13	)	$	(23	)	$	198

(1) These amounts are reported in the Consolidated Statement of Operations. There is $3 million included in net realized investment gains (losses) and $2 million included in equity in earnings of limited partnerships for the three months ended June 30, 2013 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.

We review the fair value hierarchy classifications each reporting period.  Transfers between hierarchy levels may occur due to changes in the available market observable inputs.  Transfers in and out of level classifications are reported as having occurred at the beginning of the quarter in which the transfers occurred.

For Indemnity, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 for the three months ended June 30, 2013.

For the Exchange, there were no transfers between Level 1 and Level 2 or from Level 2 to Level 3 for the three months ended June 30, 2013. Level 3 to Level 2 transfers totaled $23 million for three fixed maturity holdings. These transfers out of Level 3 were primarily the result of using observable market data to determine the fair value at June 30, 2013.

20

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group
(in millions)	Beginning balance at December 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, 2013
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0		$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	3		0			0			0		(2		)	0			1
Total fixed maturities	4		0			0			0		(2		)	0			2
Total available-for-sale securities	4		0			0			0		(2		)	0			2
Other investments	19		1			0			0		0			0			20
Total Level 3 assets – Indemnity	$	23	$	1		$	0		$	0	$	(2	)	$	0		$	22
Exchange
Available-for-sale securities:
Corporate debt securities	$	43	$	0		$	(1	)	$	1	$	(2	)	$	(8	)	$	33
Commercial mortgage-backed securities	0		0			(1		)	0		(1		)	6			4
Collateralized debt obligations	16		1			0			0		(7		)	2			12
Total fixed maturities	59		1			(2		)	1		(10		)	0			49
Nonredeemable preferred stock	0		0			3			4		0			0			7
Total available-for-sale securities	59		1			1			5		(10		)	0			56
Trading securities:
Common stock	15		(3		)	0			0		(5		)	0			7
Total trading securities	15		(3		)	0			0		(5		)	0			7
Other investments	109		7			0			0		(3		)	0			113
Total Level 3 assets – Exchange	$	183	$	5		$	1		$	5	$	(18	)	$	0		$	176
Total Level 3 assets – Erie Insurance Group	$	206	$	6		$	1		$	5	$	(20	)	$	0		$	198

(1) These amounts are reported in the Consolidated Statement of Operations. There is $(2) million of losses included in net realized investment (losses) and $8 million included in equity in earnings of limited partnerships for the six months ended June 30, 2013 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.

For Indemnity, there were no Level 1 to Level 2 transfers for the six months ended June 30, 2013. Level 2 to Level 1 transfers totaled $1 million, due to trading activity levels related to one preferred stock holding, and there were no transfers between Levels 2 and 3.

For the Exchange, Level 1 to Level 2 transfers totaled $5 million and Level 2 to Level 1 transfers totaled $44 million due to trading activity levels related to one preferred stock holding and five preferred stock holdings, respectively, for the six months ended June 30, 2013. Level 2 to Level 3 transfers totaled $18 million for five fixed maturity holdings and Level 3 to Level 2 transfers totaled $18 million for two fixed maturity holdings. These transfers in and out of Level 3 were primarily the result of using non-binding and binding broker quotes, respectively, to determine the fair value at June 30, 2013.

21

The following table presents our consolidated fair value measurements on a recurring basis by pricing source at June 30, 2014:

	Erie Insurance Group
(in millions)	June 30, 2014
	Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services	$	496	$	0	$	496	$	0
Priced via market comparables/broker quotes (1)	1		0		0		1
Priced via internal modeling	0		0		0		0
Total fixed maturities	497		0		496		1
Nonredeemable preferred stock:
Priced via pricing services	12		2		10		0
Priced via market comparables/broker quotes (1)	2		0		2		0
Total nonredeemable preferred stock	14		2		12		0
Common stock:
Priced via pricing services	12		12		0		0
Total common stock	12		12		0		0
Other investments:
Priced via unobservable inputs (2)	18		0		0		18
Total other investments	18		0		0		18
Total – Indemnity	$	541	$	14	$	508	$	19
Exchange
Fixed maturities:
Priced via pricing services	$	8,646	$	0	$	8,646	$	0
Priced via market comparables/broker quotes (1)	48		0		30		18
Priced via internal modeling	7		0		0		7
Total fixed maturities	8,701		0		8,676		25
Nonredeemable preferred stock:
Priced via pricing services	679		303		376		0
Priced via market comparables/broker quotes (1)	37		0		37		0
Priced via internal modeling	1		0		0		1
Total nonredeemable preferred stock	717		303		413		1
Common stock:
Priced via pricing services	3,559		3,559		0		0
Priced via internal modeling	15		0		0		15
Total common stock	3,574		3,559		0		15
Other investments:
Priced via unobservable inputs (2)	102		0		0		102
Total other investments	102		0		0		102
Total – Exchange	$	13,094	$	3,862	$	9,089	$	143
Total – Erie Insurance Group	$	13,635	$	3,876	$	9,597	$	162

(1) When a non-binding broker quote was the only price available, the security was classified as Level 3.

(2) Other investments measured at fair value represent real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner.

There were no assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2014.

22

Note 7.  Investments

Available-for-sale securities

The following table summarizes the cost and fair value of our available-for-sale securities at June 30, 2014:

	Erie Insurance Group
	June 30, 2014
(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	230	$	11	$	0	$	241
Corporate debt securities	254		2		0		256
Collateralized debt obligations	0		0		0		0
Total fixed maturities	484		13		0		497
Nonredeemable preferred stock	12		2		0		14
Common stock	13		0		1		12
Total available-for-sale securities – Indemnity	$	509	$	15	$	1	$	523
Exchange
Available-for-sale securities:
U.S. treasury	$	31	$	0	$	0	$	31
Government sponsored enterprises	3		1		0		4
States & political subdivisions	1,438		83		2		1,519
Foreign government securities	15		0		0		15
Corporate debt securities	6,409		465		8		6,866
Residential mortgage-backed securities	145		3		2		146
Commercial mortgage-backed securities	32		2		0		34
Collateralized debt obligations	7		7		0		14
Other debt securities	69		3		0		72
Total fixed maturities	8,149		564		12		8,701
Nonredeemable preferred stock	646		73		2		717
Common stock	196		2		1		197
Total available-for-sale securities – Exchange	$	8,991	$	639	$	15	$	9,615
Total available-for-sale securities – Erie Insurance Group	$	9,500	$	654	$	16	$	10,138

23

The following table summarizes the cost and fair value of our available-for-sale securities at December 31, 2013:

	Erie Insurance Group
	December 31, 2013
(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	237	$	7	$	1	$	243
Corporate debt securities	280		2		0		282
Collateralized debt obligations	1		0		0		1
Total fixed maturities	518		9		1		526
Nonredeemable preferred stock	24		2		1		25
Common stock	26		0		1		25
Total available-for-sale securities – Indemnity	$	568	$	11	$	3	$	576
Exchange
Available-for-sale securities:
U.S. government & agencies	$	171	$	1	$	0	$	172
States & political subdivisions	1,430		55		15		1,470
Foreign government securities	15		0		0		15
Corporate debt securities	5,902		354		45		6,211
Residential mortgage-backed securities	157		3		4		156
Commercial mortgage-backed securities	45		2		0		47
Collateralized debt obligations	8		8		0		16
Other debt securities	73		3		1		75
Total fixed maturities	7,801		426		65		8,162
Nonredeemable preferred stock	577		55		11		621
Common stock	201		0		3		198
Total available-for-sale securities – Exchange	$	8,579	$	481	$	79	$	8,981
Total available-for-sale securities – Erie Insurance Group	$	9,147	$	492	$	82	$	9,557

The amortized cost and estimated fair value of fixed maturities at June 30, 2014 are shown below by remaining contractual term to maturity.  Mortgage-backed securities are allocated based upon their stated maturity dates.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Erie Insurance Group
	June 30, 2014
(in millions)	Amortized		Estimated
	cost		fair value
Indemnity
Due in one year or less	$	69	$	69
Due after one year through five years	229		232
Due after five years through ten years	113		118
Due after ten years	73		78
Total fixed maturities – Indemnity	$	484	$	497
Exchange
Due in one year or less	377		384
Due after one year through five years	3,155		3,365
Due after five years through ten years	3,094		3,303
Due after ten years	1,523		1,649
Total fixed maturities – Exchange	$	8,149	$	8,701
Total fixed maturities – Erie Insurance Group	$	8,633	$	9,198

24

Available-for-sale securities in a gross unrealized loss position at June 30, 2014 are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	June 30, 2014
(dollars in millions)	Less than 12 months				12 months or longer				Total
Indemnity	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair  value		Unrealized losses		No. of holdings
Available-for-sale securities:
States & political subdivisions	$	3	$	0	$	7	$	0	$	10	$	0	4
Corporate debt securities	49		0		6		0		55		0		172
Total fixed maturities	52		0		13		0		65		0		176
Nonredeemable preferred stock	0		0		2		0		2		0		2
Common stock	0		0		12		1		12		1		1
Total available-for-sale securities – Indemnity	$	52	$	0	$	27	$	1	$	79	$	1	179
Quality breakdown of fixed maturities:
Investment grade	$	11	$	0	$	13	$	0	$	24	$	0	7
Non-investment grade	41		0		0		0		41		0		169
Total fixed maturities – Indemnity	$	52	$	0	$	13	$	0	$	65	$	0	176
Exchange
Available-for-sale securities:
U.S. treasury	$	0	$	0	$	0	$	0	$	0	$	0	1
States & political subdivisions	38		0		111		2		149		2		36
Foreign government securities	0		0		5		0		5		0		1
Corporate debt securities	312		2		279		6		591		8		376
Residential mortgage-backed securities	15		0		51		2		66		2		12
Commercial mortgage-backed securities	1		0		0		0		1		0		1
Other debt securities	4		0		7		0		11		0		3
Total fixed maturities	370		2		453		10		823		12		430
Nonredeemable preferred stock	42		0		40		2		82		2		14
Common stock	0		0		131		1		131		1		2
Total available-for-sale securities – Exchange	$	412	$	2	$	624	$	13	$	1,036	$	15	446
Quality breakdown of fixed maturities:
Investment grade	$	203	$	1	$	429	$	9	$	632	$	10	131
Non-investment grade	167		1		24		1		191		2		299
Total fixed maturities – Exchange	$	370	$	2	$	453	$	10	$	823	$	12	430

The above securities for Indemnity and the Exchange have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest.  The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost.  Any securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.

25

Available-for-sale securities in a gross unrealized loss position at December 31, 2013 are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	December 31, 2013
(dollars in millions)	Less than 12 months				12 months or longer				Total
Indemnity	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		No. of holdings
Available-for-sale securities:
States & political subdivisions	$	58	$	1	$	0	$	0	$	58	$	1	21
Corporate debt securities	54		0		10		0		64		0		11
Total fixed maturities	112		1		10		0		122		1		32
Nonredeemable preferred stock	5		1		3		0		8		1		4
Common stock	12		1		13		0		25		1		2
Total available-for-sale securities – Indemnity	$	129	$	3	$	26	$	0	$	155	$	3	38
Quality breakdown of fixed maturities:
Investment grade	$	112	$	1	$	10	$	0	$	122	$	1	32
Non-investment grade	0		0		0		0		0		0		0
Total fixed maturities – Indemnity	$	112	$	1	$	10	$	0	$	122	$	1	32
Exchange
Available-for-sale securities:
U.S. government & agencies	$	1	$	0	$	0	$	0	$	1	$	0	2
States & political subdivisions	408		13		18		2		426		15		100
Foreign government securities	5		0		0		0		5		0		1
Corporate debt securities	1,251		43		36		2		1,287		45		237
Residential mortgage-backed securities	71		4		8		0		79		4		12
Commercial mortgage-backed securities	5		0		0		0		5		0		1
Other debt securities	30		1		0		0		30		1		5
Total fixed maturities	1,771		61		62		4		1,833		65		358
Nonredeemable preferred stock	182		10		13		1		195		11		27
Common stock	97		3		101		0		198		3		3
Total available-for-sale securities – Exchange	$	2,050	$	74	$	176	$	5	$	2,226	$	79	388
Quality breakdown of fixed maturities:
Investment grade	$	1,707	$	57	$	62	$	4	$	1,769	$	61	344
Non-investment grade	64		4		0		0		64		4		14
Total fixed maturities – Exchange	$	1,771	$	61	$	62	$	4	$	1,833	$	65	358

The above securities for Indemnity and the Exchange have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest.  The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost.  Any securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.

26

Net investment income

Interest and dividend income are recognized as earned and recorded to net investment income.  Investment income, net of expenses, was generated from the following portfolios:

	Erie Insurance Group
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity
Fixed maturities	$	3	$	3	$	6	$	6
Equity securities	0		0		1		1
Cash equivalents and other	1		1		1		1
Total investment income	4		4		8		8
Less: investment expenses	0		1		0		1
Investment income, net of expenses – Indemnity	$	4	$	3	$	8	$	7
Exchange
Fixed maturities	$	85	$	83	$	171	$	166
Equity securities	30		27		59		51
Cash equivalents and other	1		0		1		0
Total investment income	116		110		231		217
Less: investment expenses	9		9		19		17
Investment income, net of expenses – Exchange	$	107	$	101	$	212	$	200
Investment income, net of expenses – Erie Insurance Group	$	111	$	104	$	220	$	207

27

Realized investment gains (losses)

Realized gains and losses on sales of securities are recognized in income based upon the specific identification method. Realized gains (losses) on investments were as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Indemnity
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	0		$	0		$	0		$	0
Gross realized losses	0			0			0			0
Net realized gains	0			0			0			0
Equity securities:
Gross realized gains	0			0			1			0
Gross realized losses	0			0			0			0
Net realized gains	0			0			1			0
Net realized investment gains – Indemnity	$	0		$	0		$	1		$	0
Exchange
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	4		$	7		$	10		$	22
Gross realized losses	0			(3		)	(1		)	(5		)
Net realized gains	4			4			9			17
Equity securities:
Gross realized gains	2			2			10			4
Gross realized losses	(1		)	0			(2		)	0
Net realized gains	1			2			8			4
Trading securities:
Common stock:
Gross realized gains	52			54			122			156
Gross realized losses	(7		)	(3		)	(10		)	(15		)
Increases in fair value(1)	83			4			59			148
Net realized gains	128			55			171			289
Net realized investment gains – Exchange	$	133		$	61		$	188		$	310
Net realized investment gains – Erie Insurance Group	$	133		$	61		$	189		$	310

(1) The fair value on our common stock portfolio is based upon exchange traded prices provided by a nationally recognized pricing service.

28

Net impairment losses

Net impairment losses recorded in earnings for Indemnity were $0.1 million for the second quarter and six months ended June 30, 2014 and June 30, 2013. Net impairment losses recorded in earnings for the Exchange were $0.1 million for the second quarter and $0.3 million for the six months ended June 30, 2014, compared to net impairment losses of $1 million for the second quarter and the six months ended June 30, 2013.

In considering if fixed maturity securities were credit-impaired, some of the factors considered include: potential for the default of interest and/or principal, level of subordination, collateral of the issue, compliance with financial covenants, credit ratings and industry conditions.  We have the intent to sell all credit-impaired fixed maturity securities, therefore the entire amount of the impairment charges were included in earnings and no non-credit impairments were recognized in other comprehensive income.

Limited partnerships

Limited partnership investments, excluding certain real estate limited partnerships recorded at fair value, are generally reported on a one-quarter lag, therefore our year-to-date limited partnership results through June 30, 2014 are comprised of partnership financial results for the fourth quarter of 2013 and first quarter of 2014.  Given the lag in reporting, our limited partnership results do not reflect the market conditions of the second quarter of 2014.  Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

Amounts included in equity in earnings of limited partnerships by method of accounting are included below:

(in millions)	Erie Insurance Group
	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity
Equity in earnings of limited partnerships accounted for under the equity method	$	2	$	5	$	7	$	7
Change in fair value of limited partnerships accounted for under the fair value option	1		0		2		1
Equity in earnings of limited partnerships – Indemnity	$	3	$	5	$	9	$	8
Exchange
Equity in earnings of limited partnerships accounted for under the equity method	$	18	$	31	$	57	$	60
Change in fair value of limited partnerships accounted for under the fair value option	6		3		11		7
Equity in earnings of limited partnerships – Exchange	$	24	$	34	$	68	$	67
Equity in earnings of limited partnerships – Erie Insurance Group	$	27	$	39	$	77	$	75

29

We have provided summarized financial information in the following tables for the six months ended June 30, 2014 and for the year ended December 31, 2013.  Amounts provided in the tables are presented using the latest available financial statements received from the partnerships for the respective periods.  Limited partnership financial information has been presented based upon the investment percentage in the partnerships for the Erie Insurance Group consistent with how management evaluates the investments.

As these investments are generally reported on a one-quarter lag, our limited partnership results through June 30, 2014 include partnership financial results for the fourth quarter of 2013 and the first quarter of 2014.

	Erie Insurance Group
	As of and for the six months ended June 30, 2014
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded		Income (loss) recognized due to valuation adjustments by the partnerships			Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	24	$	39	$	(3	)	$	4
Greater than or equal to 10% but less than 50%	3	19		3			0
Greater than 50%	0	0		0			0
Total private equity	27	58		0			4
Mezzanine debt:
Less than 10%	11	12		0			1
Greater than or equal to 10% but less than 50%	3	6		0			0
Greater than 50%	1	0		0			0
Total mezzanine debt	15	18		0			1
Real estate:
Less than 10%	11	44		2			1
Greater than or equal to 10% but less than 50%	3	15		1			0
Greater than 50%	2	6		0			0
Total real estate	16	65		3			1
Total limited partnerships – Indemnity	58	$	141	$	3		$	6
Exchange
Private equity:
Less than 10%	42	$	368	$	(7	)	$	24
Greater than or equal to 10% but less than 50%	3	80		15			1
Greater than 50%	0	0		0			0
Total private equity	45	448		8			25
Mezzanine debt:
Less than 10%	20	113		1			9
Greater than or equal to 10% but less than 50%	4	23		(2		)	2
Greater than 50%	3	31		0			1
Total mezzanine debt	27	167		(1		)	12
Real estate:
Less than 10%	20	215		8			10
Greater than or equal to 10% but less than 50%	6	77		3			1
Greater than 50%	2	24		(14		)	16
Total real estate	28	316		(3		)	27
Total limited partnerships – Exchange	100	$	931	$	4		$	64
Total limited partnerships – Erie Insurance Group		$	1,072	$	7		$	70

Per the limited partnership financial statements, total partnership assets were $47 billion and total partnership liabilities were $4 billion at June 30, 2014 (as recorded in the March 31, 2014 limited partnership financial statements).  For the six months period comparable to that presented in the preceding table (fourth quarter of 2013 and first quarter of 2014), total partnership valuation adjustment gains were $0.5 billion and total partnership net income was $3 billion.

30

As these investments are generally reported on a one-quarter lag, our limited partnership results through December 31, 2013 include partnership financial results for the fourth quarter of 2012 and the first three quarters of 2013.

	Erie Insurance Group
	As of and for the year ended December 31, 2013
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded		Income (loss) recognized due to valuation adjustments by the partnerships			Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$	46	$	(6	)	$	9
Greater than or equal to 10% but less than 50%	3	16		3			0
Greater than 50%	0	0		0			0
Total private equity	29	62		(3		)	9
Mezzanine debt:
Less than 10%	11	14		0			1
Greater than or equal to 10% but less than 50%	3	6		0			2
Greater than 50%	1	0		0			0
Total mezzanine debt	15	20		0			3
Real estate:
Less than 10%	12	44		0			5
Greater than or equal to 10% but less than 50%	3	14		(1		)	4
Greater than 50%	2	6		1			4
Total real estate	17	64		0			13
Total limited partnerships – Indemnity	61	$	146	$	(3	)	$	25
Exchange
Private equity:
Less than 10%	44	$	396	$	(24	)	$	79
Greater than or equal to 10% but less than 50%	3	67		13			2
Greater than 50%	0	0		0			0
Total private equity	47	463		(11		)	81
Mezzanine debt:
Less than 10%	19	117		1			13
Greater than or equal to 10% but less than 50%	4	23		(3		)	7
Greater than 50%	3	32		1			3
Total mezzanine debt	26	172		(1		)	23
Real estate:
Less than 10%	22	211		(10		)	34
Greater than or equal to 10% but less than 50%	6	71		(2		)	10
Greater than 50%	2	23		(1		)	16
Total real estate	30	305		(13		)	60
Total limited partnerships – Exchange	103	$	940	$	(25	)	$	164
Total limited partnerships – Erie Insurance Group		$	1,086	$	(28	)	$	189

Per the limited partnership financial statements, total partnership assets were $50 billion and total partnership liabilities were $5 billion at December 31, 2013 (as recorded in the September 30, 2013 limited partnership financial statements).  For the twelve month period comparable to that presented in the preceding table (fourth quarter of 2012 and first three quarters of 2013), total partnership valuation adjustment gains were $2 billion and total partnership net income was $7 billion.

See also Note 14. “Commitments and Contingencies,” for investment commitments related to limited partnerships.

31

Note 8.  Bank Line of Credit

As of June 30, 2014, Indemnity has access to a $100 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on November 3, 2018. As of June 30, 2014, a total of $98.2 million remains available under the facility due to $1.8 million outstanding letters of credit, which reduce the availability for letters of credit to $23.2 million.  Indemnity had no borrowings outstanding on its line of credit as of June 30, 2014.  Bonds with a fair value of $113 million were pledged as collateral on the line at June 30, 2014.

As of June 30, 2014, the Exchange has access to a $300 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on October 25, 2018. As of June 30, 2014, a total of $298.9 million remains available under the facility due to $1.1 million outstanding letters of credit, which reduce the availability for letters of credit to $23.9 million.  The Exchange had no borrowings outstanding on its line of credit as of June 30, 2014.  Bonds with a fair value of $331 million were pledged as collateral on the line at June 30, 2014.

Both lines have securities pledged as collateral that have no trading restrictions and are reported as available-for-sale fixed maturities in the Consolidated Statements of Financial Position as of June 30, 2014.  The banks require compliance with certain covenants, which include leverage ratios for Indemnity’s line of credit and statutory surplus and risk based capital ratios for the Exchange’s line of credit.  We are in compliance with all covenants at June 30, 2014.

Note 9.  Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

At June 30, 2014, we recorded a net deferred tax liability of $556 million on our Consolidated Statements of Financial Position.  Of this amount, $1 million is a net deferred tax asset attributable to Indemnity and $557 million is a net deferred tax liability attributable to the Exchange.  There was no deferred tax valuation allowance recorded at June 30, 2014.  Our effective tax rate is calculated after consideration of permanent differences related to our investment revenues.  Given that these amounts represent over 98% of the total permanent differences, the effective tax rate is approximately 35% for both Indemnity and the Exchange when the investment related permanent differences are excluded.

32

Note 10.   Postretirement Benefits

Pension plans

Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan for certain members of executive and senior management of the Erie Insurance Group.  The gross liability for postretirement benefits is presented in the Consolidated Statements of Financial Position as part of other liabilities.  A portion of annual expenses related to our postretirement benefit plans is allocated to related entities within the Erie Insurance Group. Although Indemnity is the sponsor of these postretirement plans and records the funded status of these plans, the Exchange and EFL reimburse Indemnity for approximately 55% of the annual benefit expense of these plans, which represents pension benefits for Indemnity employees performing claims and EFL functions.

Prior to 2003, the employee pension plan purchased annuities from EFL for certain plan participants that were receiving benefit payments under the pension plan. These are nonparticipating annuity contracts under which EFL has unconditionally contracted to provide specified benefits to beneficiaries; however, the pension plan remains the primary obligor to the beneficiaries and a contingent liability,$26 million at June 30, 2014, exists in the event EFL does not honor the annuity contracts.

The cost of our pension plans are as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Service cost for benefits earned	$	5		$	6		$	11		$	13
Interest cost on benefits obligation	7			7			14			13
Expected return on plan assets	(8		)	(7		)	(16		)	(15		)
Prior service cost amortization	1			1			1			1
Net actuarial loss amortization	1			3			3			7
Pension plan cost (1)	$	6		$	10		$	13		$	19

(1) Pension plan costs represent the total cost for the Erie Insurance Group before reimbursements to Indemnity from the Exchange and EFL.

Note 11.  Indemnity Capital Stock

Class A and B common stock

Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of 2,400 Class A shares per Class B share.  There were no conversions of Class B shares to Class A shares during the six months ended June 30, 2014 and the year ended December 31, 2013. There is no provision for conversion of Class A shares to Class B shares, and, Class B shares surrendered for conversion cannot be reissued.

Stock repurchase program

In October 2011, our Board of Directors approved a continuation of the current stock repurchase program for a total of $150 million, with no time limitation.  Indemnity had approximately $18 million of repurchase authority remaining under this program at June 30, 2014.

33

Note 12.  Indemnity Accumulated Other Comprehensive Loss

Changes in Indemnity's accumulated other comprehensive loss by component attributable to the Indemnity shareholder interest is presented as follows for the six months ended June 30, 2014:

	Indemnity Shareholder Interest
(in millions)	Unrealized holding gains (losses) on available-for-sale securities			Postretirement plans(2)			Total
Balance at December 31, 2013	$	6		$	(65	)	$	(59	)
Other comprehensive income before reclassifications, net of tax	5			0			5
Amounts reclassified from accumulated other comprehensive income (loss), net of tax(1)	(1		)	0			(1		)
Net current period other comprehensive income, net of tax	4			0			4
Balance at June 30, 2014	$	10		$	(65	)	$	(55	)

(1) See the following table for details about these reclassifications.

(2) There are no amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.

Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented are as follows for the three and six months ended June 30, 2014:

	Erie Insurance Group
	Three months ended		Six months ended
	June 30, 2014		June 30, 2014
(in millions)	Amounts reclassified from accumulated other comprehensive income (loss)(1)
Unrealized holding gains (losses) on available-for-sale securities:
Net realized investment gains	$	5	$	18
Net impairment losses recognized in earnings	0		0
Income from operations before income taxes and noncontrolling interest	5		18
Provision for income taxes	2		7
Net income	3		11
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	3		10
Net income attributable to Indemnity	$	0	$	1
Amortization of postretirement plan items(2):
Net income attributable to Indemnity	$	0	$	0
Net income attributable to Indemnity	$	0	$	1

(1) Positive amounts indicate net income, while negative amounts indicate net loss.

(2) There are no amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.

34

Note 13.  Indemnity Shareholders’ Equity and Noncontrolling Interest

A reconciliation of the beginning and ending balances of Indemnity's shareholders’ equity and the noncontrolling interest is presented as follows for the year ended December 31, 2013 and for the six months ended June 30, 2014:

	Erie Insurance Group
(in millions, except per share data)	Indemnity shareholder interest			Exchange noncontrolling interest			Erie Insurance Group
Balance at December 31, 2012	$	642		$	6,149		$	6,791
Net income	163			885			1,048
Change in other comprehensive income (loss), net of tax	74			(218		)	(144		)
Net purchase of treasury stock	(32		)	—			(32		)
Dividends declared:
Class A $2.4125 per share	(112		)	—			(112		)
Class B $361.875 per share	(1		)	—			(1		)
Balance at December 31, 2013	$	734		$	6,816		$	7,550
Net income	95			117			212
Change in other comprehensive income, net of tax	4			133			137
Net purchase of treasury stock	(19		)	—			(19		)
Dividends declared:
Class A $1.27 per share	(59		)	—			(59		)
Class B $190.50 per share	0			—			0
Balance at June 30, 2014	$	755		$	7,066		$	7,821

Note 14.  Commitments and Contingencies

Indemnity has contractual commitments to invest up to $26 million related to its limited partnership investments at June 30, 2014.  These commitments are split among private equity securities of $11 million, mezzanine debt securities of $9 million, and real estate activities of $6 million.  These commitments will be funded as required by the partnership agreements.

The Exchange, including EFL, has contractual commitments to invest up to $445 million related to its limited partnership investments at June 30, 2014.  These commitments are split among private equity securities of $146 million, mezzanine debt securities of $173 million, and real estate activities of $126 million.  These commitments will be funded as required by the partnership agreements.

We are involved in litigation arising in the ordinary course of conducting business.  In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated.  When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss.  To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results of operations, or cash flows.  Legal fees are expensed as incurred.  We believe that our accruals for legal proceedings are appropriate and, individually and in the aggregate, are not expected to be material to our consolidated financial condition, operations, or cash flows.

We review all litigation on an ongoing basis when making accrual and disclosure decisions.  For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages.  Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated.  If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable.  In the event that a legal proceeding results in a substantial judgment against, or settlement by, us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse effect on the financial condition, results of operations, or cash flows of the Indemnity shareholder interest or the consolidated financial statements of Erie Indemnity Company.

35

We are subject to escheatment laws and regulations requiring the identification, reporting and payment to the state of unclaimed or abandoned funds of our policyholders, annuitants, claimants and shareholders. We are also subject to audit and examination for compliance with these requirements.

In August 2012, we were notified that we would be subject to an audit of our compliance with the unclaimed property laws of a number of jurisdictions both within and outside our operating territory. The audit commenced in April 2013 and is ongoing. Additionally, EFL has been named in a lawsuit filed by the State Treasurer of West Virginia. The Complaint alleges that EFL has failed to comply with the West Virginia Uniform Unclaimed Property Act. EFL filed a motion to dismiss and a favorable decision was rendered in December 2013 with the Court dismissing the Complaint with prejudice. The State Treasurer appealed the dismissal of the lawsuit in January 2014.

It is probable that ongoing inquiries, audits, and other regulatory activity will result in the payment of additional death claims and escheatment of funds, as well as possible fines. EFL will incur expenses to identify death claims, confirm that benefits are due and notify the beneficiaries. At this time, we are not able to reasonably estimate the possible loss or range of loss related to this issue due to the early stage of development.

Note 15. Indemnity Supplemental Information

Consolidating Statement of Financial Position

	Erie Insurance Group
	At June 30, 2014
(in millions)	Indemnity shareholder interest		Exchange noncontrolling interest		Reclassifications and eliminations			Erie Insurance Group
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$	497	$	8,701	$	—		$	9,198
Equity securities	26		914		—			940
Trading securities, at fair value	—		3,377		—			3,377
Limited partnerships	141		931		—			1,072
Other invested assets	1		20		—			21
Total investments	665		13,943		—			14,608
Cash and cash equivalents	63		237		—			300
Premiums receivable from policyholders	—		1,287		—			1,287
Reinsurance recoverable	—		168		—			168
Deferred income tax asset	1		0		—			1
Deferred acquisition costs	—		579		—			579
Other assets	112		405		—			517
Receivables from the Exchange and other affiliates	339		—		(339		)	—
Note receivable from EFL	25		—		(25		)	—
Total assets	$	1,205	$	16,619	$	(364	)	$	17,460
Liabilities
Losses and loss expense reserves	$	—	$	3,964	$	—		$	3,964
Life policy and deposit contract reserves	—		1,789		—			1,789
Unearned premiums	—		2,788		—			2,788
Deferred income tax liability	0		557		—			557
Other liabilities	450		455		(364		)	541
Total liabilities	450		9,553		(364		)	9,639
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	755		—		—			755
Noncontrolling interest in consolidated entity – Exchange	—		7,066		—			7,066
Total equity	755		7,066		—			7,821
Total liabilities, shareholders’ equity, and noncontrolling interest	$	1,205	$	16,619	$	(364	)	$	17,460

36

Consolidating Statement of Financial Position

	Erie Insurance Group
	At December 31, 2013
(in millions)	Indemnity shareholder interest		Exchange noncontrolling interest		Reclassifications and eliminations			Erie Insurance Group
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$	526	$	8,162	$	—		$	8,688
Equity securities	50		819		—			869
Trading securities, at fair value	—		3,202		—			3,202
Limited partnerships	146		940		—			1,086
Other invested assets	1		20		—			21
Total investments	723		13,143		—			13,866
Cash and cash equivalents	49		403		—			452
Premiums receivable from policyholders	—		1,167		—			1,167
Reinsurance recoverable	—		172		—			172
Deferred income tax asset	2		0		—			2
Deferred acquisition costs	—		566		—			566
Other assets	114		337		—			451
Receivables from the Exchange and other affiliates	300		—		(300		)	—
Note receivable from EFL	25		—		(25		)	—
Total assets	$	1,213	$	15,788	$	(325	)	$	16,676
Liabilities
Losses and loss expense reserves	$	—	$	3,747	$	—		$	3,747
Life policy and deposit contract reserves	—		1,758		—			1,758
Unearned premiums	—		2,598		—			2,598
Deferred income tax liability	0		450		—			450
Other liabilities	479		419		(325		)	573
Total liabilities	479		8,972		(325		)	9,126
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	734		—		—			734
Noncontrolling interest in consolidated entity – Exchange	—		6,816		—			6,816
Total equity	734		6,816		—			7,550
Total liabilities, shareholders’ equity, and noncontrolling interest	$	1,213	$	15,788	$	(325	)	$	16,676

Receivables from the Exchange and EFL and concentrations of credit risk – Financial instruments could potentially expose Indemnity to concentrations of credit risk, including unsecured receivables from the Exchange.  A majority of Indemnity’s revenue and receivables are from the Exchange and affiliates.  See also Note 4, “Variable Interest Entity.”

Management fees and expense allocation amounts due from the Exchange were $335 million and $296 million at June 30, 2014 and December 31, 2013, respectively.  The receivable from EFL for expense allocations and interest on the surplus note totaled $4 million at June 30, 2014 and December 31, 2013.

Note receivable from EFL – Indemnity is due $25 million from EFL in the form of a surplus note that was issued in 2003.  The note may be repaid only out of unassigned surplus of EFL.  Both principal and interest payments are subject to prior approval by the Pennsylvania Insurance Commissioner.  The note bears an annual interest rate of 6.7% and will be payable on demand on or after December 31, 2018, with interest scheduled to be paid semi-annually, subject to prior approval by the Pennsylvania Insurance Commissioner.  For each of the six months ended June 30, 2014 and 2013, Indemnity recognized interest income on the note of $0.8 million.

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Income attributable to Indemnity shareholder interest

	Indemnity Shareholder Interest
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Management operations:
Management fee revenue, net	$	366	$	336	$	685	$	632
Service agreement revenue	8		8		15		15
Total revenue from management operations	374		344		700		647
Cost of management operations	306		285		574		539
Income from management operations before taxes	68		59		126		108
Investment operations:
Net investment income	4		3		8		7
Net realized gains on investments	0		0		1		0
Net impairment losses recognized in earnings	0		0		0		0
Equity in earnings of limited partnerships	3		5		9		8
Income from investment operations before taxes	7		8		18		15
Income from operations before income taxes	75		67		144		123
Provision for income taxes	26		23		49		42
Net income attributable to Indemnity	$	49	$	44	$	95	$	81

Indemnity’s components of direct cash flows as included in the Consolidated Statements of Cash Flows

	Indemnity Shareholder Interest
(in millions)	Six months ended June 30,
	2014			2013
Management fee received	$	659		$	604
Service agreement fee received	15			15
Net investment income received	11			11
Limited partnership distributions	8			12
Decrease in reimbursements collected from affiliates	(13		)	0
Commissions and bonuses paid to agents	(397		)	(356		)
Salaries and wages paid	(80		)	(76		)
Pension contribution and employee benefits paid	(29		)	(28		)
General operating expenses paid	(94		)	(83		)
Income taxes paid	(44		)	(42		)
Net cash provided by operating activities	36			57
Net cash provided by investing activities	57			15
Net cash used in financing activities	(79		)	(45		)
Net increase in cash and cash equivalents	14			27
Cash and cash equivalents at beginning of period	49			12
Cash and cash equivalents at end of period	$	63		$	39

Note 16. Subsequent Events

No items were identified in the period subsequent to the financial statement date that required adjustment or disclosure.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition and results of operations highlights significant factors influencing the Erie Insurance Group (“we,” “us,” “our”).  This discussion should be read in conjunction with the historical financial statements and the related notes thereto included in Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q, and with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2013, as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2014.

INDEX

	Page Number
Cautionary Statement Regarding Forward-Looking Information	39
Recent Accounting Pronouncements	40
Operating Overview	41
Results of Operations	47
Management Operations	47
Property and Casualty Insurance Operations	49
Life Insurance Operations	53
Investment Operations	54
Financial Condition	57
Investments	57
Liabilities	61
Impact of Inflation	62
Liquidity and Capital Resources	62
Critical Accounting Estimates	65

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:

Statements contained herein that are not historical fact are forward-looking statements and, as such, are subject to risks and uncertainties that could cause actual events and results to differ, perhaps materially, from those discussed herein.  Forward-looking statements relate to future trends, events or results and include, without limitation, statements and assumptions on which such statements are based that are related to our plans, strategies, objectives, expectations, intentions and adequacy of resources.  Examples of forward-looking statements are discussions relating to premium and investment income, expenses, operating results, agency relationships, and compliance with contractual and regulatory requirements.  Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.  Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.  Among the risks and uncertainties, in addition to those set forth in our filings with the Securities and Exchange Commission, that could cause actual results and future events to differ from those set forth or contemplated in the forward-looking statements include the following:

Risk factors related to the Erie Indemnity Company (“Indemnity”) shareholder interest:

• dependence upon Indemnity’s relationship with the Exchange and the management fee under the agreement with the subscribers at the Exchange;

• costs of providing services to the Exchange under the subscriber’s agreement;

• ability to attract and retain talented management and employees;

• ability to maintain uninterrupted business operations;

• factors affecting the quality and liquidity of Indemnity’s investment portfolio;

• credit risk from the Exchange;

• Indemnity’s ability to meet liquidity needs and access capital; and

• outcome of pending and potential litigation against Indemnity.

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Risk factors related to the non-controlling interest owned by the Erie Insurance Exchange (“Exchange”), which includes the Property and Casualty Group and Erie Family Life Insurance Company:

• general business and economic conditions;

• dependence upon the independent agency system;

• ability to maintain our reputation for customer service;

• factors affecting insurance industry competition;

• changes in government regulation of the insurance industry;

• premium rates and reserves must be established from forecasts of ultimate costs;

• emerging claims, coverage issues in the industry, and changes in reserve estimates related to the property and casualty business;

• changes in reserve estimates related to the life business;

• severe weather conditions or other catastrophic losses, including terrorism;

• the Exchange’s ability to acquire reinsurance coverage and collectability from reinsurers;

• factors affecting the quality and liquidity of the Exchange’s investment portfolio;

• the Exchange’s ability to meet liquidity needs and access capital;

• the Exchange’s ability to maintain an acceptable financial strength rating;

• outcome of pending and potential litigation against the Exchange; and

• dependence upon the service provided by Indemnity.

A forward-looking statement speaks only as of the date on which it is made and reflects our analysis only as of that date.  We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions, or otherwise.

RECENT ACCOUNTING PRONOUNCEMENTS

See Item 1. “Financial Statements - Note 2. Significant Accounting Policies,” contained within this report for a discussion of adopted and/or pending accounting pronouncements, none of which are expected to have a material impact on our future financial condition, results of operations, or cash flows.

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OPERATING OVERVIEW

Overview

The Erie Insurance Group represents the consolidated results of Indemnity and the results of its variable interest entity, the Exchange.  The Erie Insurance Group operates predominantly as a property and casualty insurer through its regional insurance carriers that write a broad range of personal and commercial coverages.  Our property and casualty insurance companies include the Exchange and its wholly owned subsidiaries, Erie Insurance Company (“EIC”), Erie Insurance Company of New York (“ENY”), Erie Insurance Property and Casualty Company (“EPC”), and Flagship City Insurance Company (“Flagship”).  These entities operate collectively as the “Property and Casualty Group.”  The Erie Insurance Group also operates as a life insurer through the Exchange’s wholly owned subsidiary, Erie Family Life Insurance Company (“EFL”), which underwrites and sells individual and group life insurance policies and fixed annuities.

The Exchange is a reciprocal insurance exchange organized under Article X of Pennsylvania's Insurance Company Law of 1921 under which individuals, partnerships, and corporations are authorized to exchange reciprocal or inter-insurance contracts with each other, or with individuals, partnerships, and corporations of other states and countries, providing indemnity among themselves from any loss which may be insured against under any provision of the insurance laws except life insurance.  Each applicant for insurance to the Exchange signs a subscriber’s agreement, which contains an appointment of Indemnity as their attorney-in-fact to transact the business of the Exchange on their behalf.

Pursuant to the subscriber’s agreement and for its services as attorney-in-fact, Indemnity earns a management fee calculated as a percentage of the direct premiums written by the Exchange and the other members of the Property and Casualty Group, which are assumed by the Exchange under an intercompany pooling arrangement.

The Indemnity shareholder interest includes Indemnity’s equity and income, but not the equity or income of the Exchange.  The Exchange’s equity, which is comprised of its retained earnings and accumulated other comprehensive income, is held for the interest of its subscribers (policyholders) and meets the definition of a noncontrolling interest, which is reflected as such in our consolidated financial statements.

“Indemnity shareholder interest” refers to the interest in Erie Indemnity Company owned by the Class A and Class B shareholders.  “Noncontrolling interest” refers to the interest in the Erie Insurance Exchange held for the interest of the subscribers (policyholders).

The Indemnity shareholder interest in income comprises:

• a management fee of up to 25% of all property and casualty insurance premiums written or assumed by the Exchange, less the costs associated with the sales, underwriting, and issuance of these policies;

• net investment income and results on investments that belong to Indemnity; and

• other income and expenses, including income taxes, that are the responsibility of Indemnity.

The Exchange’s or the noncontrolling interest in income comprises:

• a 100% interest in the net underwriting results of the property and casualty insurance operations;

• a 100% interest in the net earnings of EFL's life insurance operations;

• net investment income and results on investments that belong to the Exchange and its subsidiaries; and

• other income and expenses, including income taxes, that are the responsibility of the Exchange and its subsidiaries.

41

Results of the Erie Insurance Group’s Operations by Interest (Unaudited)

The following tables represent a breakdown of the composition of the income attributable to the Indemnity shareholder interest and the income attributable to the noncontrolling interest (Exchange).  For purposes of this discussion, EFL’s investments are included in the life insurance operations.

Three months ended June 30,

	Indemnity shareholder interest				Noncontrolling interest (Exchange)					Eliminations of related party transactions						Erie Insurance Group
(in millions)	Three months ended June 30,				Three months ended June 30,					Three months ended June 30,						Three months ended June 30,
	2014		2013		2014			2013		2014			2013			2014			2013
Management operations:
Management fee revenue, net	$	366	$	336	$	—		$	—	$	(366	)	$	(336	)	$	—		$	—
Service agreement revenue	8		8		—			—		—			—			8			8
Total revenue from management operations	374		344		—			—		(366		)	(336		)	8			8
Cost of management operations	306		285		—			—		(306		)	(285		)	—			—
Income from management operations before taxes	68		59		—			—		(60		)	(51		)	8			8
Property and casualty insuranceoperations:
Net premiums earned	—		—		1,298			1,196		—			—			1,298			1,196
Losses and loss expenses	—		—		1,101			837		(2		)	(2		)	1,099			835
Policy acquisition and underwriting expenses	—		—		380			348		(64		)	(53		)	316			295
(Loss) income from property and casualty insurance operations before taxes	—		—		(183		)	11		66			55			(117		)	66
Life insurance operations:(1)
Total revenue	—		—		46			46		(1		)	(1		)	45			45
Total benefits and expenses	—		—		36			33		0			0			36			33
Income from life insurance operations before taxes	—		—		10			13		(1		)	(1		)	9			12
Investment operations:(1)
Net investment income	4		3		89			81		(5		)	(3		)	88			81
Net realized gains on investments	0		0		133			58		—			—			133			58
Net impairment losses recognized in earnings	0		0		0			0		—			—			0			0
Equity in earnings of limited partnerships	3		5		23			33		—			—			26			38
Income from investment operations before taxes	7		8		245			172		(5		)	(3		)	247			177
Income from operations beforeincome taxes and noncontrollinginterest	75		67		72			196		—			—			147			263
Provision for income taxes	26		23		18			63		—			—			44			86
Net income	$	49	$	44	$	54		$	133	$	—		$	—		$	103		$	177

(1) Earnings on life insurance related invested assets are integral to the evaluation of the life insurance operations because of the long duration of life products.  On that basis, for presentation purposes, the life insurance operations in the table above include life insurance related investment results.  However, the life insurance investment results are included in the investment operations segment discussion as part of the Exchange’s investment results.

Net income in the second quarter of 2014 was primarily impacted by the losses experienced in our property and casualty insurance operations, compared to gains in the second quarter of 2013, offset somewhat by improved results in our investment operations.

Losses from the Exchange’s property and casualty insurance operations increased in the second quarter of 2014 due to an increase in catastrophe losses. The Exchange’s property and casualty insurance operations experienced a 8.7% increase in earned premium in the second quarter of 2014, driven by increases in policies in force and the average premium per policy.

Our investment operations generated higher levels of net realized gains on investments, primarily due to larger increases in fair value of common stocks in the second quarter of 2014, compared to the second quarter of 2013, and a slight increase in net investment income, offset somewhat by a slight decrease in equity in earnings of limited partnerships.

42

Six months ended June 30,

	Indemnity shareholder interest				Noncontrolling interest (Exchange)					Eliminations of  related party  transactions						Erie Insurance Group
(in millions)	Six months ended June 30,				Six months ended June 30,					Six months ended June 30,						Six months ended June 30,
	2014		2013		2014			2013		2014			2013			2014			2013
Management operations:
Management fee revenue, net	$	685	$	632	$	—		$	—	$	(685	)	$	(632	)	$	—		$	—
Service agreement revenue	15		15		—			—		—			—			15			15
Total revenue from management operations	700		647		—			—		(685		)	(632		)	15			15
Cost of management operations	574		539		—			—		(574		)	(539		)	—			—
Income from management operations before taxes	126		108		—			—		(111		)	(93		)	15			15
Property and casualty insuranceoperations:
Net premiums earned	—		—		2,566			2,352		—			—			2,566			2,352
Losses and loss expenses	—		—		2,108			1,654		(3		)	(3		)	2,105			1,651
Policy acquisition and underwriting expenses	—		—		745			676		(117		)	(97		)	628			579
(Loss) income from property and casualty insurance operations before taxes	—		—		(287		)	22		120			100			(167		)	122
Life insurance operations:(1)
Total revenue	—		—		96			92		(1		)	(1		)	95			91
Total benefits and expenses	—		—		73			68		0			0			73			68
Income from life insurance operations before taxes	—		—		23			24		(1		)	(1		)	22			23
Investment operations:(1)
Net investment income	8		7		173			160		(8		)	(6		)	173			161
Net realized gains on investments	1		0		183			304		—			—			184			304
Net impairment losses recognized in earnings	0		0		0			0		—			—			0			0
Equity in earnings of limited partnerships	9		8		67			66		—			—			76			74
Income from investment operations before taxes	18		15		423			530		(8		)	(6		)	433			539
Income from operations beforeincome taxes and noncontrollinginterest	144		123		159			576		—			—			303			699
Provision for income taxes	49		42		42			190		—			—			91			232
Net income	$	95	$	81	$	117		$	386	$	—		$	—		$	212		$	467

(1) Earnings on life insurance related invested assets are integral to the evaluation of the life insurance operations because of the long duration of life products.  On that basis, for presentation purposes, the life insurance operations in the table above include life insurance related investment results.  However, the life insurance investment results are included in the investment operations segment discussion as part of the Exchange’s investment results.

Net income in the first six months of 2014 was primarily impacted by the losses experienced in our property and casualty insurance operations, compared to gains in the first six months of 2013, and generating lower earnings from our investment operations.

Losses from the Exchange’s property and casualty insurance operations increased in the first six months of 2014 due to an increase in catastrophe losses and a higher volume of non-catastrophe weather related claims. The Exchange’s property and casualty insurance operations experienced a 9.1% increase in earned premium in the first six months of 2014, driven by increases in policies in force and the average premium per policy.

Our investment operations generated lower levels of net realized gains on investments, primarily due to lower increases in fair value of common stocks and lower realized gains from sales of common stock recorded in the first six months of 2014, compared to the first six months of 2013, offset somewhat by a slight increase in net investment income.

43

Reconciliation of Operating Income to Net Income (Unaudited)

We disclose operating income, a non-GAAP financial measure, to enhance our investors’ understanding of our performance related to the Indemnity shareholder interest.  Our method of calculating this measure may differ from those used by other companies, and therefore comparability may be limited.

Indemnity defines operating income as net income excluding realized capital gains and losses, impairment losses and related federal income taxes.

Indemnity uses operating income to evaluate the results of its operations.  It reveals trends that may be obscured by the net effects of realized capital gains and losses including impairment losses.  Realized capital gains and losses, including impairment losses, may vary significantly between periods and are generally driven by business decisions and economic developments such as capital market conditions which are not related to our ongoing operations.  We are aware that the price to earnings multiple commonly used by investors as a forward-looking valuation technique uses operating income as the denominator.  Operating income should not be considered as a substitute for net income prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and does not reflect Indemnity’s overall profitability.

The following table reconciles operating income and net income for the Indemnity shareholder interest:

	Indemnity Shareholder Interest
(in millions, except per share data)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014			2013
	(Unaudited)				(Unaudited)
Operating income attributable to Indemnity	$	49	$	44	$	94		$	81
Net realized gains and impairments on investments	0		0		1			0
Income tax expense	0		0		0			0
Realized gains and impairments, net of income taxes	0		0		1			0
Net income attributable to Indemnity	$	49	$	44	$	95		$	81
Per Indemnity Class A common share-diluted:
Operating income attributable to Indemnity	$	0.94	$	0.84	$	1.81		$	1.54
Net realized gains and impairments on investments	0.00		0.00		0.02			0.00
Income tax expense	0.00		0.00		(0.01		)	0.00
Realized gains and impairments, net of income taxes	0.00		0.00		0.01			0.00
Net income attributable to Indemnity	$	0.94	$	0.84	$	1.82		$	1.54

Summary of Results – Indemnity Shareholder Interest

Three months ended June 30,

Net income attributable to Indemnity Class A per share-diluted was $0.94 per share in the second quarter of 2014, compared to $0.84 per share in the second quarter of 2013.

Operating income attributable to Indemnity Class A per share-diluted (excluding net realized gains or losses, impairments on investments, and related taxes) was $0.94 per share in the second quarter of 2014, compared to $0.84 per share in the second quarter of 2013.

Six months ended June 30,

Net income attributable to Indemnity Class A per share-diluted was $1.82 per share for the six months ended June 30, 2014, compared to $1.54 per share for the six months ended June 30, 2013.

Operating income attributable to Indemnity Class A per share-diluted (excluding net realized gains or losses, impairments on investments, and related taxes) was $1.81 per share for the six months ended June 30, 2014, compared to $1.54 per share for the six months ended June 30, 2013.

44

Operating Segments

Our reportable segments include management operations, property and casualty insurance operations, life insurance operations and investment operations.

Management operations

Management operations generate internal management fee revenue, which accrues to the Indemnity shareholder interest, as Indemnity provides services relating to the sales, underwriting, and issuance of policies on behalf of the Exchange.  Management fee revenue is based upon all premiums written or assumed by the Exchange and the management fee rate, which is not to exceed 25%.  Our Board of Directors establishes the management fee rate at least annually, generally in December for the following year, and considers factors such as the relative financial strength of Indemnity and the Exchange and projected revenue streams.  The management fee rate was set at 25% for both 2014 and 2013.  Management fee revenue is eliminated upon consolidation.

Property and casualty insurance operations

The property and casualty insurance business is driven by premium growth, the combined ratio, and investment returns.  The property and casualty insurance industry is cyclical, with periods of rising premium rates and shortages of underwriting capacity followed by periods of substantial price competition and excess capacity.  The cyclical nature of the insurance industry has a direct impact on the direct written premium of the Property and Casualty Group.

The property and casualty insurance operation’s premium growth strategy focuses on growth by expansion of existing operations including a careful agency selection process and increased market penetration in existing operating territories.  Expanding the size of our existing agency force of nearly2,200 independent agencies, with over10,700 licensed property and casualty representatives, will contribute to future growth as new agents build their books of business with the Property and Casualty Group.

Geographic expansion is also a component of the Property and Casualty Group's premium growth strategy. The Property and Casualty Group plans to expand operations into the Commonwealth of Kentucky by the first quarter of 2015 or earlier if possible.

The property and casualty insurance operations insure preferred and standard risks while maintaining a disciplined underwriting approach.  Based upon direct written premium in 2013, 44% of our premiums were derived from personal auto, 26% from homeowners and 29% from commercial lines.  Pennsylvania, Maryland, Virginia, North Carolina and Ohio made up 75% of the property and casualty lines insurance business 2013 direct written premium.

Members of the Property and Casualty Group pool their underwriting results under an intercompany pooling agreement.  Under the pooling agreement, the Exchange retains a 94.5% interest in the net underwriting results of the Property and Casualty Group, while EIC retains a 5.0% interest, and ENY retains a 0.5% interest.

The key measure of underwriting profitability traditionally used in the property and casualty insurance industry is the combined ratio, which is expressed as a percentage.  It is the sum of the ratio of losses and loss expenses to premiums earned (loss ratio) plus the ratio of policy acquisition and other underwriting expenses to premiums earned (expense ratio).  When the combined ratio is less than 100%, underwriting results are generally considered profitable; when the combined ratio is greater than 100%, underwriting results are generally considered unprofitable.

Factors affecting losses and loss expenses include the frequency and severity of losses, the nature and severity of catastrophic losses, the quality of risks underwritten, and underlying claims and settlement expenses.

Investments held by the Property and Casualty Group are reported in the investment operations segment, separate from the underwriting business.

Life insurance operations

EFL generates revenues through the sale of its individual and group life insurance policies and fixed annuities.  These products provide our property and casualty agency force an opportunity to cross-sell both personal and commercial accounts.  EFL’s profitability depends principally on the ability to develop, price, and distribute insurance products, attract and retain deposit funds, generate investment returns, and manage expenses.  Other drivers include mortality and morbidity experience, persistency experience to enable the recovery of acquisition costs, maintenance of interest spreads over the amounts credited to deposit funds, and the maintenance of strong ratings from rating agencies. EFL plans to expand operations into the Commonwealth of Kentucky by the first quarter of 2015 or earlier if possible.

45

Earnings on life insurance related invested assets are integral to the evaluation of the life insurance operations because of the long duration of life products.  On that basis, for presentation purposes, the life insurance operations segment discussion includes the life insurance related investment results.  However, also for presentation purposes, the segment footnote and the investment operations segment discussion also include the life insurance investment results as part of the Exchange’s investment results.

Investment operations

We generate revenues from our fixed maturity, equity security, and limited partnership investment portfolios to support our underwriting business.  The Indemnity and Exchange portfolios are managed with the objective of maximizing after-tax returns on a risk-adjusted basis, while the EFL portfolio is managed to be closely aligned to its liabilities and to maintain a sufficient yield to meet profitability targets.  Management actively evaluates the portfolios for impairments.  We record impairment writedowns on investments in instances where the fair value of the investment is substantially below cost, and we conclude that the decline in fair value is other-than-temporary, which includes consideration for intent to sell.

General Conditions and Trends Affecting Our Business

Economic conditions

Unfavorable changes in economic conditions, including declining consumer confidence, inflation, high unemployment, and the threat of recession, among others, may lead the Property and Casualty Group’s customers to modify coverage, not renew policies, or even cancel policies, which could adversely affect the premium revenue of the Property and Casualty Group, and consequently Indemnity’s management fee.  These conditions could also impair the ability of customers to pay premiums when due, and as a result, the Property and Casualty Group’s bad debt write-offs could increase.  Our key challenge is to generate profitable revenue growth in a highly competitive market that continues to experience the effects of uncertain economic conditions.

Financial market volatility

Our portfolio of fixed income, preferred and common stocks, and limited partnerships are subject to market volatility especially in periods of instability in the worldwide financial markets.  Over time, net investment income could also be impacted by volatility and by the general level of interest rates, which impact reinvested cash flow from the portfolio and business operations.  Depending upon market conditions, which are unpredictable and remain uncertain, considerable fluctuation could exist in our reported total investment income, which could have an adverse impact on our financial condition, results of operations, and cash flows.

46

RESULTS OF OPERATIONS

The information that follows is presented on a segment basis prior to eliminations.

Management Operations

Indemnity earns management fee revenue from providing services relating to the sales, underwriting, and issuance of policies on behalf of the Exchange as a result of its attorney-in-fact relationship, which is eliminated upon consolidation. A summary of the results of our management operations is as follows:

	Indemnity Shareholder Interest
	Three months ended June 30,									Six months ended June 30,
(dollars in millions)	2014			2013			% Change			2014			2013			% Change
	(Unaudited)									(Unaudited)
Management fee revenue, net	$	366		$	336		8.9		%	$	685		$	632		8.3	%
Service agreement revenue	8			8			(0.2	)		15			15			1.4
Total revenue from management operations	374			344			8.7			700			647			8.2
Cost of management operations	306			285			7.6			574			539			6.4
Income from management operations – Indemnity (1)	$	68		$	59		14.2		%	$	126		$	108		16.8	%
Gross margin	18.2		%	17.3		%	0.9		pts.	18.0		%	16.7		%	1.3	pts.

(1) The Indemnity shareholder interest retains 100% of the income from the management operations.

Management fee revenue

Management fee revenue is based upon all premiums written or assumed by the Exchange and the management fee rate, which is determined by our Board of Directors at least annually. Management fee revenue is calculated by multiplying the management fee rate by the direct premiums written by the Exchange and the other members of the Property and Casualty Group, which are assumed by the Exchange under an intercompany pooling agreement. The following table presents the calculation of management fee revenue:

	Indemnity Shareholder Interest
	Three months ended June 30,								Six months ended June 30,
(dollars in millions)	2014			2013			% Change		2014			2013			% Change
	(Unaudited)								(Unaudited)
Property and Casualty Group direct written premium	$	1,474		$	1,354		8.8	%	$	2,753		$	2,541		8.3	%
Management fee rate	25		%	25		%			25		%	25		%
Management fee revenue, gross	368			338			8.8		688			635			8.3
Change in allowance for management fee returned on cancelled policies(1)	(2		)	(2		)	NM		(3		)	(3		)	NM
Management fee revenue, net of allowance	$	366		$	336		8.9	%	$	685		$	632		8.3	%

NM = not meaningful

(1) Management fees are returned to the Exchange when policies are cancelled mid-term and unearned premiums are refunded.  We record an estimated allowance for management fees returned on mid-term policy cancellations.

Management fee revenue increased $30 million, or 8.9%, in the second quarter of 2014, and $53 million, or 8.3%, in the first six months of 2014, compared to the same respective periods in 2013. Direct written premium of the Property and Casualty Group increased 8.8% in the second quarter of 2014 and 8.3% in the first six months of 2014, compared to the same respective periods in 2013, due to a 4.5% increase in policies in force and a 4.2% increase in the year-over-year average premium per policy for all lines of business.  The year-over-year policy retention ratio was 90.6% at June 30, 2014 and December 31, 2013, and 90.9% at June 30, 2013.  See the “Property and Casualty Insurance Operations” segment that follows for a complete discussion of property and casualty direct written premium, which has a direct bearing on Indemnity’s management fee.

The management fee rate was set at 25%, the maximum rate, for both 2014 and 2013.  Changes in the management fee rate can affect the Indemnity shareholder interest's revenue and net income from this segment significantly.

47

Service agreement revenue

Service agreement revenue includes service charges Indemnity collects from policyholders for providing extended payment terms on policies written by the Property and Casualty Group and late payment and policy reinstatement fees.   The service charges are fixed dollar amounts per billed installment.  Service agreement revenue totaled $8 million in both the second quarters of 2014 and 2013, and $15 million in both the six months ended June 30, 2014 and 2013.  The consistency in the service fee revenue compared to the growth in policies in force reflects the continued shift in policies to the monthly direct debit payment plan, which does not incur service charges, and the no-fee single payment plan, which offers a premium discount.  The shift to these plans is driven by the consumers’ desire to avoid paying service charges and to take advantage of the discount in pricing offered for paid-in-full policies.

Cost of management operations

	Indemnity Shareholder Interest
	Three months ended June 30,						Six months ended June 30,
(in millions)	2014		2013		% Change		2014		2013		% Change
	(Unaudited)						(Unaudited)
Commissions:
Total commissions	$	205	$	187	10.0	%	$	379	$	351	8.1	%
Non-commission expense:
Sales and advertising	$	16	$	15	1.5	%	$	30	$	29	1.9	%
Underwriting and policy processing	32		30		6.6		64		60		7.1
Information technology	31		27		15.8		59		53		11.4
Customer service	6		6		8.6		13		11		14.2
Administrative and other	16		20		(22.9	)	29		35		(18.4	)
Total non-commission expense	$	101	$	98	2.8	%	$	195	$	188	3.2	%
Total cost of management operations	$	306	$	285	7.6	%	$	574	$	539	6.4	%

Commissions – Commissions increased $18 million in the second quarter of 2014 and $28 million for the six months ended June 30, 2014, compared to the same respective periods in 2013. These increases were primarily a result of the 8.8% and 8.3%, respectively, increase in direct written premiums of the Property and Casualty Group. In the second quarter of 2014, commission growth outpaced direct premium written growth primarily due to an increase in agent incentive costs.

Non-commission expense – Non-commission expense increased $3 million in the second quarter of 2014, compared to the second quarter of 2013.  Sales and advertising costs increased $1 million due to advertising costs. Underwriting and policy processing costs increased $2 million due to the increased cost of underwriting reports and increased postage costs. Information technology costs increased $4 million, which included $2 million of professional fees and $2 million of hardware costs. Customer service costs remained flat compared to the second quarter of 2013.  Administrative and other expenses decreased $4 million driven by decreases of $3 million in personnel costs, primarily from decreased employee incentive plan costs related to underwriting performance and decreased pension costs, and a decrease of $1 million in professional fees.

Non-commission expense increased $7 million in the six months ended June 30, 2014, compared to the six months ended June 30, 2013.  Sales and advertising costs increased $1 million due to advertising costs. Underwriting and policy processing costs increased $4 million due to the increased cost of underwriting reports, personnel costs and postage expense. Information technology costs increased $6 million, which included $3 million in professional fees, $2 million in hardware costs and $1 million in personnel costs. Customer service costs increased $2 million due to an increase of $1 million each in credit card processing fees and personnel costs.  Administrative and other expenses decreased $6 million driven by decreases of $4 million in personnel costs, primarily from decreased employee incentive plan costs related to underwriting performance and decreased pension costs, and a decrease of $2 million in professional fees.

Gross margin

The gross margin in the second quarter of 2014 was 18.2%, compared to 17.3% in the second quarter of 2013, and was 18.0% for the six months ended June 30, 2014, compared to 16.7% for the six months ended June 30, 2013, as a result of revenue growth outpacing expense increases.

48

Property and Casualty Insurance Operations

The Property and Casualty Group operates in 11 Midwestern, Mid-Atlantic, and Southeastern states and the District of Columbia and primarily writes private passenger automobile, homeowners, commercial multi-peril, commercial automobile, and workers compensation lines of insurance.  A summary of the results of our property and casualty insurance operations is as follows:

	Property and Casualty Group
	Three months ended June 30,									Six months ended June 30,
(dollars in millions)	2014			2013			% Change			2014			2013			% Change
	(Unaudited)									(Unaudited)
Premiums:
Direct written premium	$	1,474		$	1,354		8.8		%	$	2,753		$	2,541		8.3		%
Reinsurance premium – assumed and ceded	(9		)	(3		)	NM			(16		)	(16		)	3.4
Net written premium	1,465			1,351			8.5			2,737			2,525			8.4
Change in unearned premium	(167		)	(155		)	(7.0	)		(171		)	(173		)	1.4
Net premiums earned	1,298			1,196			8.7			2,566			2,352			9.1
Losses and loss expenses:
Current accident year, excluding catastrophe losses	866			774			11.9			1,793			1,557			15.2
Current accident year catastrophe losses	244			45			NM			337			72			NM
Prior accident years, including prior year catastrophe losses	(9		)	18			NM			(22		)	25			NM
Losses and loss expenses	1,101			837			31.5			2,108			1,654			27.5
Policy acquisition and other underwriting expenses	380			348			9.4			745			676			10.3
Total losses and expenses	1,481			1,185			25.0			2,853			2,330			22.5
Underwriting (loss) income – Exchange(1)	$	(183	)	$	11		NM		%	$	(287	)	$	22		0.0		%
Loss and loss expense ratios:
Current accident year loss ratio, excluding catastrophe losses	66.6		%	64.8		%	1.8		pts.	69.9		%	66.2		%	3.7		pts.
Current accident year catastrophe loss ratio	18.8			3.7			15.1			13.1			3.0			10.1
Prior accident year loss ratio, including prior year catastrophe losses	(0.7		)	1.5			(2.2	)		(0.9		)	1.1			(2.0	)
Total loss and loss expense ratio	84.7			70.0			14.7			82.1			70.3			11.8
Policy acquisition and other underwriting expense ratio	29.3			29.1			0.2			29.0			28.7			0.3
Combined ratio	114.0		%	99.1		%	14.9		pts.	111.1		%	99.0		%	12.1		pts.

NM = not meaningful

(1)The Exchange retains 100% of the income from the property and casualty insurance operations.

We measure profit or loss from our property and casualty insurance segment based upon its underwriting results, which are represented by net premiums earned less losses and loss expenses and policy acquisition and other underwriting expenses on a pre-tax basis.  The loss and loss expense ratio and combined ratio are key performance indicators that we use to assess business trends and to make comparisons to industry results.  The investment results related to our property and casualty insurance operations are included in our investment operations segment discussion.

Premiums

Direct written premium – Direct written premium of the Property and Casualty Group increased 8.8% to $1.5 billion in the second quarter of 2014, from $1.4 billion in the second quarter of 2013, driven by an increase in policies in force and increases in average premium per policy.  Year-over-year policies in force for all lines of business increased by 4.5% in the second quarter of 2014 as the result of continuing strong policyholder retention and an increase in new policies written, compared to an increase of 4.4% in the second quarter of 2013.  The year-over-year average premium per policy for all lines of business increased 4.2% at June 30, 2014, compared to 4.8% at June 30, 2013. 

Premiums generated from new business increased 5.4% to $182 million in the second quarter of 2014, compared to an increase of 11.8% in the second quarter of 2013.  Underlying the trend in new business premiums was a 3.6% increase in new business policies written in the second quarter of 2014, compared to 11.1% in the second quarter of 2013, while the year-over-year average premium per policy on new business increased 1.5% at June 30, 2014, compared to 4.6% at June 30, 2013.

49

Premiums generated from renewal business increased 9.3% to $1.3 billion in the second quarter of 2014, compared to an increase of 8.9% to $1.2 billion in the second quarter of 2013.  Underlying the trend in renewal business premiums were increases in average premium per policy and steady policy retention ratios.  The renewal business year-over-year average premium per policy increased 4.6% at June 30, 2014, compared to 4.9% at June 30, 2013.  The Property and Casualty Group’s year-over-year policy retention ratio was 90.6% at June 30, 2014 and December 31, 2013, and 90.9% at June 30, 2013.

Personal lines – Total personal lines premiums written increased 8.1% to $1.0 billion in the second quarter of 2014, from $963 million in the second quarter of 2013, driven by an increase of 4.5% in the total personal lines policies in force and an increase of 3.7% in the total personal lines year-over-year average premium per policy.

New business premiums written on personal lines increased 6.1% in the second quarter of 2014, compared to 18.8% in the second quarter of 2013, driven by increases in new business policies written and average premium per policy.  Personal lines new business policies written increased 3.9% in the second quarter of 2014, compared to 13.3% in the second quarter of 2013, while the year-over-year average premium per policy on personal lines new business increased 4.2% at June 30, 2014, compared to 5.0% at June 30, 2013.

• Private passenger auto new business premiums written increased 7.3% in the second quarter of 2014, compared to 20.0% in the second quarter of 2013.  New business policies written for private passenger auto increased 4.9% in the second quarter of 2014, compared to 16.2% in the second quarter of 2013, while the new business year-over-year average premium per policy for private passenger auto increased 3.7% at June 30, 2014, compared to 3.3% at June 30, 2013.

• Homeowners new business premiums written increased 3.0% in the second quarter of 2014, compared to 17.4% in the second quarter of 2013.  New business policies written for homeowners decreased 0.1% in the second quarter of 2014, compared to an increase of 11.2% in the second quarter of 2013.  The new business year-over-year average premium per policy for homeowners increased 4.8% at June 30, 2014, compared to 8.6% at June 30, 2013.

Renewal premiums written on personal lines increased 8.3% in the second quarter of 2014, compared to 7.5% in the second quarter of 2013, driven by increases in average premium per policy and steady policy retention ratios.  The year-over-year average premium per policy on personal lines renewal business increased 3.7% at June 30, 2014, compared to 3.9% at June 30, 2013.  The personal lines year-over-year policy retention ratio was 91.1% at June 30, 2014, 91.2% at December 31, 2013, and 91.5% at June 30, 2013.

• Private passenger auto renewal premiums written increased 6.4% in the second quarter of 2014, compared to 4.7% in the second quarter of 2013.  The year-over-year average premium per policy on private passenger auto renewal business increased 1.7% at June 30, 2014, compared to 1.5% at June 30, 2013.  The private passenger auto year-over-year policy retention ratio was 91.9% at June 30, 2014, 92.1% at December 31, 2013, and 92.2% at June 30, 2013.

• Homeowners renewal premiums written increased 11.6% in the second quarter of 2014, compared to 12.3% in the second quarter of 2013.  The year-over-year average premium per policy on homeowners renewal business increased 7.7% at June 30, 2014, compared to 8.9% at June 30, 2013.  The homeowners year-over-year policyholder retention ratio was 90.0% at June 30, 2014, 90.1% at December 31, 2013, and 90.6% at June 30, 2013.

Commercial lines – Total commercial lines premiums written increased 10.7% to $433 million in the second quarter of 2014, from $391 million in the second quarter of 2013, driven by a 4.7% increase in the total commercial lines policies in force and a 5.4% increase in the total commercial lines year-over-year average premium per policy.

New business premiums written on commercial lines increased 4.1% in the second quarter of 2014, compared to an increase of 1.2% in the second quarter of 2013, driven by an increase in new business policies written seen across all major commercial lines of business. Commercial lines new business policies written increased 2.2% in the second quarter of 2014, compared to an increase of 1.7% in the second quarter of 2013, while the year-over-year average premium per policy on commercial lines new business decreased 0.2% at June 30, 2014, compared to an increase of 9.8% at June 30, 2013.

Renewal premiums for commercial lines increased 12.0% in the second quarter of 2014, compared to an increase of 12.6% in the second quarter of 2013, driven by increases in average premium per policy and steady policy retention ratios.  The combined impact of these increases was seen primarily in the commercial multi-peril, commercial auto and workers compensation lines of business.  The year-over-year average premium per policy on commercial lines renewal business

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increased 6.3% at June 30, 2014, compared to 6.6% at June 30, 2013.  The year-over-year policy retention ratio for commercial lines was 86.9% at June 30, 2014, 86.7% at December 31, 2013, and 86.4% at June 30, 2013.

Future trends — premium revenue – We plan to continue our efforts to grow Property and Casualty Group premiums and improve our competitive position in the marketplace.  Expanding the size of our agency force through a careful agency selection process and increased market penetration in our existing operating territories will contribute to future growth as existing and new agents build their books of business with the Property and Casualty Group. At June 30, 2014, we had nearly2,200 agencies with over10,700 licensed property and casualty representatives. The Property and Casualty Group plans to expand operations into the Commonwealth of Kentucky by the first quarter of 2015 or earlier if possible.

Changes in premium levels attributable to the growth in policies in force and rate changes directly affect the profitability of the Property and Casualty Group and have a direct bearing on Indemnity’s management fee.  Our continued focus on underwriting discipline and the maturing of our pricing sophistication models have contributed to the Property and Casualty Group’s growth in new policies in force, steady policy retention ratios, and increased average premium per policy.

Losses and loss expenses

Current accident year, excluding catastrophe losses – The current accident year loss and loss expense ratio for all lines of business, excluding catastrophe losses, was 66.6% in the second quarter of 2014, compared to 64.8% in the second quarter of 2013, and was 69.9% for the six months ended June 30, 2014, compared to 66.2% for the six months ended June 30, 2013. The higher ratio for the first six months of 2014 was driven primarily by a higher volume of non-catastrophe weather related claims resulting from more severe winter weather experienced in the first quarter and a few large commercial property claims in the second quarter, compared to the first six months of 2013.

Current accident year catastrophe losses – Catastrophic events, destructive weather patterns, or changes in climate conditions are an inherent risk of the property and casualty insurance business and can have a material impact on our property and casualty insurance underwriting results.  In addressing this risk, we employ what we believe are reasonable underwriting standards and monitor our exposure by geographic region.  The Property and Casualty Group’s definition of catastrophes includes those weather-related or other loss events that we consider significant to our geographic footprint which, individually or in the aggregate, may not reach the level of a national catastrophe as defined by the Property Claim Service (“PCS”).  The Property and Casualty Group maintains property catastrophe reinsurance coverage from unaffiliated reinsurers to mitigate future potential catastrophe loss exposures and no longer participates in the voluntary assumed reinsurance business, which lowers the variability of the Property and Casualty Group’s underwriting results.

Catastrophe losses for the current accident year, as defined by the Property and Casualty Group, totaled $244 million in the second quarter of 2014, compared to $45 million in the second quarter of 2013, and contributed 18.8 points and 3.7 points, respectively, to the loss ratios. In the second quarter of 2014, catastrophe losses primarily resulted from a large hail storm that occurred in May in the state of Pennsylvania. For the six months ended June 30, 2014, catastrophe losses for the current accident year totaled $337 million, compared to $72 million compared to the six months ended June 30, 2013, and contributed 13.1 and 3.0 points, respectively, to the loss ratios.

Prior accident years, including prior accident year catastrophe losses – The following table provides a breakout of our property and casualty insurance operation’s prior year loss reserve development, including prior accident year catastrophe loss reserves, by type of business:

	Property and Casualty Group
	Three months ended June 30,						Six months ended June 30,
(in millions)	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
Direct business, including reserves for catastrophe losses and salvage and subrogation	$	(10	)	$	20		$	(27	)	$	29
Assumed reinsurance business	2			4			10			3
Ceded reinsurance business	(1		)	(6		)	(5		)	(7		)
Total prior year loss development	$	(9	)	$	18		$	(22	)	$	25

Negative amounts represent a redundancy (decrease in reserves), while positive amounts represent a deficiency (increase in reserves).

Direct business, including reserves for catastrophe losses and salvage and subrogation – In the second quarter of 2014, the Property and Casualty Group experienced favorable development on direct prior accident year loss reserves of $10 million that

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improved the combined ratio by 0.8 points, compared to adverse development of $20 million in the second quarter of 2013 that contributed 1.7 points to the combined ratio. For the six months ended June 30, 2014, favorable development of direct prior accident year loss reserves totaled $27 million and improved the combined ratio by 1.1 points, compared to adverse development of $29 million that contributed 1.2 points for the six months ended June 30, 2013.

The favorable development in the first six months of 2014 was primarily due to the workers compensation line of business, offset somewhat by adverse development in the commercial auto line of business. In the first six months of 2013, the adverse development was primarily related to increased reserves that occurred in the first quarter on two massive injury lifetime medical claims in the workers compensation line of business, combined with adverse development in the commercial multi-peril line of business that occurred in the second quarter.

Assumed reinsurance – The Property and Casualty Group experienced adverse development on prior accident year loss reserves for its assumed involuntary reinsurance business totaling $2 million in the second quarter of 2014, compared to adverse development of $4 million in the second quarter of 2013. In the first six months of 2014, adverse development on prior accident year loss reserves for the assumed reinsurance business totaled $10 million, compared to adverse development of $3 million in the first six months of 2013.

Ceded reinsurance – The Property and Casualty Group’s ceded reinsurance reserve recoveries increased by $1 million and $6 million in the second quarters of 2014 and 2013, respectively, and increased by $5 million and $7 million in the first six months of 2014 and 2013, respectively.  An increase in ceded recoveries is reflected as favorable loss development as it represents an increase in recoveries resulting from adverse development on our direct loss reserves, while a decrease in ceded recoveries is reflected as adverse loss development as it represents a decrease in recoveries resulting from favorable development on our direct loss reserves.  In the first six months of 2014, the increase in ceded recoveries was primarily due to adverse development related to the business catastrophe liability, whereas the increase in the first six months of 2013 was primarily due to adverse development related to the pre-1986 automobile massive injury claims and in the commercial multi-peril and business catastrophe liability lines of business.

Policy acquisition and other underwriting expenses – Our policy acquisition and other underwriting expense ratio increased 0.2 points to 29.3% in the second quarter of 2014, from 29.1% in the second quarter of 2013, and increased 0.3 points to 29.0% for the six months ended June 30, 2014, from 28.7% for the six months ended June 30, 2013. The management fee rate was 25% for the periods ended June 30, 2014 and 2013.

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Life Insurance Operations

EFL is a Pennsylvania-domiciled life insurance company which underwrites and sells individual and group life insurance policies and fixed annuities and operates in 10 states and the District of Columbia.  EFL plans to expand operations into the Commonwealth of Kentucky by the first quarter of 2015 or earlier if possible. A summary of the results of our life insurance operations is as follows:

	Erie Family Life Insurance Company
	Three months ended June 30,								Six months ended June 30,
(in millions)	2014			2013			% Change		2014			2013			% Change
	(Unaudited)								(Unaudited)
Individual and group life premiums, gross	$	32		$	31		4.3	%	$	62		$	60		4.2	%
Reinsurance premiums – ceded	(10		)	(11		)	1.3		(20		)	(21		)	1.1
Individual and group life premiums, net	22			20			7.5		42			39			7.0
Other revenue	0			0			52.5		1			1			27.9
Total net policy revenue	22			20			8.1		43			40			7.2
Net investment income	23			23			1.2		47			46			1.4
Net realized gains on investments	0			3			(94.8	)	5			6			(19.3	)
Impairment losses recognized in earnings	0			(1		)	52.6		0			(1		)	(85.5	)
Equity in earnings of limited partnerships	1			1			(40.1	)	1			1			(33.5	)
Total revenues	46			46			(2.7	)	96			92			2.8
Benefits and other changes in policy reserves	27			26			4.6		55			52			5.5
Amortization of deferred policy acquisition costs	3			3			(5.1	)	6			6			4.9
Other operating expenses	6			4			22.9		12			10			14.9
Total benefits and expenses	36			33			6.1		73			68			6.8
Income before taxes – Exchange(1)	$	10		$	13		(26.2	)%	$	23		$	24		(8.9	)%

NM = not meaningful

(1) The Exchange retains 100% of the income from the life insurance operations.

Policy revenue

Gross policy revenues increased 4.3% to $32 million in the second quarter 2014, from $31 million in the second quarter of 2013.  EFL uses, and has used, a variety of reinsurance programs to reduce claims volatility and for other financial benefits.  While the amount of risk that EFL retains can vary based upon the type of policy issued and the year it was issued, EFL generally does not retain more than $1 million of risk on any individual life.  Ceded reinsurance premiums totaled $10 million and $11 million in the second quarter of 2014 and 2013, respectively. For the six months ended June 30, 2014, compared to 2013, gross policy revenues totaled $62 million and $60 million, respectively, while ceded reinsurance premiums totaled $20 million and $21 million for the six months ended June 30, 2014 and 2013, respectively.

Annuity and universal life premiums that are recorded as deposits totaled $16 million in both the second quarters of 2014 and 2013, respectively, and $32 million for both the six months ended June 30, 2014 and 2013, and therefore are not reflected in individual and group life premiums in the table above.

Investment revenue

EFL's investment revenue remained relatively flat in the second quarter and first six months of 2014, compared to the second quarter and first six months of 2013. See the “Investment Operations” segment discussion that follows for further information.

Benefits and expenses

In the second quarter and first six months of 2014, total benefits and expenses were primarily impacted by an increase in death benefits and future life policy benefits, compared to the second quarter and first six months of 2013.

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Investment Operations

The investment results related to our life insurance operations are included in the investment operations segment discussion as part of the Exchange’s investment results.  A summary of the results of our investment operations is as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,							Six months ended June 30,
	2014		2013			% Change		2014		2013			% Change
Indemnity	(Unaudited)							(Unaudited)
Net investment income	$	4	$	3		11.9	%	$	8	$	7		15.1	%
Net realized gains on investments	0		0			NM		1		0			NM
Net impairment losses recognized in earnings	0		0			NM		0		0			NM
Equity in earnings of limited partnerships	3		5			(38.4	)	9		8			18.7
Net revenue from investment operations – Indemnity	$	7	$	8		(17.0	)%	$	18	$	15		23.3	%
Exchange
Net investment income	$	112	$	104		8.0	%	$	220	$	206		6.7	%
Net realized gains on investments	133		61			NM		188		310			(39.5	)
Net impairment losses recognized in earnings	0		(1		)	NM		0		(1		)	NM
Equity in earnings of limited partnerships	24		34			(28.6	)	68		67			1.4
Net revenue from investment operations – Exchange(1)	$	269	$	198		35.2	%	$	476	$	582		(18.4	)%

NM = not meaningful

(1) The Exchange’s investment results for the second quarter of 2014 and 2013 include net investment revenues from EFL’s operations of $24 million and $26 million, respectively. The Exchange’s investment results for the first six months of 2014 and 2013 include net investment revenues from EFL’s operations of $53 million and $52 million, respectively

Net investment income

Net investment income primarily includes interest and dividends on our fixed maturity and equity security portfolios net of investment expenses.  Indemnity’s net investment income increased $1 million in the second quarter of 2014, compared to the second quarter of 2013, while the Exchange’s net investment income increased $8 million.  Indemnity's net investment income increased $1 million for the six months ended June 30, 2014, compared to the six months ended June 30, 2013, while the Exchange's net investment income increased $14 million. The increases in net investment income for Indemnity were primarily due to higher invested balances, while the increases for the Exchange were primarily due to higher invested balances and higher dividend income from equity securities.

Net realized gains on investments

Net realized gains and losses on investments include the changes in fair value of common stocks designated as trading securities, and gains and losses resulting from the actual sales of all security categories.  Indemnity generated net realized gains of $0.2 million in the second quarter of both 2014 and 2013, while the Exchange generated net realized gains of $133 million in the second quarter of 2014, compared to gains of $61 million in the second quarter of 2013. Indemnity generated net realized gains of $1 million for the six months ended June 30, 2014, compared to gains of $0.2 million for the six months ended June 30, 2013 while the Exchange generated net realized gains of $188 million for the six months ended June 30, 2014, compared to gains of $310 million for the six months ended June 30, 2013.

Net realized gains for Indemnity during the six months ended June 30, 2014 primarily represented gains from the sale of equity securities. Net realized gains for the Exchange increased in the second quarter of 2014 primarily due to larger increases in fair value of common stocks compared to the second quarter of 2013. Net realized gains for the Exchange decreased for the six months ended June 30, 2014 primarily due to lower increases in fair value of common stocks and lower realized gains from sales of common stock compared to the six months ended June 30, 2013.

Net impairment losses recognized in earnings

Net impairment losses recorded in earnings for Indemnity were $0.1 million for the second quarter and six months ended June 30, 2014 and June 30, 2013. Net impairment losses recorded in earnings for the Exchange were $0.1 million for the second quarter and $0.3 million for the six months ended June 30, 2014, compared to net impairment losses of $1 million for the second quarter and the six months ended June 30, 2013.

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Equity in earnings of limited partnerships

Indemnity’s equity in earnings of limited partnerships decreased $2 million in the second quarter of 2014, compared to the second quarter of 2013, while the Exchange’s equity in earnings of limited partnerships decreased $10 million.  Equity in earnings of limited partnerships for both Indemnity and the Exchange increased $1 million for the six months ended June 30, 2014, compared to the six months ended June 30, 2013. The decrease in earnings for both Indemnity and the Exchange during the second quarter of 2014 was due to lower earnings from private equity investments, partially offset by higher earnings from mezzanine debt investments for Indemnity, and higher earnings from real estate investments for the Exchange. The increase in earnings for Indemnity during the six months ended June 30, 2014 was due to higher earnings from private equity investments partially offset by lower earnings from real estate, while earnings increased slightly for the Exchange due to minor changes in earnings from each investment sector.

A breakdown of our net realized gains (losses) on investments is as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity	(Unaudited)				(Unaudited)
Securities sold:
Fixed maturities	$	0	$	0	$	0	$	0
Equity securities	0		0		1		0
Total net realized gains – Indemnity(1)	$	0	$	0	$	1	$	0
Exchange
Securities sold:
Fixed maturities	$	4	$	4	$	9	$	17
Equity securities	1		2		8		4
Common stock equity securities	45		51		112		141
Common stock increases in fair value(2)	83		4		59		148
Total net realized gains – Exchange(1) (3)	$	133	$	61	$	188	$	310

(1) See Item 1. “Financial Statements – Note 7. Investments,” contained within this report for additional disclosures regarding net realized gains (losses) on investments.

(2) The fair value on our common stock portfolio is based upon exchange traded prices provided by a nationally recognized pricing service.

(3) The Exchange’s results for the second quarter of 2014 and 2013 include net realized gains from EFL’s operations of $0.2 million and $3 million, respectively. The Exchange’s results for the first six months of 2014 and 2013 include net realized gains from EFL’s operations of $5 million and $6 million, respectively.

The components of equity in earnings (losses) of limited partnerships are as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity	(Unaudited)				(Unaudited)
Private equity	$	0	$	3	$	4	$	2
Mezzanine debt	1		0		1		1
Real estate	2		2		4		5
Total equity in earnings of limited partnerships – Indemnity	$	3	$	5	$	9	$	8
Exchange
Private equity	$	6	$	22	$	33	$	32
Mezzanine debt	5		5		11		12
Real estate	13		7		24		23
Total equity in earnings of limited partnerships – Exchange (1)	$	24	$	34	$	68	$	67

(1) The Exchange’s results for the second quarter of 2014 and 2013 include equity in earnings of limited partnerships from EFL's operations of $0.3 million and $0.5 million, respectively. The Exchange’s results for the first six months of 2014 and 2013 include equity in earnings of limited partnerships from EFL's operations of $0.6 million and $0.9 million, respectively.

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Limited partnership earnings pertain to investments in U.S. and foreign private equity, mezzanine debt, and real estate partnerships.  Valuation adjustments are recorded to reflect the changes in fair value of the underlying investments held by the limited partnerships.  These adjustments are recorded as a component of equity in earnings of limited partnerships in the Consolidated Statements of Operations.

Limited partnership earnings tend to be cyclical based upon market conditions, the age of the partnership, and the nature of the investments.  Generally, limited partnership earnings are recorded on a quarter lag from financial statements we receive from our general partners.  As a consequence, earnings from limited partnerships reported at June 30, 2014 reflect investment valuation changes resulting from the financial markets and the economy in the fourth quarter of 2013 and first quarter of 2014.

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FINANCIAL CONDITION

Investments

We generate revenues from our fixed maturity, equity security, and limited partnership investment portfolios to support our underwriting business.  The Indemnity and Exchange portfolios are managed with the objective of maximizing after-tax returns on a risk-adjusted basis, while the EFL portfolio is managed to be closely aligned to its liabilities and to maintain a sufficient yield to meet profitability targets.  Management actively evaluates the portfolios for impairments.  We record impairment writedowns on investments in instances where the fair value of the investment is substantially below cost, and we conclude that the decline in fair value is other-than-temporary, which includes consideration for intent to sell.

Distribution of investments

	Erie Insurance Group
	Carrying value at				Carrying value at
(in millions)	June 30, 2014		% to total		December 31, 2013		% to total
Indemnity	(Unaudited)
Fixed maturities	$	497	75	%	$	526	73	%
Equity securities:
Preferred stock	14		2		25		3
Common stock	12		2		25		3
Limited partnerships:
Private equity	58		8		62		9
Mezzanine debt	18		3		20		3
Real estate	65		10		64		9
Real estate mortgage loans	1		0		1		0
Total investments – Indemnity	$	665	100	%	$	723	100	%
Exchange
Fixed maturities	$	8,701	63	%	$	8,162	62	%
Equity securities:
Preferred stock	717		5		621		5
Common stock	3,574		26		3,400		26
Limited partnerships:
Private equity	448		3		463		4
Mezzanine debt	167		1		172		1
Real estate	316		2		305		2
Life policy loans	17		0		17		0
Real estate mortgage loans	3		0		3		0
Total investments – Exchange	$	13,943	100	%	$	13,143	100	%
Total investments – Erie Insurance Group	$	14,608			$	13,866

We continually review our investment portfolio to evaluate positions that might incur other-than-temporary declines in value.  For all investment holdings, general economic conditions and/or conditions specifically affecting the underlying issuer or its industry, including downgrades by the major rating agencies, are considered in evaluating impairment in value.  In addition to specific factors, other factors considered in our review of investment valuation are the length of time the fair value is below cost and the amount the fair value is below cost.

We individually analyze all positions with emphasis on those that have, in management’s opinion, declined significantly below cost.  In compliance with impairment guidance for debt securities, we perform further analysis to determine if a credit-related impairment has occurred.  Some of the factors considered in determining whether a debt security is credit impaired include potential for the default of interest and/or principal, level of subordination, collateral of the issue, compliance with financial covenants, credit ratings and industry conditions.  We have the intent to sell all credit-impaired debt securities, therefore the entire amount of the impairment charges are included in earnings and no impairments are recorded in other comprehensive income.  For available-for-sale equity securities, a charge is recorded in the Consolidated Statements of Operations for positions that have experienced other-than-temporary impairments.  (See the “Investment Operations” section contained within this report for further information.)  Management believes its investment valuation philosophy and accounting practices result in appropriate and timely measurement of value and recognition of impairment.

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Fixed maturities

Under our investment strategy, we maintain a fixed maturity portfolio that is of high quality and well diversified within each market sector.  This investment strategy also achieves a balanced maturity schedule.  Our fixed maturity portfolio is managed with the goal of achieving reasonable returns while limiting exposure to risk.  Our municipal bond portfolio accounts for $241 million, or 48%, of the total fixed maturity portfolio for Indemnity and $1.5 billion, or 17%, of the fixed maturity portfolio for the Exchange at June 30, 2014.  The overall credit rating of the municipal portfolio without consideration of the underlying insurance is AA. During the second quarter of 2014, Indemnity and the Exchange allocated $47 million and $250 million, respectively, to investments in high yield bonds.

Fixed maturities classified as available-for-sale are carried at fair value with unrealized gains and losses, net of deferred taxes, included in shareholders’ equity.  Indemnity’s net unrealized gains on fixed maturities, net of deferred taxes, amounted to $9 million at June 30, 2014, compared to $5 million at December 31, 2013.  At June 30, 2014, the Exchange had net unrealized gains on fixed maturities of $359 million, compared to $234 million at December 31, 2013.

The following table presents a breakdown of the fair value of our fixed maturity portfolio by sector and rating for Indemnity and the Exchange, respectively:

	Erie Insurance Group(1)
	At June 30, 2014
(in millions)	(Unaudited)
Industry Sector	AAA		AA		A		BBB		Non- investment grade		Fair value
Indemnity
Basic materials	$	0	$	0	$	3	$	9	$	3	$	15
Communications	0		0		4		20		6		30
Consumer	0		0		10		16		19		45
Energy	0		0		0		15		7		22
Financial	0		8		58		45		4		115
Government-municipal	105		101		32		3		0		241
Industrial	0		0		1		5		5		11
Structured securities(2)	0		0		0		0		0		0
Technology	0		0		0		4		2		6
Utilities	0		0		4		7		1		12
Total – Indemnity	$	105	$	109	$	112	$	124	$	47	$	497
Exchange
Basic materials	$	0	$	0	$	55	$	204	$	43	$	302
Communications	0		0		237		317		57		611
Consumer	0		35		343		714		96		1,188
Diversified	0		0		14		0		1		15
Energy	8		67		130		490		53		748
Financial	1		154		1,031		1,602		128		2,916
Foreign government	0		10		5		0		0		15
Government-municipal	425		879		190		25		0		1,519
Government sponsored entity	0		4		0		0		0		4
Industrial	0		10		70		262		42		384
Structured securities(2)	47		159		32		25		4		267
Technology	0		33		59		91		11		194
U.S. Treasury	0		31		0		0		0		31
Utilities	0		3		134		345		25		507
Total – Exchange	$	481	$	1,385	$	2,300	$	4,075	$	460	$	8,701

(1) Ratings are supplied by S&P, Moody’s, and Fitch.  The table is based upon the lowest rating for each security.

(2) Structured securities include asset-backed securities, collateral, lease and debt obligations, commercial mortgage-backed securities, and residential mortgage-backed securities.

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Equity securities

Our equity securities consist of common stock and nonredeemable preferred stock.  Investment characteristics of common stock and non-redeemable preferred stock differ from one another.  Our nonredeemable preferred stock portfolio provides a source of current income that is competitive with investment-grade bonds.

The following table presents an analysis of the fair value of our preferred and common stock securities by sector for Indemnity and Exchange, respectively:

	Erie Insurance Group
	Fair value at:
(in millions)	June 30, 2014				December 31, 2013
	(Unaudited)
Industry sector	Preferred stock		Common stock		Preferred stock		Common stock
Indemnity
Communications	$	1	$	0	$	1	$	0
Diversified	0		0		3		0
Financial	8		0		16		0
Funds (1)	0		12		0		25
Utilities	5		0		5		0
Total – Indemnity	$	14	$	12	$	25	$	25
Exchange
Basic materials	$	0	$	81	$	0	$	86
Communications	6		305		6		352
Consumer	16		1,017		6		968
Diversified	0		21		2		14
Energy	0		240		0		205
Financial	593		594		518		538
Funds (1)	0		499		0		479
Government	0		0		2		0
Industrial	0		474		0		457
Technology	1		277		0		240
Utilities	101		66		87		61
Total – Exchange	$	717	$	3,574	$	621	$	3,400

(1) Includes certain exchange traded funds with underlying holdings of fixed maturity securities totaling $12 million for Indemnity and $197 million for the Exchange at June 30, 2014, and $25 million for Indemnity and $198 million for the Exchange at December 31, 2013. These securities meet the criteria of a common stock under U.S. GAAP, and are included on the balance sheet as available-for-sale equity securities. Remaining common stock investments are classified as trading securities.

Equity securities classified as available-for-sale include preferred and certain common stock securities, and are carried at fair value on the Consolidated Statements of Financial Position with all changes in unrealized gains and losses reflected in other comprehensive income.  The unrealized gain on equity securities classified as available-for-sale, net of deferred taxes, for Indemnity was $0.6 million at June 30, 2014, compared to an unrealized loss of less than $0.1 million at December 31, 2013. The net unrealized gain on equity securities classified as available-for-sale for the Exchange was $47 million at June 30, 2014, compared to an unrealized gain of $26 million at December 31, 2013.

Our common stocks classified as trading securities are measured at fair value with all changes in unrealized gains and losses reflected in the Consolidated Statements of Operations.

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Limited partnerships

In the second quarter of 2014, investments in limited partnerships decreased slightly for Indemnity and the Exchange from the investment levels at December 31, 2013.  Changes in partnership values are a function of contributions and distributions, adjusted for market value changes in the underlying investments. The decrease in limited partnership investments was due to net distributions received from the partnerships which were partially offset by partnership earnings.  Indemnity has made no new limited partnership commitments since 2006, and the balance of its limited partnership investments is expected to decline over time as additional distributions are received. The results from our limited partnerships are based upon financial statements received from our general partners, which are generally received on a quarter lag.  As a result, the market values and earnings recorded during the second quarter of 2014 reflect the partnership activity experienced in the first quarter of 2014.

The components of limited partnership investments are as follows:

	Erie Insurance Group
(in millions)	At June 30, 2014		At December 31, 2013
Indemnity	(Unaudited)
Private equity	$	58	$	62
Mezzanine debt	18		20
Real estate	65		64
Total limited partnerships – Indemnity	$	141	$	146
Exchange
Private equity	$	448	$	463
Mezzanine debt	167		172
Real estate	316		305
Total limited partnerships – Exchange	$	931	$	940

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Liabilities

Property and casualty losses and loss expense reserves

Loss reserves are established to account for the estimated ultimate costs of losses and loss expenses for claims that have been reported but not yet settled and claims that have been incurred but not reported.  While we exercise professional diligence to establish reserves at the end of each period that are fully reflective of the ultimate value of all claims incurred, these reserves are, by their nature, only estimates and cannot be established with absolute certainty.

The factors which may potentially cause the greatest variation between current reserve estimates and the actual future paid amounts include unforeseen changes in statutory or case law altering the amounts to be paid on existing claim obligations, new medical procedures and/or drugs with costs significantly different from those seen in the past, inflation, and claims patterns on current business that differ significantly from historical claims patterns.

Losses and loss expense reserves are presented on the Consolidated Statements of Financial Position on a gross basis.  The following table represents the direct and assumed losses and loss expense reserves by major line of business for our property and casualty insurance operations.  The reinsurance recoverable amount represents the related ceded amounts which results in the net liability attributable to the Property and Casualty Group.

	Property and Casualty Group
(in millions)	At June 30, 2014		At December 31, 2013
	(Unaudited)
Gross reserve liability(1):
Personal auto	$	1,214	$	1,217
Automobile massive injury	337		345
Homeowners	384		271
Workers compensation	617		604
Workers compensation massive injury	86		94
Commercial auto	391		371
Commercial multi-peril	671		587
All other lines of business	174		170
Assumed reinsurance	90		88
Gross reserves	3,964		3,747
Less: reinsurance recoverable	149		156
Net reserve liability — Exchange	$	3,815	$	3,591

(1) Loss reserves are set at estimated ultimate costs, except for workers compensation loss reserves which have been discounted using an interest rate of 2.5%.  This discounting reduced unpaid losses and loss expenses by $84 million at June 30, 2014 and $85 million at December 31, 2013.

The reserves that have the greatest potential for variation are the massive injury lifetime medical claim reserves.  The Property and Casualty Group is currently reserving for 243 claimants requiring lifetime medical care, of which 95 involve massive injuries.  The reserve carried by the Property and Casualty Group for the massive injury claimants, which includes automobile massive injury and workers compensation massive injury reserves, totaled $282 million at June 30, 2014, which is net of $141 million of anticipated reinsurance recoverables, compared to $291 million at December 31, 2013, which is net of $148 million of anticipated reinsurance recoverables.

Life insurance reserves

EFL’s primary commitment is its obligation to pay future policy benefits under the terms of its life insurance and annuity contracts.  To meet these future obligations, EFL establishes life insurance reserves based upon the type of policy, the age, gender, and risk class of the insured, and the number of years the policy has been in force.  EFL also establishes annuity and universal life reserves based upon the amount of policyholder deposits (less applicable insurance and expense charges) plus interest earned on those deposits.  Life insurance and annuity reserves are supported primarily by EFL’s long-term, fixed income investments as the underlying policy reserves are generally also of a long-term nature.

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IMPACT OF INFLATION

Property and casualty insurance premiums are established before losses occur and before loss expenses are incurred, and therefore, before the extent to which inflation may impact such costs is known. Consequently, in establishing premium rates, we attempt to anticipate the potential impact of inflation, including medical cost inflation, construction and auto repair cost inflation and tort issues.  Medical costs are a broad element of inflation that impacts personal and commercial auto, general liability, workers compensation, and commercial multi-peril lines of insurance written by the Property and Casualty Group.  Inflation assumptions take the form of explicit numerical values in the survival ratio, individual claim, and massive injury lifetime medical reserving methods.  Inflation assumptions are implicitly derived through the selection of applicable loss development patterns for all other reserving methods.  Occasionally, unusual aberrations in loss development patterns are caused by external and internal factors such as changes in claim reporting, settlement patterns, unusually large losses, process changes, legal or regulatory changes, and other influences.  In these instances, analyses of alternate development factor selections are performed to evaluate the effect of these factors and actuarial judgment is applied to make appropriate assumptions needed to develop a best estimate of ultimate losses.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

Liquidity is a measure of a company’s ability to generate sufficient cash flows to meet the short- and long-term cash requirements of its business operations and growth needs.  Our liquidity requirements have been met primarily by funds generated from premiums collected and income from investments.  Our insurance operations provide liquidity in that premiums are collected in advance of paying losses under the policies purchased with those premiums.  Cash outflows for the property and casualty insurance business are generally variable since settlement dates for liabilities for unpaid losses and the potential for large losses, whether individual or in the aggregate, cannot be predicted with absolute certainty.  Accordingly, after satisfying our operating cash requirements, excess cash flows are used to build our investment operation’s portfolios in order to increase future investment income, which then may be used as a source of liquidity if cash from our insurance operations would not be sufficient to meet our obligations.  Cash provided from these sources is used primarily to fund losses and policyholder benefits, fund the costs of our management operations including commissions, salaries and wages, pension plans, share repurchases, dividends to shareholders, and the purchase and development of information technology.  We expect that our operating cash needs will be met by funds generated from operations.

Volatility in the financial markets presents challenges to us as we do occasionally access our investment portfolio as a source of cash.  Some of our fixed income investments, despite being publicly traded, are illiquid.  Volatility in these markets could impair our ability to sell certain of our fixed income securities or cause such securities to sell at deep discounts.  Additionally, our limited partnership investments are significantly less liquid.  We believe we have sufficient liquidity to meet our needs from other sources even if market volatility persists throughout 2014.

Cash flow activities — Erie Insurance Group

The following table provides condensed consolidated cash flow information for the six months ended June 30:

(in millions)	Erie Insurance Group
	2014			2013
Net cash provided by operating activities	$	245		$	330
Net cash used in investing activities	(332		)	(335		)
Net cash used in financing activities	(65		)	(30		)
Net decrease in cash and cash equivalents	$	(152	)	$	(35	)

Net cash provided by operating activities totaled $245 million and $330 million for the first six months of 2014 and 2013, respectively.  Decreased cash from operating activities for the first six months of 2014 was driven primarily by increases in losses paid and loss expenses paid, commissions and bonuses paid to agents, and other underwriting and acquisition costs, combined with a decrease in limited partnership distributions received. Somewhat offsetting this decrease in cash provided was an increase in premiums collected by the Exchange, driven by the increase in premiums written, and an increase in net investment income received, combined with a decrease in income taxes paid, compared to the first six months of 2013.

At June 30, 2014, we recorded a net deferred tax asset of $1 million attributable to Indemnity and a net deferred tax liability of $557 million attributable to the Exchange.  There was no deferred tax valuation allowance recorded at June 30, 2014. In the

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first quarter of 2014, Indemnity received a tax refund of $1 million related to the 2006-2009 Internal Revenue Audit. Our capital gain and loss strategies take into consideration our ability to offset gains and losses in future periods, carry-back of capital loss opportunities to the three preceding years, and capital loss carry-forward opportunities to apply against future capital gains over the next five years.

Net cash used in investing activities totaled $332 million and $335 million for the first six months of 2014 and 2013, respectively.  Investing activities in the first six months of 2014 primarily included a decrease in fixed maturity and common stock purchases, offset somewhat by an increase in certain preferred stock purchases, combined with decreased cash generated from fixed maturity calls, compared to the first six months of 2013.  At June 30, 2014, we had contractual commitments to invest up to $471 million related to our limited partnership investments to be funded as required by the partnerships’ agreements.  Of this amount, the total remaining commitment to fund limited partnerships that invest in private equity securities was $157 million, mezzanine debt securities was $182 million, and real estate activities was $132 million.

For a discussion of net cash used in financing activities, see the following section “Cash flow activities — Indemnity,” for the primary drivers of the financing cash flows related to the Indemnity shareholder interest.

Cash flow activities — Indemnity

The following table is a summary of cash flows for Indemnity for the six months ended June 30:

(in millions)	Indemnity Shareholder Interest
	2014			2013
Net cash provided by operating activities	$	36		$	57
Net cash provided by investing activities	57			15
Net cash used in financing activities	(79		)	(45		)
Net increase in cash and cash equivalents	$	14		$	27

See Item 1. “Financial Statements - Note 15. Indemnity Supplemental Information,” contained within this report for more detail on Indemnity’s cash flows.

Net cash provided by Indemnity’s operating activities totaled $36 million for the first six months of 2014, compared to $57 million for the first six months of 2013.  Decreased cash from operating activities for the first six months of 2014 was primarily due to increases in commissions and bonuses paid to agents, a decrease in reimbursements collected from affiliates, and an increase in general operating expenses. Somewhat offsetting this decrease in cash was an increase in management fee revenue received compared to the first six months of 2013. Management fee revenues were higher reflecting the increase in the premiums written or assumed by the Exchange.  Cash paid for agent commissions and bonuses increased to $397 million in the first six months of 2014, compared to $356 million for the first six months of 2013, as a result of an increase in cash paid for scheduled commissions and bonus awards.  Indemnity made a $15 million contribution to its pension plan in the first quarter of 2014, compared to $17 million in the first quarter of 2013.  Indemnity expects to make an additional $8 million contribution to its pension plan during the third quarter of 2014. Indemnity’s policy for funding its pension plan is generally to contribute an amount equal to the greater of the IRS minimum required contribution or the target normal cost for the year plus interest to the date the contribution is made.  Indemnity is generally reimbursed approximately 55% of the net periodic benefit cost of the pension plan from its affiliates, which represents pension benefits for Indemnity employees performing claims and EFL functions.

At June 30, 2014, Indemnity recorded a net deferred tax asset of $1 million.  There was no deferred tax valuation allowance recorded at June 30, 2014. In the first quarter of 2014, Indemnity received a tax refund of $1 million related to the 2006-2009 Internal Revenue Audit.

Net cash provided by Indemnity’s investing activities totaled $57 million for the first six months of 2014, compared to $15 million for the first six months of 2013.  Indemnity’s first six months of 2014 investing activities primarily included increased cash generated from the sales of fixed maturities and common stocks, slightly offset by an increase in purchases of other fixed maturity securities, compared to the first six months of 2013.  Also impacting Indemnity's future investing activities are limited partnership commitments, which totaled $26 million at June 30, 2014, and will be funded as required by the partnerships’ agreements.  Of this amount, the total remaining commitment to fund limited partnerships that invest in private equity securities was $11 million, mezzanine debt securities was $9 million, and real estate activities was $6 million.

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Net cash used in Indemnity’s financing activities totaled $79 million for the first six months of 2014, compared to $45 million for the first six months of 2013.  The increase in cash used in financing activities for the first six months of 2014 was driven by an increase in the cash outlay for dividends paid to shareholders and share repurchases. Dividends paid to shareholders totaled $59 million for the first six months of 2014, compared to $28 million dividends paid for the first six months of 2013.  Normally, the regular quarterly dividend declared by the Board at its December meeting of the previous year is paid in January, as it was in 2014. In 2013 however, the payment of the regular dividend normally made in January was accelerated and paid in December 2012, due to the potential significant increases in tax rates on 2013 dividend income pending at the time of declaration. Additionally, Indemnity increased both its Class A and Class B shareholder quarterly dividends by 7.2% for 2014, compared to 2013.  There are no regulatory restrictions on the payment of dividends to Indemnity’s shareholders.

Indemnity repurchased 130,256 shares of its Class A nonvoting common stock in conjunction with its stock repurchase program at a total cost of $9.3 million, based upon settlement date, in the second quarter of 2014.  During the first six months of 2014, shares repurchased under this program totaled 275,173 at a total cost of $19.4 million. In the first six months of 2013, shares repurchased under this program totaled 227,162 at a total cost of $16.3 million.  In October 2011, our Board of Directors approved a continuation of the current stock repurchase program for a total of $150 million with no time limitation.  This repurchase authority includes, and is not in addition to, any unspent amounts remaining under the prior authorization.  Indemnity had approximately $18 million of repurchase authority remaining under this program at June 30, 2014, based upon trade date.

Additionally, in January 2014, we repurchased 2,800 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $201,411, or $71.93 per share, for the vesting of stock-based awards for executive management. These shares were delivered to executive management in January 2014.

In May 2014, we repurchased 7,227 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $552,503, or $76.45 per share, for the vesting of stock-based awards for a former outside director. These shares were delivered in May 2014.

In May and June 2014, we repurchased 54,371 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $4,143,544, or $76.21 per share, for the vesting of stock-based awards in conjunction with our long-term incentive plan. These shares were delivered to plan participants in June 2014.

In January and June 2013, Indemnity purchased 444 and 3,033 shares, respectively, of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $30,927, or $69.65 per share, and $224,527 or $74.03 per share, to settle payments due to a retired executive under our long-term incentive plan. These shares were delivered to the plan participant in January and July 2013, respectively.

Capital Outlook

We regularly prepare forecasts evaluating the current and future cash requirements of Indemnity and the Exchange for both normal and extreme risk events.  Should an extreme risk event result in a cash requirement exceeding normal cash flows, we have the ability to meet our future funding requirements through various alternatives available to us.

Indemnity

Outside of Indemnity’s normal operating and investing cash activities, future funding requirements could be met through: 1) Indemnity’s cash and cash equivalents, which total approximately $63 million at June 30, 2014, 2) a $100 million bank revolving line of credit held by Indemnity, and 3) liquidation of assets held in Indemnity’s investment portfolio, including common stock, preferred stock, and investment grade bonds which totaled approximately $363 million at June 30, 2014.  Volatility in the financial markets could impair Indemnity’s ability to sell certain of its fixed income securities or cause such securities to sell at deep discounts.  Additionally, Indemnity has the ability to curtail or modify discretionary cash outlays such as those related to shareholder dividends and share repurchase activities.

As of June 30, 2014, Indemnity has access to a $100 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on November 3, 2018. As of June 30, 2014, a total of $98.2 million remains available under the facility due to $1.8 million outstanding letters of credit, which reduce the availability for letters of credit to $23.2 million.  Indemnity had no borrowings outstanding on its line of credit as of June 30, 2014. Bonds with a fair value of $113 million were pledged as collateral on the line at June 30, 2014. These securities have no trading restrictions and are reported as available-for-sale fixed maturities in the Consolidated Statements of Financial Position.  The bank requires compliance with certain covenants, which include leverage ratios for Indemnity.  Indemnity was in compliance with its bank covenants at June 30, 2014.

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Exchange

Outside of the Exchange’s normal operating and investing cash activities, future funding requirements could be met through: 1) the Exchange’s cash and cash equivalents, which total approximately $237 million at June 30, 2014, 2) a $300 million bank revolving line of credit held by the Exchange, and 3) liquidation of assets held in the Exchange’s investment portfolio, including common stock, preferred stock, and investment grade bonds which totaled approximately $12.2 billion at June 30, 2014.  Volatility in the financial markets could impair the Exchange’s ability to sell certain of its fixed income securities or cause such securities to sell at deep discounts.

As of June 30, 2014, the Exchange has access to a $300 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on October 25, 2018. As of June 30, 2014, a total of $298.9 million remains available under the facility due to $1.1 million outstanding letters of credit, which reduce the availability for letters of credit to $23.9 million.  The Exchange had no borrowings outstanding on its line of credit as of June 30, 2014.  Bonds with a fair value of $331 million were pledged as collateral on the line at June 30, 2014. These securities have no trading restrictions and are reported as available-for-sale fixed maturities in the Consolidated Statements of Financial Position.  The bank requires compliance with certain covenants, which include statutory surplus and risk based capital ratios for the Exchange.  The Exchange was in compliance with its bank covenants at June 30, 2014.

Indemnity has no rights to the assets, capital, or line of credit of the Exchange and, conversely, the Exchange has no rights to the assets, capital, or line of credit of Indemnity.  We believe we have the funding sources available to us to support our cash flow requirements in 2014. 

Off-Balance Sheet Arrangements

Off-balance sheet arrangements include those with unconsolidated entities that may have a material current or future effect on our financial condition or results of operations, including material variable interests in unconsolidated entities that conduct certain activities.  We have no material off-balance sheet obligations or guarantees, other than limited partnership investment commitments. 

Surplus Notes

Indemnity holds a surplus note for $25 million from EFL that is payable on demand on or after December 31, 2018; however, no principal or interest payments may be made without prior approval of the Pennsylvania Insurance Commissioner.  Interest payments are scheduled to be paid semi-annually.  For the six months ended June 30, 2014 and 2013, Indemnity recognized interest income on the note of $0.8 million.

The Exchange holds a surplus note for $20 million from EFL that is payable on demand on or after December 31, 2025; however, no principal or interest payments may be made without prior approval of the Pennsylvania Insurance Commissioner.  Interest payments are scheduled to be paid semi-annually.  For the six months ended June 30, 2014 and 2013, the Exchange recognized interest income on the note of $0.6 million.

CRITICAL ACCOUNTING ESTIMATES

We make estimates and assumptions that have a significant effect on the amounts and disclosures reported in the financial statements.  The most significant estimates relate to the property and casualty insurance losses and loss expense reserves, life insurance and annuity policy reserves, investment valuation, deferred acquisition costs related to life insurance and investment-type contracts, deferred taxes, and retirement benefit plans for employees.  While management believes its estimates are appropriate, the ultimate amounts may differ from estimates provided.  Our most critical accounting estimates are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for the year ended December 31, 2013 of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 27, 2014.  See Item 1. “Financial Statements - Note 6. Fair Value,” contained within this report for additional information on our valuation of investments.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is primarily related to fluctuations in prices and interest rates.  Quantitative and qualitative disclosures about market risk resulting from changes in prices, interest rates, and other risk exposures for the year ended December 31, 2013 are included in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 27, 2014.

There have been no material changes that impact our portfolio or reshape our periodic investment reviews of asset allocations during the six months ended June 30, 2014.  For a recent discussion of conditions surrounding our investment portfolio, see the “Operating Overview,” “Investment Operations,” and “Financial Condition, Investments” discussions contained in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained within this report.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Our management evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer, any change in our internal control over financial reporting and determined there has been no change in our internal control over financial reporting during the six months ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

State Court Lawsuit Against Erie Indemnity Company

Erie Indemnity Company (“Indemnity”) was named as a defendant in a complaint filed on August 1, 2012 by alleged subscribers of the Erie Insurance Exchange (the “Exchange”) in the Court of Common Pleas Civil Division of Fayette County, Pennsylvania captioned Erie Insurance Exchange, an unincorporated association, by Joseph S. Sullivan and Anita Sullivan, Patricia R. Beltz, and Jenna L. DeBord, trustees ad litem v. Erie Indemnity Co. (the “Sullivan” lawsuit).

As subsequently amended, the complaint alleges that, beginning on September 1, 1997, Indemnity retained “Service Charges” (installment fees) and “Added Service Charges” (late fees and policy reinstatement charges) on policies written by the Exchange and its insurance subsidiaries, which allegedly should have been paid to the Exchange, in the amount of approximately $308 million. In addition to their claim for monetary relief on behalf of the Exchange, the plaintiffs seek an accounting of all so-called intercompany transactions between Indemnity and the Exchange from 1996 to date. Plaintiffs allege that Indemnity breached its contractual, fiduciary, and equitable duties by retaining Service Charges and Added Service Charges that should have been retained by the Exchange. Plaintiffs bring these same claims under three separate derivative-type theories. First, plaintiffs purport to bring suit as members of the Exchange on behalf of the Exchange. Second, plaintiffs purport to bring suit as trustees ad litem on behalf of the Exchange. Third, plaintiffs purport to bring suit on behalf of the Exchange pursuant to Rule 1506 of the Pennsylvania Rules of Civil Procedure, which allows shareholders to bring suit derivatively on behalf of a corporation or similar entity.

Indemnity filed a motion in the state court in November 2012 seeking dismissal of the lawsuit. On December 19, 2013, the court granted Indemnity’s motion in part, holding that the Pennsylvania Insurance Holding Company Act “provides the [Pennsylvania Insurance] Department with special competence to address the subject matter of plaintiff’s claims” and referring “all issues” in the Sullivan lawsuit to the Pennsylvania Insurance Department (the “Department”) for “its views and any determination.” The court stayed all further proceedings and reserved decision on all other grounds for dismissal raised by Indemnity. Plaintiffs sought reconsideration of the court’s order, and on January 13, 2014, the court entered a revised order affirming its prior order and clarifying that the Department “shall decide any and all issues within its jurisdiction.” On January 30, 2014, Plaintiffs asked the court to certify its order to permit an immediate appeal to the Superior Court and to stay any proceedings in the Department pending completion of any appeal. On February 18, 2014, the court issued an order denying Plaintiffs’ motion. On March 20, 2014, Plaintiffs filed a petition for review with the Superior Court of Pennsylvania. Indemnity filed an answer to the petition on April 3, 2014. On May 5, 2014, the Superior Court denied Plaintiffs’ petition for review.

The Sullivan matter is currently proceeding before the Pennsylvania Insurance Department and has been assigned to an Administrative Judge for determination. In the event that a hearing is required, the Administrative Judge has scheduled the hearing for September 16, 2014.

Indemnity believes that it has meritorious legal and factual defenses and intends to vigorously defend against all allegations and requests for relief.

Federal Court Lawsuit Against Directors

On February 6, 2013, a lawsuit was filed in the United States District Court for the Western District of Pennsylvania, captioned Erie Insurance Exchange, an unincorporated association, by members Patricia R. Beltz, Joseph S. Sullivan and Anita Sullivan, and Patricia R. Beltz, on behalf of herself and others similarly situate v. Richard L. Stover; J. Ralph Borneman, Jr; Terrence W. Cavanaugh; Jonathan Hirt Hagen; Susan Hirt Hagen; Thomas B. Hagen; C. Scott Hartz; Claude C. Lilly, III; Lucian L. Morrison; Thomas W. Palmer; Martin P. Sheffield; Elizabeth H. Vorsheck; and Robert C. Wilburn (the “Beltz” lawsuit), by alleged policyholders of the Exchange who are also the plaintiffs in the Sullivan lawsuit. The individuals named as defendants in the Beltz lawsuit were the then-current Directors of Indemnity.

As subsequently amended, the Beltz lawsuit asserts many of the same allegations and claims for monetary relief as in the Sullivan lawsuit. Plaintiffs purport to sue on behalf of all policyholders of the Exchange, or, alternatively, on behalf of the Exchange itself. Indemnity filed a motion to intervene as a Party Defendant in the Beltz lawsuit in July 2013, and the Directors filed a motion to dismiss the lawsuit in August 2013. On February 10, 2014, the court entered an order granting Indemnity’s motion to intervene and permitting Indemnity to join the Directors’ motion to dismiss; granting in part the Directors’ motion to dismiss; referring the matter to the Department to decide any and all issues within its jurisdiction; denying all other relief sought in the Directors’ motion as moot; and dismissing the case without prejudice. To avoid duplicative proceedings and expedite the Department’s review, the Parties have stipulated that only the Sullivan action will proceed before the Department

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and any final and non-appealable determinations made by the Department in the Sullivan action will be applied to the Beltz action. On March 7, 2014, Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Third Circuit. Indemnity filed a motion to dismiss the appeal on April 3, 2014. The Court of Appeals for the Third Circuit has not yet rendered a decision on either Plaintiffs’ appeal or Indemnity’s motion to dismiss the appeal.

Indemnity believes that it has meritorious legal and factual defenses and intends to vigorously defend against all allegations and requests for relief in the Beltz lawsuit. The Directors have also advised Indemnity that they intend to vigorously defend against the claims in the Beltz lawsuit and have sought indemnification and advancement of expenses from the Company in connection with the Beltz lawsuit.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table summarizes Indemnity’s Class A common stock repurchased each month, based upon trade date, during the quarter ended June 30, 2014:

(dollars in millions, except per share data)  Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
April 1 – 30, 2014	78,781	$	70.39	78,781	$20
May 1 – 31, 2014	44,541	75.26		15,281	19
Jun 1 – 30, 2014	52,434	75.55		20,096	18
Total	175,756			114,158

In October 2011, our Board of Directors approved a continuation of the current stock repurchase program, authorizing repurchases for a total of $150 million with no time limitation.  This repurchase authority included, and was not in addition to, any unspent amounts remaining under the prior authorization.

During the quarter ended June 30, 2014, we repurchased 7,227 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $552,503, or $76.45 per share, for the vesting of stock-based awards for a former outside director. These shares were delivered in May 2014. Additionally, we repurchased 54,371 shares of our outstanding Class A nonvoting common stock outside of our publicly announced share repurchase program at a total cost of $4,143,544, or $76.21 per share, for the vesting of stock-based awards in conjunction with our long-term incentive plan. These shares were delivered to plan participants in June 2014.

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ITEM 6. EXHIBITS

Exhibit
Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Erie Indemnity Company
			(Registrant)
Date:	July 31, 2014	By:	/s/ Terrence W. Cavanaugh
			Terrence W. Cavanaugh, President & CEO
		By:	/s/ Marcia A. Dall
			Marcia A. Dall, Executive Vice President & CFO

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Terrence W. Cavanaugh, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Erie Indemnity Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	July 31, 2014
		/s/ Terrence W. Cavanaugh
		Terrence W. Cavanaugh
		President & CEO

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Marcia A. Dall, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Erie Indemnity Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	July 31, 2014
		/s/ Marcia A. Dall
		Marcia A. Dall
		Executive Vice President & CFO

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

We, Terrence W. Cavanaugh, Chief Executive Officer of the Erie Indemnity Company (the "Company"), and Marcia A. Dall, Chief Financial Officer of the Company, certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that:

(1) The Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2014 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Terrence W. Cavanaugh

Terrence W. Cavanaugh

President & CEO

/s/ Marcia A. Dall

Marcia A. Dall

Executive Vice President & CFO

July 31, 2014

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Fair Value (Details 3) (Fair value measurements on a recurring basis, USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014 Holdings
Fair value inputs assets quantitative information
Fair value (in dollars)	$ 162
No. of holdings	22
Maximum
Unobservable input
Securities priced via unobservable inputs as a percentage of total portfolio (as a percent)	1.20%
Indemnity
Fair value inputs assets quantitative information
Fair value (in dollars)	19
No. of holdings	4
Indemnity | Corporate debt securities | Market approach
Fair value inputs assets quantitative information
Fair value (in dollars)	1
No. of holdings	1
Unobservable input
Non-binding broker quote (in dollars per share)	$ 114
Indemnity | Collateralized debt obligations | Income approach
Fair value inputs assets quantitative information
Fair value (in dollars)	0
No. of holdings	1
Unobservable input
Repayment at maturity (as a percent)	1.00%
Discount rate (as a percent)	15.00%
Indemnity | Real estate
Fair value inputs assets quantitative information
Fair value (in dollars)	18
No. of holdings	2
Exchange
Fair value inputs assets quantitative information
Fair value (in dollars)	143
No. of holdings	18
Exchange | Corporate debt securities | Market approach
Fair value inputs assets quantitative information
Fair value (in dollars)	25
No. of holdings	7
Unobservable input
Comparable security yield (as a percent)	6.00%
Exchange | Corporate debt securities | Market approach | Minimum
Unobservable input
Non-binding broker quote (in dollars per share)	$ 109
Comparable transaction EBITDA mutiples (as a multiple)	8.0
Exchange | Corporate debt securities | Market approach | Maximum
Unobservable input
Non-binding broker quote (in dollars per share)	$ 117
Comparable transaction EBITDA mutiples (as a multiple)	12.1
Exchange | Corporate debt securities | Market approach | Weighted average
Unobservable input
Non-binding broker quote (in dollars per share)	$ 111
Comparable transaction EBITDA mutiples (as a multiple)	8.0
Exchange | Collateralized debt obligations | Income approach
Fair value inputs assets quantitative information
Fair value (in dollars)	0
No. of holdings	2
Exchange | Collateralized debt obligations | Income approach | Minimum
Unobservable input
Repayment at maturity (as a percent)	1.00%
Discount rate (as a percent)	15.00%
Exchange | Collateralized debt obligations | Income approach | Maximum
Unobservable input
Repayment at maturity (as a percent)	100.00%
Discount rate (as a percent)	18.00%
Exchange | Collateralized debt obligations | Income approach | Weighted average
Unobservable input
Repayment at maturity (as a percent)	64.00%
Discount rate (as a percent)	17.00%
Exchange | Nonredeemable preferred stock | Market approach
Fair value inputs assets quantitative information
Fair value (in dollars)	1
No. of holdings	1
Exchange | Nonredeemable preferred stock | Market approach | Minimum
Unobservable input
Comparable company price-to-sales ratio (as a ratio)	12.0
Exchange | Nonredeemable preferred stock | Market approach | Maximum
Unobservable input
Comparable company price-to-sales ratio (as a ratio)	22.0
Exchange | Nonredeemable preferred stock | Market approach | Weighted average
Unobservable input
Comparable company price-to-sales ratio (as a ratio)	19.0
Exchange | Common stock | Market approach
Fair value inputs assets quantitative information
Fair value (in dollars)	15
No. of holdings	4
Exchange | Common stock | Market approach | Minimum
Unobservable input
Comparable transaction EBITDA mutiples (as a multiple)	8.0
Discount for lack of marketability (as a percent)	5.00%
Exchange | Common stock | Market approach | Maximum
Unobservable input
Comparable transaction EBITDA mutiples (as a multiple)	12.1
Discount for lack of marketability (as a percent)	30.00%
Exchange | Common stock | Market approach | Weighted average
Unobservable input
Comparable transaction EBITDA mutiples (as a multiple)	8.0
Discount for lack of marketability (as a percent)	10.00%
Exchange | Real estate
Fair value inputs assets quantitative information
Fair value (in dollars)	$ 102
No. of holdings	4

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Indemnity Accumulated Other Comprehensive Income (Loss) (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented
Net realized investment gains	$ 133	$ 61	$ 189	$ 310
Net impairment losses recognized in earnings	0	(1)	0	(1)
Income (loss) from operations before income taxes and noncontrolling interest	147	263	303	699
Provision for income taxes	44	86	91	232
Net income (loss)	103	177	212	467	1,048
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	54	133	117	386
Net income attributable to Indemnity	49	44	95	81
Amounts reclassified from accumulated other comprehensive income (loss)
Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented
Net income attributable to Indemnity	0		1
Unrealized holding gains (losses) on available-for-sale securities | Amounts reclassified from accumulated other comprehensive income (loss)
Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented
Net realized investment gains	5		18
Net impairment losses recognized in earnings	0		0
Income (loss) from operations before income taxes and noncontrolling interest	5		18
Provision for income taxes	2		7
Net income (loss)	3		11
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	3		10
Net income attributable to Indemnity	0		1
Amortization of postretirement plan items | Amounts reclassified from accumulated other comprehensive income (loss)
Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented
Net income attributable to Indemnity	$ 0		$ 0

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Bank Line of Credit (Details) (Revolving line of credit, USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Indemnity
Bank Line of Credit
Maximum borrowing capacity under the bank revolving line of credit	$ 100
Maximum letter of credit sublimit under the bank revolving line of credit	25
Expiration date of the bank revolving line of credit	Nov. 03, 2018
Available borrowing capacity under the bank revolving line of credit, due to outstanding letters of credit	98.2
Outstanding amount of letters of credit under the bank revolving line of credit	1.8
Available amount of letters of credit under the bank revolving line of credit	23.2
Borrowings outstanding under the bank revolving line of credit	0
Fair value of bonds pledged as collateral on the bank revolving line of credit	113
Exchange
Bank Line of Credit
Maximum borrowing capacity under the bank revolving line of credit	300
Maximum letter of credit sublimit under the bank revolving line of credit	25
Expiration date of the bank revolving line of credit	Oct. 25, 2018
Available borrowing capacity under the bank revolving line of credit, due to outstanding letters of credit	298.9
Outstanding amount of letters of credit under the bank revolving line of credit	1.1
Available amount of letters of credit under the bank revolving line of credit	23.9
Borrowings outstanding under the bank revolving line of credit	0
Fair value of bonds pledged as collateral on the bank revolving line of credit	$ 331

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Indemnity Shareholders' Equity and Noncontrolling Interest (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Reconciliation of the beginning and ending balances of Indemnity's shareholders' equity and the noncontrolling interest
Balance, beginning of period			$ 7,550	$ 6,791	$ 6,791
Net income	103	177	212	467	1,048
Change in other comprehensive income (loss), net of tax	65	(197)	137	(219)	(144)
Net purchase of treasury stock			(19)		(32)
Dividends declared:
Balance, end of period	7,821		7,821		7,550
Class A
Dividends declared:
Dividends declared			(59)		(112)
Class B
Dividends declared:
Dividends declared			0		(1)
Indemnity
Reconciliation of the beginning and ending balances of Indemnity's shareholders' equity and the noncontrolling interest
Balance, beginning of period			734	642	642
Net income			95		163
Change in other comprehensive income (loss), net of tax			4		74
Net purchase of treasury stock			(19)		(32)
Dividends declared:
Balance, end of period	755		755		734
Indemnity | Class A
Dividends declared:
Dividends declared (in dollars per share)	$ 0.6350	$ 0.5925	$ 1.2700	$ 1.1850	$ 2.4125
Dividends declared			(59)		(112)
Indemnity | Class B
Dividends declared:
Dividends declared (in dollars per share)	$ 95.2500	$ 88.8750	$ 190.5000	$ 177.7500	$ 361.8750
Dividends declared			0		(1)
Exchange
Reconciliation of the beginning and ending balances of Indemnity's shareholders' equity and the noncontrolling interest
Balance, beginning of period			6,816	6,149	6,149
Net income			117		885
Change in other comprehensive income (loss), net of tax			133		(218)
Dividends declared:
Balance, end of period	$ 7,066		$ 7,066		$ 6,816

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Investments Investments (Details 6) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Investments in limited partnerships
Equity in earnings of limited partnerships	$ 27	$ 39	$ 77	$ 75
Indemnity
Investments in limited partnerships
Equity in earnings of limited partnerships	3	5	9	8
Indemnity | Equity method of accounting
Investments in limited partnerships
Equity in earnings of limited partnerships	2	5	7	7
Indemnity | Fair value option
Investments in limited partnerships
Equity in earnings of limited partnerships	1	0	2	1
Exchange
Investments in limited partnerships
Equity in earnings of limited partnerships	24	34	68	67
Exchange | Equity method of accounting
Investments in limited partnerships
Equity in earnings of limited partnerships	18	31	57	60
Exchange | Fair value option
Investments in limited partnerships
Equity in earnings of limited partnerships	$ 6	$ 3	$ 11	$ 7

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Nature of Operations (Details) (Property and casualty insurance operations)	Jun. 30, 2014 States
Property and casualty insurance operations
Product information
Number of states in which the Property and Casualty Group operates	11

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Indemnity Supplemental Information (Details) (USD $) In Millions, unless otherwise specified												6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2014 Indemnity	Dec. 31, 2013 Indemnity	Jun. 30, 2013 Indemnity	Dec. 31, 2012 Indemnity	Jun. 30, 2014 Exchange	Dec. 31, 2013 Exchange	Dec. 31, 2012 Exchange	Jun. 30, 2014 Erie Family Life Insurance Company (EFL)	Jun. 30, 2013 Erie Family Life Insurance Company (EFL)	Dec. 31, 2013 Erie Family Life Insurance Company (EFL)	Jun. 30, 2014 Reclassifications and eliminations	Dec. 31, 2013 Reclassifications and eliminations
Available-for-sale securities, at fair value:
Fixed maturities	$ 9,198	$ 8,688			$ 497	$ 526			$ 8,701	$ 8,162
Equity securities	940	869			26	50			914	819
Trading securities, at fair value	3,377	3,202							3,377	3,202
Limited partnerships	1,072	1,086			141	146			931	940
Other invested assets	21	21			1	1			20	20
Total investments	14,608	13,866			665	723			13,943	13,143
Cash and cash equivalents	300	452	365	400	63	49	39	12	237	403
Premiums receivable from policyholders	1,287	1,167							1,287	1,167
Reinsurance recoverable	168	172							168	172
Deferred income tax asset	1	2			1	2			0	0
Deferred acquisition costs	579	566							579	566
Other assets	517	451			112	114			405	337
Receivables from the Exchange and other affiliates					339	300									(339)	(300)
Note receivable from EFL					25	25						25			(25)	(25)
Total assets	17,460	16,676			1,205	1,213			16,619	15,788					(364)	(325)
Liabilities
Losses and loss expense reserves	3,964	3,747							3,964	3,747
Life policy and deposit contract reserves	1,789	1,758							1,789	1,758
Unearned premiums	2,788	2,598							2,788	2,598
Deferred income tax liability	557	450			0	0			557	450
Other liabilities, adjusted for consolidation presentation	541	573			450	479			455	419					(364)	(325)
Total liabilities	9,639	9,126			450	479			9,553	8,972					(364)	(325)
Shareholders' equity and noncontrolling interest
Total Indemnity shareholders' equity	755	734			755	734
Noncontrolling interest in consolidated entity - Exchange	7,066	6,816							7,066	6,816
Total equity	7,821	7,550		6,791	755	734		642	7,066	6,816	6,149
Total liabilities, shareholders' equity, and noncontrolling interest	17,460	16,676			1,205	1,213			16,619	15,788					(364)	(325)
Receivables from the Exchange and EFL									335	296		4		4
Note receivable from EFL, annual interest rate (as a percent)												6.70%
Note receivable from EFL, interest income recognized by Indemnity												$ 0.8	$ 0.8

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Indemnity Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of reconciliation of the numerators and denominators used in the basic and diluted per-share computations

A reconciliation of the numerators and denominators used in the basic and diluted per-share computations is presented as follows for each class of Indemnity common stock:

	Indemnity Shareholder Interest
(dollars in millions, except per share data)	Three months ended June 30,
	2014					2013
	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per- share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	49	46,214,153	$	1.05	$	44	46,693,333	$	0.95
Dilutive effect of stock-based awards	0		96,461	—		0		92,126	—
Assumed conversion of Class B shares	0		6,100,800	—		0		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	49	52,411,414	$	0.94	$	44	52,886,259	$	0.84
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$	0	2,542	$	158	$	0	2,542	$	142

	Indemnity Shareholder Interest
(dollars in millions, except per share data)	Six months ended June 30,
	2014					2013
	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per- share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	94	46,307,659	$	2.04	$	80	46,733,925	$	1.73
Dilutive effect of stock-based awards	0		96,461	—		0		92,126	—
Assumed conversion of Class B shares	1		6,100,800	—		1		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	95	52,504,920	$	1.82	$	81	52,926,851	$	1.54
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$	1	2,542	$	307	$	1	2,542	$	259

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Postretirement Benefits (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Postretirement Benefits
Postretirement annual benefit expense reimbursed to Indemnity from the Exchange and EFL (as a percent)			55.00%
Cost of pension plans
Service cost for benefits earned	$ 5	$ 6	$ 11	$ 13
Interest cost on benefits obligation	7	7	14	13
Expected return on plan assets	(8)	(7)	(16)	(15)
Prior service cost amortization	1	1	1	1
Net actuarial loss amortization	1	3	3	7
Pension plan cost	6	10	13	19
Erie Family Life Insurance Company (EFL)
Postretirement Benefits
Contingent liability for amount of nonparticipating annuity contracts the employee pension plan purchased from EFL	$ 26		$ 26

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Investments (Details 2) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Amortized cost
Total fixed maturities	$ 8,633
Estimated fair value
Estimated fair value, fixed maturities	9,198	8,688
Indemnity
Amortized cost
Due in one year or less	69
Due after one year through five years	229
Due after five years through ten years	113
Due after ten years	73
Total fixed maturities	484
Estimated fair value
Due in one year or less	69
Due after one year through five years	232
Due after five years through ten years	118
Due after ten years	78
Estimated fair value, fixed maturities	497	526
Exchange
Amortized cost
Due in one year or less	377
Due after one year through five years	3,155
Due after five years through ten years	3,094
Due after ten years	1,523
Total fixed maturities	8,149
Estimated fair value
Due in one year or less	384
Due after one year through five years	3,365
Due after five years through ten years	3,303
Due after ten years	1,649
Estimated fair value, fixed maturities	$ 8,701	$ 8,162

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Fair Value (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended																																																																													6 Months Ended	12 Months Ended																																																																																																													6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Fair value measurements on a recurring basis	Dec. 31, 2013 Fair value measurements on a recurring basis	Jun. 30, 2014 Fair value measurements on a recurring basis Level 1	Dec. 31, 2013 Fair value measurements on a recurring basis Level 1	Jun. 30, 2014 Fair value measurements on a recurring basis Level 2	Dec. 31, 2013 Fair value measurements on a recurring basis Level 2	Jun. 30, 2014 Fair value measurements on a recurring basis Level 3	Dec. 31, 2013 Fair value measurements on a recurring basis Level 3	Jun. 30, 2014 Fair value measurements on a recurring basis Level 3 Real estate fund	Dec. 31, 2013 Fair value measurements on a recurring basis Level 3 Real estate fund	Jun. 30, 2014 Indemnity	Dec. 31, 2013 Indemnity	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Fixed maturities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Fixed maturities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis States & political subdivisions	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis States & political subdivisions	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Corporate debt securities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Corporate debt securities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Collateralized debt obligations	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Collateralized debt obligations	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Nonredeemable preferred stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Nonredeemable preferred stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Common stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Common stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Real estate	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Real estate	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 Fixed maturities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 Fixed maturities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 States & political subdivisions	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 States & political subdivisions	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 Corporate debt securities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 Corporate debt securities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 Collateralized debt obligations	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 Collateralized debt obligations	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 Nonredeemable preferred stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 Nonredeemable preferred stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 Common stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 Common stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 1 Real estate	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 1 Real estate	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 Fixed maturities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 Fixed maturities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 States & political subdivisions	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 States & political subdivisions	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 Corporate debt securities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 Corporate debt securities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 Collateralized debt obligations	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 Collateralized debt obligations	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 Nonredeemable preferred stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 Nonredeemable preferred stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 Common stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 Common stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 2 Real estate	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 2 Real estate	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 Fixed maturities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 Fixed maturities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 States & political subdivisions	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 States & political subdivisions	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 Corporate debt securities	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 Corporate debt securities	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 Collateralized debt obligations	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 Collateralized debt obligations	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 Nonredeemable preferred stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 Nonredeemable preferred stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 Common stock	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 Common stock	Jun. 30, 2014 Indemnity Fair value measurements on a recurring basis Level 3 Real estate	Dec. 31, 2013 Indemnity Fair value measurements on a recurring basis Level 3 Real estate	Jun. 30, 2014 Exchange	Dec. 31, 2013 Exchange	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis U.S. government & agencies	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis U.S. treasury	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Government sponsored enterprises	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis States & political subdivisions	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis States & political subdivisions	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Foreign government securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Foreign government securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Corporate debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Corporate debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Residential mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Residential mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Commercial mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Commercial mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Collateralized debt obligations	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Collateralized debt obligations	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Other debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Other debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Nonredeemable preferred stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Nonredeemable preferred stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Common stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Common stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Real estate	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Real estate	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 U.S. government & agencies	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 U.S. treasury	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Government sponsored enterprises	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 States & political subdivisions	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 States & political subdivisions	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Foreign government securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Foreign government securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Corporate debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Corporate debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Residential mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Residential mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Commercial mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Commercial mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Collateralized debt obligations	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Collateralized debt obligations	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Other debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Other debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Nonredeemable preferred stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Nonredeemable preferred stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Common stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Common stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 1 Real estate	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 1 Real estate	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 U.S. government & agencies	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 U.S. treasury	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Government sponsored enterprises	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 States & political subdivisions	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 States & political subdivisions	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Foreign government securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Foreign government securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Corporate debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Corporate debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Residential mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Residential mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Commercial mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Commercial mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Collateralized debt obligations	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Collateralized debt obligations	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Other debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Other debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Nonredeemable preferred stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Nonredeemable preferred stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Common stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Common stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 2 Real estate	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 2 Real estate	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Fixed maturities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 U.S. government & agencies	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 U.S. treasury	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Government sponsored enterprises	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 States & political subdivisions	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 States & political subdivisions	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Foreign government securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Foreign government securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Corporate debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Corporate debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Residential mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Residential mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Commercial mortgage-backed securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Commercial mortgage-backed securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Collateralized debt obligations	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Collateralized debt obligations	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Other debt securities	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Other debt securities	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Nonredeemable preferred stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Nonredeemable preferred stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Common stock	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Common stock	Jun. 30, 2014 Exchange Fair value measurements on a recurring basis Level 3 Real estate	Dec. 31, 2013 Exchange Fair value measurements on a recurring basis Level 3 Real estate	Jun. 30, 2014 Minimum Fair value measurements on a recurring basis Level 3 Real estate	Dec. 31, 2013 Minimum Fair value measurements on a recurring basis Level 3 Real estate	Jun. 30, 2014 Maximum Fair value measurements on a recurring basis Level 3 Real estate	Dec. 31, 2013 Maximum Fair value measurements on a recurring basis Level 3 Real estate
Fair value measurements on a recurring basis by asset class and level of input
Available-for-sale securities	$ 10,138		$ 9,557											$ 523	$ 576	$ 523	$ 576	$ 497	$ 526	$ 241	$ 243	$ 256	$ 282	$ 0	$ 1	$ 14	$ 25	$ 12	$ 25			$ 14	$ 27	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 2	$ 2	$ 12	$ 25			$ 508	$ 547	$ 496	$ 524	$ 241	$ 243	$ 255	$ 281	$ 0	$ 0	$ 12	$ 23	$ 0	$ 0			$ 1	$ 2	$ 1	$ 2	$ 0	$ 0	$ 1	$ 1	$ 0	$ 1	$ 0	$ 0	$ 0	$ 0			$ 9,615	$ 8,981	$ 9,615	$ 8,981	$ 8,701	$ 8,162	$ 172	$ 31	$ 4	$ 1,519	$ 1,470	$ 15	$ 15	$ 6,866	$ 6,211	$ 146	$ 156	$ 34	$ 47	$ 14	$ 16	$ 72	$ 75	$ 717	$ 621	$ 197	$ 198			$ 500	$ 440	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 303	$ 242	$ 197	$ 198			$ 9,089	$ 8,510	$ 8,676	$ 8,131	$ 172	$ 31	$ 4	$ 1,519	$ 1,470	$ 15	$ 15	$ 6,841	$ 6,185	$ 146	$ 156	$ 34	$ 47	$ 14	$ 11	$ 72	$ 75	$ 413	$ 379	$ 0	$ 0			$ 26	$ 31	$ 25	$ 31	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 25	$ 26	$ 0	$ 0	$ 0	$ 0	$ 0	$ 5	$ 0	$ 0	$ 1	$ 0	$ 0	$ 0
Trading securities																																																																																		3,377	3,202																						3,377	3,202			3,362	3,187																						3,362	3,187			0	0																						0	0			15	15																						15	15
Other investments																														18	18															0	0															0	0															18	18																												102	98																										0	0																										0	0																										102	98
Total				13,635	12,875	3,876	3,654	9,597	9,057	162	164					541	594															14	27															508	547															19	20																	13,094	12,281																										3,862	3,627																										9,089	8,510																										143	144
Other investments:
Number of real estate funds reported under fair value option												4	4
Underlying assets, liquidation period from inception of fund																																																																																																																																																																																														5 years	5 years	10 years	10 years
Contributions made to the funds	46.0	52.0																																																																												0	0																																																																																																													0	0
Distributions received from the funds	70.0	86.0																																																																												1.8	2.4																																																																																																													6.9	21.7
Unfunded commitments																																																																														$ 1.5	$ 1.5																																																																																																													$ 4.5	$ 4.5

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Indemnity Capital Stock (Details 2) (Indemnity, Class A, Stock repurchase program, USD $) In Millions, unless otherwise specified	1 Months Ended	6 Months Ended
	Oct. 31, 2011	Jun. 30, 2014
Indemnity | Class A | Stock repurchase program
Stock repurchases
Amount of authorized stock repurchases approved for continuation under the current program	$ 150
Approximate amount of repurchase authority remaining under the current stock repurchase program		$ 18

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Investments (Details 7) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Investments in limited partnerships
Equity in earnings of limited partnerships	$ 27,000,000	$ 39,000,000	$ 77,000,000	$ 75,000,000
Asset recorded	1,072,000,000		1,072,000,000		1,086,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			7,000,000		(28,000,000)
Income (loss) recorded			70,000,000		189,000,000
Per the limited partner financial statements
Total partnership assets	47,000,000,000		47,000,000,000		50,000,000,000
Total partnership liabilities	4,000,000,000		4,000,000,000		5,000,000,000
Total partnership valuation adjustment gains (losses)			500,000,000		2,000,000,000
Total partnership net income			3,000,000,000		7,000,000,000
Indemnity
Investments in limited partnerships
Equity in earnings of limited partnerships	3,000,000	5,000,000	9,000,000	8,000,000
Number of partnerships	58		58		61
Asset recorded	141,000,000		141,000,000		146,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			3,000,000		(3,000,000)
Income (loss) recorded			6,000,000		25,000,000
Indemnity | Private equity
Investments in limited partnerships
Number of partnerships	27		27		29
Asset recorded	58,000,000		58,000,000		62,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			0		(3,000,000)
Income (loss) recorded			4,000,000		9,000,000
Indemnity | Private equity | Less than 10%
Investments in limited partnerships
Number of partnerships	24		24		26
Asset recorded	39,000,000		39,000,000		46,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			(3,000,000)		(6,000,000)
Income (loss) recorded			4,000,000		9,000,000
Indemnity | Private equity | Greater than or equal to 10% but less than 50%
Investments in limited partnerships
Number of partnerships	3		3		3
Asset recorded	19,000,000		19,000,000		16,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			3,000,000		3,000,000
Income (loss) recorded			0		0
Indemnity | Private equity | Greater than 50%
Investments in limited partnerships
Number of partnerships	0		0		0
Asset recorded	0		0		0
Income (loss) recognized due to valuation adjustments by the partnerships			0		0
Income (loss) recorded			0		0
Indemnity | Mezzanine debt
Investments in limited partnerships
Number of partnerships	15		15		15
Asset recorded	18,000,000		18,000,000		20,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			0		0
Income (loss) recorded			1,000,000		3,000,000
Indemnity | Mezzanine debt | Less than 10%
Investments in limited partnerships
Number of partnerships	11		11		11
Asset recorded	12,000,000		12,000,000		14,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			0		0
Income (loss) recorded			1,000,000		1,000,000
Indemnity | Mezzanine debt | Greater than or equal to 10% but less than 50%
Investments in limited partnerships
Number of partnerships	3		3		3
Asset recorded	6,000,000		6,000,000		6,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			0		0
Income (loss) recorded			0		2,000,000
Indemnity | Mezzanine debt | Greater than 50%
Investments in limited partnerships
Number of partnerships	1		1		1
Asset recorded	0		0		0
Income (loss) recognized due to valuation adjustments by the partnerships			0		0
Income (loss) recorded			0		0
Indemnity | Real estate
Investments in limited partnerships
Number of partnerships	16		16		17
Asset recorded	65,000,000		65,000,000		64,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			3,000,000		0
Income (loss) recorded			1,000,000		13,000,000
Indemnity | Real estate | Less than 10%
Investments in limited partnerships
Number of partnerships	11		11		12
Asset recorded	44,000,000		44,000,000		44,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			2,000,000		0
Income (loss) recorded			1,000,000		5,000,000
Indemnity | Real estate | Greater than or equal to 10% but less than 50%
Investments in limited partnerships
Number of partnerships	3		3		3
Asset recorded	15,000,000		15,000,000		14,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			1,000,000		(1,000,000)
Income (loss) recorded			0		4,000,000
Indemnity | Real estate | Greater than 50%
Investments in limited partnerships
Number of partnerships	2		2		2
Asset recorded	6,000,000		6,000,000		6,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			0		1,000,000
Income (loss) recorded			0		4,000,000
Exchange
Investments in limited partnerships
Equity in earnings of limited partnerships	24,000,000	34,000,000	68,000,000	67,000,000
Number of partnerships	100		100		103
Asset recorded	931,000,000		931,000,000		940,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			4,000,000		(25,000,000)
Income (loss) recorded			64,000,000		164,000,000
Exchange | Private equity
Investments in limited partnerships
Number of partnerships	45		45		47
Asset recorded	448,000,000		448,000,000		463,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			8,000,000		(11,000,000)
Income (loss) recorded			25,000,000		81,000,000
Exchange | Private equity | Less than 10%
Investments in limited partnerships
Number of partnerships	42		42		44
Asset recorded	368,000,000		368,000,000		396,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			(7,000,000)		(24,000,000)
Income (loss) recorded			24,000,000		79,000,000
Exchange | Private equity | Greater than or equal to 10% but less than 50%
Investments in limited partnerships
Number of partnerships	3		3		3
Asset recorded	80,000,000		80,000,000		67,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			15,000,000		13,000,000
Income (loss) recorded			1,000,000		2,000,000
Exchange | Private equity | Greater than 50%
Investments in limited partnerships
Number of partnerships	0		0		0
Asset recorded	0		0		0
Income (loss) recognized due to valuation adjustments by the partnerships			0		0
Income (loss) recorded			0		0
Exchange | Mezzanine debt
Investments in limited partnerships
Number of partnerships	27		27		26
Asset recorded	167,000,000		167,000,000		172,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			(1,000,000)		(1,000,000)
Income (loss) recorded			12,000,000		23,000,000
Exchange | Mezzanine debt | Less than 10%
Investments in limited partnerships
Number of partnerships	20		20		19
Asset recorded	113,000,000		113,000,000		117,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			1,000,000		1,000,000
Income (loss) recorded			9,000,000		13,000,000
Exchange | Mezzanine debt | Greater than or equal to 10% but less than 50%
Investments in limited partnerships
Number of partnerships	4		4		4
Asset recorded	23,000,000		23,000,000		23,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			(2,000,000)		(3,000,000)
Income (loss) recorded			2,000,000		7,000,000
Exchange | Mezzanine debt | Greater than 50%
Investments in limited partnerships
Number of partnerships	3		3		3
Asset recorded	31,000,000		31,000,000		32,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			0		1,000,000
Income (loss) recorded			1,000,000		3,000,000
Exchange | Real estate
Investments in limited partnerships
Number of partnerships	28		28		30
Asset recorded	316,000,000		316,000,000		305,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			(3,000,000)		(13,000,000)
Income (loss) recorded			27,000,000		60,000,000
Exchange | Real estate | Less than 10%
Investments in limited partnerships
Number of partnerships	20		20		22
Asset recorded	215,000,000		215,000,000		211,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			8,000,000		(10,000,000)
Income (loss) recorded			10,000,000		34,000,000
Exchange | Real estate | Greater than or equal to 10% but less than 50%
Investments in limited partnerships
Number of partnerships	6		6		6
Asset recorded	77,000,000		77,000,000		71,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			3,000,000		(2,000,000)
Income (loss) recorded			1,000,000		10,000,000
Exchange | Real estate | Greater than 50%
Investments in limited partnerships
Number of partnerships	2		2		2
Asset recorded	24,000,000		24,000,000		23,000,000
Income (loss) recognized due to valuation adjustments by the partnerships			(14,000,000)		(1,000,000)
Income (loss) recorded			$ 16,000,000		$ 16,000,000

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

Note 2.  Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Indemnity together with its affiliate companies in which Indemnity holds a majority voting or economic interest.

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position, results of operations, and cash flows for the interim periods have been included.  Operating results for the six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014.  The accompanying consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014.

Principles of consolidation

We consolidate the Exchange as a variable interest entity for which Indemnity is the primary beneficiary.  All intercompany accounts and transactions have been eliminated in consolidation.  The required presentation of noncontrolling interests is reflected in the consolidated financial statements.  Noncontrolling interests represent the ownership interests of the Exchange, all of which are held by parties other than Indemnity (i.e. the Exchange’s subscribers (policyholders)).  Noncontrolling interests also include the Exchange subscribers’ ownership interest in EFL.

Presentation of assets and liabilities – While the assets of the Exchange are presented separately in the Consolidated Statements of Financial Position, the Exchange’s assets can only be used to satisfy the Exchange’s liabilities or for other unrestricted activities.  Accounting Standards Codification (“ASC”) 810, Consolidation, does not require separate presentation of the Exchange’s assets; however, because the shareholders of Indemnity have no rights to the assets of the Exchange and, conversely, the Exchange has no rights to the assets of Indemnity, we have presented the invested assets of the Exchange separately on the Consolidated Statements of Financial Position along with the remaining consolidated assets reflecting the Exchange’s portion parenthetically.  Liabilities are required under ASC 810, Consolidation, to be presented separately for the Exchange on the Consolidated Statements of Financial Position as the Exchange’s creditors do not have recourse to the general credit of Indemnity.

Rights of shareholders of Indemnity and subscribers (policyholders) of the Exchange – The shareholders of Indemnity, through the management fee, have a controlling financial interest in the Exchange; however, they have no other rights to or obligations arising from assets and liabilities of the Exchange.  The shareholders of Indemnity own its equity but have no rights or interest in the Exchange’s (noncontrolling interest) income or equity.  The noncontrolling interest equity represents the Exchange’s equity held for the interest of its subscribers (policyholders), who have no rights or interest in the Indemnity shareholder interest income or equity.

All intercompany assets, liabilities, revenues, and expenses between Indemnity and the Exchange have been eliminated in the Consolidated Financial Statements.

Pending accounting pronouncements

In January 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-01, Accounting for Investments in Qualified Affordable Housing Projects.  This guidance permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met.  Generally, investors in qualified affordable housing project investments expect to receive substantially all of their return through the receipt of tax credits and other tax benefits.  ASU No. 2014-01 allows for the recording of the investment performance net of taxes as a component of income tax expense to more fairly represent the economics of the investments and provide users with a better understanding of the returns from such investments.  The qualifications to make this accounting election were also made less restrictive.  ASU No. 2014-01 is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted.  While we are currently evaluating whether to make the accounting election and whether the election would be made for early adoption, such election is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 clarifies the principles for recognizing revenue and provides a common revenue standard for GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Insurance contracts are not within the scope of this guidance. ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early application is not permitted. We do not expect the adoption of ASU No. 2014-09 related to the management fee and service agreement revenue to have a material impact on our consolidated financial statements.

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Investments (Details 3) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014 Holdings	Dec. 31, 2013 Holdings
Indemnity
Fair value
Less than 12 months	$ 52	$ 129
12 months or longer	27	26
Total	79	155
Unrealized losses
Less than 12 months	0	3
12 months or longer	1	0
Total	1	3
No. of holdings	179	38
Indemnity | Investment grade
Fair value
Less than 12 months	11	112
12 months or longer	13	10
Total	24	122
Unrealized losses
Less than 12 months	0	1
12 months or longer	0	0
Total	0	1
No. of holdings	7	32
Indemnity | Non-investment grade
Fair value
Less than 12 months	41	0
12 months or longer	0	0
Total	41	0
Unrealized losses
Less than 12 months	0	0
12 months or longer	0	0
Total	0	0
No. of holdings	169	0
Indemnity | Fixed maturities
Fair value
Less than 12 months	52	112
12 months or longer	13	10
Total	65	122
Unrealized losses
Less than 12 months	0	1
12 months or longer	0	0
Total	0	1
No. of holdings	176	32
Indemnity | States & political subdivisions
Fair value
Less than 12 months	3	58
12 months or longer	7	0
Total	10	58
Unrealized losses
Less than 12 months	0	1
12 months or longer	0	0
Total	0	1
No. of holdings	4	21
Indemnity | Corporate debt securities
Fair value
Less than 12 months	49	54
12 months or longer	6	10
Total	55	64
Unrealized losses
Less than 12 months	0	0
12 months or longer	0	0
Total	0	0
No. of holdings	172	11
Indemnity | Nonredeemable preferred stock
Fair value
Less than 12 months	0	5
12 months or longer	2	3
Total	2	8
Unrealized losses
Less than 12 months	0	1
12 months or longer	0	0
Total	0	1
No. of holdings	2	4
Indemnity | Common stock
Fair value
Less than 12 months	0	12
12 months or longer	12	13
Total	12	25
Unrealized losses
Less than 12 months	0	1
12 months or longer	1	0
Total	1	1
No. of holdings	1	2
Exchange
Fair value
Less than 12 months	412	2,050
12 months or longer	624	176
Total	1,036	2,226
Unrealized losses
Less than 12 months	2	74
12 months or longer	13	5
Total	15	79
No. of holdings	446	388
Exchange | Investment grade
Fair value
Less than 12 months	203	1,707
12 months or longer	429	62
Total	632	1,769
Unrealized losses
Less than 12 months	1	57
12 months or longer	9	4
Total	10	61
No. of holdings	131	344
Exchange | Non-investment grade
Fair value
Less than 12 months	167	64
12 months or longer	24	0
Total	191	64
Unrealized losses
Less than 12 months	1	4
12 months or longer	1	0
Total	2	4
No. of holdings	299	14
Exchange | Fixed maturities
Fair value
Less than 12 months	370	1,771
12 months or longer	453	62
Total	823	1,833
Unrealized losses
Less than 12 months	2	61
12 months or longer	10	4
Total	12	65
No. of holdings	430	358
Exchange | U.S. government & agencies
Fair value
Less than 12 months		1
12 months or longer		0
Total		1
Unrealized losses
Less than 12 months		0
12 months or longer		0
Total		0
No. of holdings		2
Exchange | U.S. treasury
Fair value
Less than 12 months	0
12 months or longer	0
Total	0
Unrealized losses
Less than 12 months	0
12 months or longer	0
Total	0
No. of holdings	1
Exchange | States & political subdivisions
Fair value
Less than 12 months	38	408
12 months or longer	111	18
Total	149	426
Unrealized losses
Less than 12 months	0	13
12 months or longer	2	2
Total	2	15
No. of holdings	36	100
Exchange | Foreign government securities
Fair value
Less than 12 months	0	5
12 months or longer	5	0
Total	5	5
Unrealized losses
Less than 12 months	0	0
12 months or longer	0	0
Total	0	0
No. of holdings	1	1
Exchange | Corporate debt securities
Fair value
Less than 12 months	312	1,251
12 months or longer	279	36
Total	591	1,287
Unrealized losses
Less than 12 months	2	43
12 months or longer	6	2
Total	8	45
No. of holdings	376	237
Exchange | Residential mortgage-backed securities
Fair value
Less than 12 months	15	71
12 months or longer	51	8
Total	66	79
Unrealized losses
Less than 12 months	0	4
12 months or longer	2	0
Total	2	4
No. of holdings	12	12
Exchange | Commercial mortgage-backed securities
Fair value
Less than 12 months	1	5
12 months or longer	0	0
Total	1	5
Unrealized losses
Less than 12 months	0	0
12 months or longer	0	0
Total	0	0
No. of holdings	1	1
Exchange | Other debt securities
Fair value
Less than 12 months	4	30
12 months or longer	7	0
Total	11	30
Unrealized losses
Less than 12 months	0	1
12 months or longer	0	0
Total	0	1
No. of holdings	3	5
Exchange | Nonredeemable preferred stock
Fair value
Less than 12 months	42	182
12 months or longer	40	13
Total	82	195
Unrealized losses
Less than 12 months	0	10
12 months or longer	2	1
Total	2	11
No. of holdings	14	27
Exchange | Common stock
Fair value
Less than 12 months	0	97
12 months or longer	131	101
Total	131	198
Unrealized losses
Less than 12 months	0	3
12 months or longer	1	0
Total	$ 1	$ 3
No. of holdings	2	3

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Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Schedule of cost of pension plans

The cost of our pension plans are as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Service cost for benefits earned	$	5		$	6		$	11		$	13
Interest cost on benefits obligation	7			7			14			13
Expected return on plan assets	(8		)	(7		)	(16		)	(15		)
Prior service cost amortization	1			1			1			1
Net actuarial loss amortization	1			3			3			7
Pension plan cost (1)	$	6		$	10		$	13		$	19

(1) Pension plan costs represent the total cost for the Erie Insurance Group before reimbursements to Indemnity from the Exchange and EFL.

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Investments (Tables)

6 Months Ended

Jun. 30, 2014

Investments [Abstract]

Schedule of reconciliation of cost to fair value of available-for-sale securities

The following table summarizes the cost and fair value of our available-for-sale securities at June 30, 2014:

	Erie Insurance Group
	June 30, 2014
(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	230	$	11	$	0	$	241
Corporate debt securities	254		2		0		256
Collateralized debt obligations	0		0		0		0
Total fixed maturities	484		13		0		497
Nonredeemable preferred stock	12		2		0		14
Common stock	13		0		1		12
Total available-for-sale securities – Indemnity	$	509	$	15	$	1	$	523
Exchange
Available-for-sale securities:
U.S. treasury	$	31	$	0	$	0	$	31
Government sponsored enterprises	3		1		0		4
States & political subdivisions	1,438		83		2		1,519
Foreign government securities	15		0		0		15
Corporate debt securities	6,409		465		8		6,866
Residential mortgage-backed securities	145		3		2		146
Commercial mortgage-backed securities	32		2		0		34
Collateralized debt obligations	7		7		0		14
Other debt securities	69		3		0		72
Total fixed maturities	8,149		564		12		8,701
Nonredeemable preferred stock	646		73		2		717
Common stock	196		2		1		197
Total available-for-sale securities – Exchange	$	8,991	$	639	$	15	$	9,615
Total available-for-sale securities – Erie Insurance Group	$	9,500	$	654	$	16	$	10,138

The following table summarizes the cost and fair value of our available-for-sale securities at December 31, 2013:

	Erie Insurance Group
	December 31, 2013
(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	237	$	7	$	1	$	243
Corporate debt securities	280		2		0		282
Collateralized debt obligations	1		0		0		1
Total fixed maturities	518		9		1		526
Nonredeemable preferred stock	24		2		1		25
Common stock	26		0		1		25
Total available-for-sale securities – Indemnity	$	568	$	11	$	3	$	576
Exchange
Available-for-sale securities:
U.S. government & agencies	$	171	$	1	$	0	$	172
States & political subdivisions	1,430		55		15		1,470
Foreign government securities	15		0		0		15
Corporate debt securities	5,902		354		45		6,211
Residential mortgage-backed securities	157		3		4		156
Commercial mortgage-backed securities	45		2		0		47
Collateralized debt obligations	8		8		0		16
Other debt securities	73		3		1		75
Total fixed maturities	7,801		426		65		8,162
Nonredeemable preferred stock	577		55		11		621
Common stock	201		0		3		198
Total available-for-sale securities – Exchange	$	8,579	$	481	$	79	$	8,981
Total available-for-sale securities – Erie Insurance Group	$	9,147	$	492	$	82	$	9,557

Schedule of amortized cost and estimated fair value of fixed maturities by remaining contractual term to maturity

The amortized cost and estimated fair value of fixed maturities at June 30, 2014 are shown below by remaining contractual term to maturity.  Mortgage-backed securities are allocated based upon their stated maturity dates.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Erie Insurance Group
	June 30, 2014
(in millions)	Amortized		Estimated
	cost		fair value
Indemnity
Due in one year or less	$	69	$	69
Due after one year through five years	229		232
Due after five years through ten years	113		118
Due after ten years	73		78
Total fixed maturities – Indemnity	$	484	$	497
Exchange
Due in one year or less	377		384
Due after one year through five years	3,155		3,365
Due after five years through ten years	3,094		3,303
Due after ten years	1,523		1,649
Total fixed maturities – Exchange	$	8,149	$	8,701
Total fixed maturities – Erie Insurance Group	$	8,633	$	9,198

Schedule of available-for-sale securities in a gross unrealized loss position by length of time for securities in a gross unrealized loss position

Available-for-sale securities in a gross unrealized loss position at June 30, 2014 are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	June 30, 2014
(dollars in millions)	Less than 12 months				12 months or longer				Total
Indemnity	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair  value		Unrealized losses		No. of holdings
Available-for-sale securities:
States & political subdivisions	$	3	$	0	$	7	$	0	$	10	$	0	4
Corporate debt securities	49		0		6		0		55		0		172
Total fixed maturities	52		0		13		0		65		0		176
Nonredeemable preferred stock	0		0		2		0		2		0		2
Common stock	0		0		12		1		12		1		1
Total available-for-sale securities – Indemnity	$	52	$	0	$	27	$	1	$	79	$	1	179
Quality breakdown of fixed maturities:
Investment grade	$	11	$	0	$	13	$	0	$	24	$	0	7
Non-investment grade	41		0		0		0		41		0		169
Total fixed maturities – Indemnity	$	52	$	0	$	13	$	0	$	65	$	0	176
Exchange
Available-for-sale securities:
U.S. treasury	$	0	$	0	$	0	$	0	$	0	$	0	1
States & political subdivisions	38		0		111		2		149		2		36
Foreign government securities	0		0		5		0		5		0		1
Corporate debt securities	312		2		279		6		591		8		376
Residential mortgage-backed securities	15		0		51		2		66		2		12
Commercial mortgage-backed securities	1		0		0		0		1		0		1
Other debt securities	4		0		7		0		11		0		3
Total fixed maturities	370		2		453		10		823		12		430
Nonredeemable preferred stock	42		0		40		2		82		2		14
Common stock	0		0		131		1		131		1		2
Total available-for-sale securities – Exchange	$	412	$	2	$	624	$	13	$	1,036	$	15	446
Quality breakdown of fixed maturities:
Investment grade	$	203	$	1	$	429	$	9	$	632	$	10	131
Non-investment grade	167		1		24		1		191		2		299
Total fixed maturities – Exchange	$	370	$	2	$	453	$	10	$	823	$	12	430

Available-for-sale securities in a gross unrealized loss position at December 31, 2013 are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	December 31, 2013
(dollars in millions)	Less than 12 months				12 months or longer				Total
Indemnity	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		No. of holdings
Available-for-sale securities:
States & political subdivisions	$	58	$	1	$	0	$	0	$	58	$	1	21
Corporate debt securities	54		0		10		0		64		0		11
Total fixed maturities	112		1		10		0		122		1		32
Nonredeemable preferred stock	5		1		3		0		8		1		4
Common stock	12		1		13		0		25		1		2
Total available-for-sale securities – Indemnity	$	129	$	3	$	26	$	0	$	155	$	3	38
Quality breakdown of fixed maturities:
Investment grade	$	112	$	1	$	10	$	0	$	122	$	1	32
Non-investment grade	0		0		0		0		0		0		0
Total fixed maturities – Indemnity	$	112	$	1	$	10	$	0	$	122	$	1	32
Exchange
Available-for-sale securities:
U.S. government & agencies	$	1	$	0	$	0	$	0	$	1	$	0	2
States & political subdivisions	408		13		18		2		426		15		100
Foreign government securities	5		0		0		0		5		0		1
Corporate debt securities	1,251		43		36		2		1,287		45		237
Residential mortgage-backed securities	71		4		8		0		79		4		12
Commercial mortgage-backed securities	5		0		0		0		5		0		1
Other debt securities	30		1		0		0		30		1		5
Total fixed maturities	1,771		61		62		4		1,833		65		358
Nonredeemable preferred stock	182		10		13		1		195		11		27
Common stock	97		3		101		0		198		3		3
Total available-for-sale securities – Exchange	$	2,050	$	74	$	176	$	5	$	2,226	$	79	388
Quality breakdown of fixed maturities:
Investment grade	$	1,707	$	57	$	62	$	4	$	1,769	$	61	344
Non-investment grade	64		4		0		0		64		4		14
Total fixed maturities – Exchange	$	1,771	$	61	$	62	$	4	$	1,833	$	65	358

Schedule of investment income, net of expenses, from portfolios

Interest and dividend income are recognized as earned and recorded to net investment income.  Investment income, net of expenses, was generated from the following portfolios:

	Erie Insurance Group
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity
Fixed maturities	$	3	$	3	$	6	$	6
Equity securities	0		0		1		1
Cash equivalents and other	1		1		1		1
Total investment income	4		4		8		8
Less: investment expenses	0		1		0		1
Investment income, net of expenses – Indemnity	$	4	$	3	$	8	$	7
Exchange
Fixed maturities	$	85	$	83	$	171	$	166
Equity securities	30		27		59		51
Cash equivalents and other	1		0		1		0
Total investment income	116		110		231		217
Less: investment expenses	9		9		19		17
Investment income, net of expenses – Exchange	$	107	$	101	$	212	$	200
Investment income, net of expenses – Erie Insurance Group	$	111	$	104	$	220	$	207

Schedule of realized gains (losses) on investments

Realized gains and losses on sales of securities are recognized in income based upon the specific identification method. Realized gains (losses) on investments were as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Indemnity
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	0		$	0		$	0		$	0
Gross realized losses	0			0			0			0
Net realized gains	0			0			0			0
Equity securities:
Gross realized gains	0			0			1			0
Gross realized losses	0			0			0			0
Net realized gains	0			0			1			0
Net realized investment gains – Indemnity	$	0		$	0		$	1		$	0
Exchange
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	4		$	7		$	10		$	22
Gross realized losses	0			(3		)	(1		)	(5		)
Net realized gains	4			4			9			17
Equity securities:
Gross realized gains	2			2			10			4
Gross realized losses	(1		)	0			(2		)	0
Net realized gains	1			2			8			4
Trading securities:
Common stock:
Gross realized gains	52			54			122			156
Gross realized losses	(7		)	(3		)	(10		)	(15		)
Increases in fair value(1)	83			4			59			148
Net realized gains	128			55			171			289
Net realized investment gains – Exchange	$	133		$	61		$	188		$	310
Net realized investment gains – Erie Insurance Group	$	133		$	61		$	189		$	310

(1) The fair value on our common stock portfolio is based upon exchange traded prices provided by a nationally recognized pricing service.

Schedule of limited partnership results, generally reported on a one-quarter lag

As these investments are generally reported on a one-quarter lag, our limited partnership results through June 30, 2014 include partnership financial results for the fourth quarter of 2013 and the first quarter of 2014.

	Erie Insurance Group
	As of and for the six months ended June 30, 2014
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded		Income (loss) recognized due to valuation adjustments by the partnerships			Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	24	$	39	$	(3	)	$	4
Greater than or equal to 10% but less than 50%	3	19		3			0
Greater than 50%	0	0		0			0
Total private equity	27	58		0			4
Mezzanine debt:
Less than 10%	11	12		0			1
Greater than or equal to 10% but less than 50%	3	6		0			0
Greater than 50%	1	0		0			0
Total mezzanine debt	15	18		0			1
Real estate:
Less than 10%	11	44		2			1
Greater than or equal to 10% but less than 50%	3	15		1			0
Greater than 50%	2	6		0			0
Total real estate	16	65		3			1
Total limited partnerships – Indemnity	58	$	141	$	3		$	6
Exchange
Private equity:
Less than 10%	42	$	368	$	(7	)	$	24
Greater than or equal to 10% but less than 50%	3	80		15			1
Greater than 50%	0	0		0			0
Total private equity	45	448		8			25
Mezzanine debt:
Less than 10%	20	113		1			9
Greater than or equal to 10% but less than 50%	4	23		(2		)	2
Greater than 50%	3	31		0			1
Total mezzanine debt	27	167		(1		)	12
Real estate:
Less than 10%	20	215		8			10
Greater than or equal to 10% but less than 50%	6	77		3			1
Greater than 50%	2	24		(14		)	16
Total real estate	28	316		(3		)	27
Total limited partnerships – Exchange	100	$	931	$	4		$	64
Total limited partnerships – Erie Insurance Group		$	1,072	$	7		$	70

Amounts included in equity in earnings of limited partnerships by method of accounting are included below:

(in millions)	Erie Insurance Group
	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity
Equity in earnings of limited partnerships accounted for under the equity method	$	2	$	5	$	7	$	7
Change in fair value of limited partnerships accounted for under the fair value option	1		0		2		1
Equity in earnings of limited partnerships – Indemnity	$	3	$	5	$	9	$	8
Exchange
Equity in earnings of limited partnerships accounted for under the equity method	$	18	$	31	$	57	$	60
Change in fair value of limited partnerships accounted for under the fair value option	6		3		11		7
Equity in earnings of limited partnerships – Exchange	$	24	$	34	$	68	$	67
Equity in earnings of limited partnerships – Erie Insurance Group	$	27	$	39	$	77	$	75

As these investments are generally reported on a one-quarter lag, our limited partnership results through December 31, 2013 include partnership financial results for the fourth quarter of 2012 and the first three quarters of 2013.

	Erie Insurance Group
	As of and for the year ended December 31, 2013
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded		Income (loss) recognized due to valuation adjustments by the partnerships			Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$	46	$	(6	)	$	9
Greater than or equal to 10% but less than 50%	3	16		3			0
Greater than 50%	0	0		0			0
Total private equity	29	62		(3		)	9
Mezzanine debt:
Less than 10%	11	14		0			1
Greater than or equal to 10% but less than 50%	3	6		0			2
Greater than 50%	1	0		0			0
Total mezzanine debt	15	20		0			3
Real estate:
Less than 10%	12	44		0			5
Greater than or equal to 10% but less than 50%	3	14		(1		)	4
Greater than 50%	2	6		1			4
Total real estate	17	64		0			13
Total limited partnerships – Indemnity	61	$	146	$	(3	)	$	25
Exchange
Private equity:
Less than 10%	44	$	396	$	(24	)	$	79
Greater than or equal to 10% but less than 50%	3	67		13			2
Greater than 50%	0	0		0			0
Total private equity	47	463		(11		)	81
Mezzanine debt:
Less than 10%	19	117		1			13
Greater than or equal to 10% but less than 50%	4	23		(3		)	7
Greater than 50%	3	32		1			3
Total mezzanine debt	26	172		(1		)	23
Real estate:
Less than 10%	22	211		(10		)	34
Greater than or equal to 10% but less than 50%	6	71		(2		)	10
Greater than 50%	2	23		(1		)	16
Total real estate	30	305		(13		)	60
Total limited partnerships – Exchange	103	$	940	$	(25	)	$	164
Total limited partnerships – Erie Insurance Group		$	1,086	$	(28	)	$	189

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Indemnity
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	$ 26
Description of commitment: contractual commitment to invest in limited partnership investments	Contractual commitments to invest in limited partnership investments, consisting of private equity securities, mezzanine debt securities, and real estate activities.
Indemnity | Private equity
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	11
Indemnity | Mezzanine debt
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	9
Indemnity | Real estate
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	6
Exchange
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	445
Description of commitment: contractual commitment to invest in limited partnership investments	Contractual commitments to invest in limited partnership investments, consisting of private equity securities, mezzanine debt securities, and real estate activities.
Exchange | Private equity
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	146
Exchange | Mezzanine debt
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	173
Exchange | Real estate
Contractual commitments
Represents the entity's maximum contractual commitments to invest in its limited partnership investments	$ 126

XML

Investments (Details 4) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Investment income from portfolios
Investment income, net of expenses	$ 111	$ 104	$ 220	$ 207
Indemnity
Investment income from portfolios
Total investment income	4	4	8	8
Less: investment expenses	0	1	0	1
Investment income, net of expenses	4	3	8	7
Indemnity | Fixed maturities
Investment income from portfolios
Total investment income	3	3	6	6
Indemnity | Equity securities
Investment income from portfolios
Total investment income	0	0	1	1
Indemnity | Cash equivalents and other
Investment income from portfolios
Total investment income	1	1	1	1
Exchange
Investment income from portfolios
Total investment income	116	110	231	217
Less: investment expenses	9	9	19	17
Investment income, net of expenses	107	101	212	200
Exchange | Fixed maturities
Investment income from portfolios
Total investment income	85	83	171	166
Exchange | Equity securities
Investment income from portfolios
Total investment income	30	27	59	51
Exchange | Cash equivalents and other
Investment income from portfolios
Total investment income	$ 1	$ 0	$ 1	$ 0

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Indemnity Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of changes in Indemnity's accumulated other comprehensive loss by component attributable to the Indemnity shareholder interest

Changes in Indemnity's accumulated other comprehensive loss by component attributable to the Indemnity shareholder interest is presented as follows for the six months ended June 30, 2014:

	Indemnity Shareholder Interest
(in millions)	Unrealized holding gains (losses) on available-for-sale securities			Postretirement plans(2)			Total
Balance at December 31, 2013	$	6		$	(65	)	$	(59	)
Other comprehensive income before reclassifications, net of tax	5			0			5
Amounts reclassified from accumulated other comprehensive income (loss), net of tax(1)	(1		)	0			(1		)
Net current period other comprehensive income, net of tax	4			0			4
Balance at June 30, 2014	$	10		$	(65	)	$	(55	)

(1) See the following table for details about these reclassifications.

(2) There are no amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.

Schedule of amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented

Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented are as follows for the three and six months ended June 30, 2014:

	Erie Insurance Group
	Three months ended		Six months ended
	June 30, 2014		June 30, 2014
(in millions)	Amounts reclassified from accumulated other comprehensive income (loss)(1)
Unrealized holding gains (losses) on available-for-sale securities:
Net realized investment gains	$	5	$	18
Net impairment losses recognized in earnings	0		0
Income from operations before income taxes and noncontrolling interest	5		18
Provision for income taxes	2		7
Net income	3		11
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	3		10
Net income attributable to Indemnity	$	0	$	1
Amortization of postretirement plan items(2):
Net income attributable to Indemnity	$	0	$	0
Net income attributable to Indemnity	$	0	$	1

(1) Positive amounts indicate net income, while negative amounts indicate net loss.

(2) There are no amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.

XML

Indemnity Shareholders' Equity and Noncontrolling Interest (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Schedule of reconciliation of the beginning and ending balances of Indemnity's shareholders' equity and the noncontrolling interest

A reconciliation of the beginning and ending balances of Indemnity's shareholders’ equity and the noncontrolling interest is presented as follows for the year ended December 31, 2013 and for the six months ended June 30, 2014:

	Erie Insurance Group
(in millions, except per share data)	Indemnity shareholder interest			Exchange noncontrolling interest			Erie Insurance Group
Balance at December 31, 2012	$	642		$	6,149		$	6,791
Net income	163			885			1,048
Change in other comprehensive income (loss), net of tax	74			(218		)	(144		)
Net purchase of treasury stock	(32		)	—			(32		)
Dividends declared:
Class A $2.4125 per share	(112		)	—			(112		)
Class B $361.875 per share	(1		)	—			(1		)
Balance at December 31, 2013	$	734		$	6,816		$	7,550
Net income	95			117			212
Change in other comprehensive income, net of tax	4			133			137
Net purchase of treasury stock	(19		)	—			(19		)
Dividends declared:
Class A $1.27 per share	(59		)	—			(59		)
Class B $190.50 per share	0			—			0
Balance at June 30, 2014	$	755		$	7,066		$	7,821

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Nature of Operations

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

Note 1.  Nature of Operations

Erie Indemnity Company (“Indemnity”) is a publicly held Pennsylvania business corporation that has been the managing attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange (“Exchange”) since 1925.  The Exchange is a subscriber-owned, Pennsylvania-domiciled reciprocal insurer that writes property and casualty insurance.

Indemnity’s primary function is to perform certain services for the Exchange relating to the sales, underwriting and issuance of policies on behalf of the Exchange.  This is done in accordance with a subscriber’s agreement (a limited power of attorney) executed by each subscriber (policyholder), which appoints Indemnity as their common attorney-in-fact to transact business on their behalf and to manage the affairs of the Exchange.  Pursuant to the subscriber’s agreement and for its services as attorney-in-fact, Indemnity earns a management fee calculated as a percentage of the direct premiums written by the Exchange and the other members of the Property and Casualty Group (defined below), which are assumed by the Exchange under an intercompany pooling arrangement.

Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance by acting as the common attorney-in-fact and decision maker for the subscribers (policyholders) at the Exchange.

The Exchange, together with its wholly owned subsidiaries, Erie Insurance Company (“EIC”), Erie Insurance Company of New York (“ENY”), Erie Insurance Property and Casualty Company (“EPC”), and Flagship City Insurance Company (“Flagship”), operate as a property and casualty insurer and are collectively referred to as the “Property and Casualty Group”.  The Property and Casualty Group operates in 11 Midwestern, Mid-Atlantic and Southeastern states and the District of Columbia.

Erie Family Life Insurance Company (“EFL”), a wholly owned subsidiary of the Exchange, operates as a life insurer that underwrites and sells individual and group life insurance policies and fixed annuities.

Indemnity plans to expand the property and casualty and life insurance operations of the Erie Insurance Group into the Commonwealth of Kentucky by the first quarter of 2015 or earlier if possible.

All property and casualty and life insurance operations are owned by the Exchange and Indemnity functions solely as the management company.

The consolidated financial statements of Erie Indemnity Company reflect the results of Indemnity and its variable interest entity, the Exchange, which we refer to collectively as the “Erie Insurance Group” (“we,” “us,” “our”).

“Indemnity shareholder interest” refers to the interest in Erie Indemnity Company owned by the Class A and Class B shareholders.  “Noncontrolling interest” refers to the interest in the Erie Insurance Exchange held for the subscribers (policyholders).

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Indemnity Supplemental Information (Tables)

6 Months Ended

Jun. 30, 2014

Condensed financial statements

Schedule of Consolidating Statement of Financial Position

Consolidating Statement of Financial Position

	Erie Insurance Group
	At June 30, 2014
(in millions)	Indemnity shareholder interest		Exchange noncontrolling interest		Reclassifications and eliminations			Erie Insurance Group
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$	497	$	8,701	$	—		$	9,198
Equity securities	26		914		—			940
Trading securities, at fair value	—		3,377		—			3,377
Limited partnerships	141		931		—			1,072
Other invested assets	1		20		—			21
Total investments	665		13,943		—			14,608
Cash and cash equivalents	63		237		—			300
Premiums receivable from policyholders	—		1,287		—			1,287
Reinsurance recoverable	—		168		—			168
Deferred income tax asset	1		0		—			1
Deferred acquisition costs	—		579		—			579
Other assets	112		405		—			517
Receivables from the Exchange and other affiliates	339		—		(339		)	—
Note receivable from EFL	25		—		(25		)	—
Total assets	$	1,205	$	16,619	$	(364	)	$	17,460
Liabilities
Losses and loss expense reserves	$	—	$	3,964	$	—		$	3,964
Life policy and deposit contract reserves	—		1,789		—			1,789
Unearned premiums	—		2,788		—			2,788
Deferred income tax liability	0		557		—			557
Other liabilities	450		455		(364		)	541
Total liabilities	450		9,553		(364		)	9,639
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	755		—		—			755
Noncontrolling interest in consolidated entity – Exchange	—		7,066		—			7,066
Total equity	755		7,066		—			7,821
Total liabilities, shareholders’ equity, and noncontrolling interest	$	1,205	$	16,619	$	(364	)	$	17,460

Consolidating Statement of Financial Position

	Erie Insurance Group
	At December 31, 2013
(in millions)	Indemnity shareholder interest		Exchange noncontrolling interest		Reclassifications and eliminations			Erie Insurance Group
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$	526	$	8,162	$	—		$	8,688
Equity securities	50		819		—			869
Trading securities, at fair value	—		3,202		—			3,202
Limited partnerships	146		940		—			1,086
Other invested assets	1		20		—			21
Total investments	723		13,143		—			13,866
Cash and cash equivalents	49		403		—			452
Premiums receivable from policyholders	—		1,167		—			1,167
Reinsurance recoverable	—		172		—			172
Deferred income tax asset	2		0		—			2
Deferred acquisition costs	—		566		—			566
Other assets	114		337		—			451
Receivables from the Exchange and other affiliates	300		—		(300		)	—
Note receivable from EFL	25		—		(25		)	—
Total assets	$	1,213	$	15,788	$	(325	)	$	16,676
Liabilities
Losses and loss expense reserves	$	—	$	3,747	$	—		$	3,747
Life policy and deposit contract reserves	—		1,758		—			1,758
Unearned premiums	—		2,598		—			2,598
Deferred income tax liability	0		450		—			450
Other liabilities	479		419		(325		)	573
Total liabilities	479		8,972		(325		)	9,126
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	734		—		—			734
Noncontrolling interest in consolidated entity – Exchange	—		6,816		—			6,816
Total equity	734		6,816		—			7,550
Total liabilities, shareholders’ equity, and noncontrolling interest	$	1,213	$	15,788	$	(325	)	$	16,676

Indemnity

Condensed financial statements

Schedule of Income attributable to Indemnity shareholder interest

Income attributable to Indemnity shareholder interest

	Indemnity Shareholder Interest
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Management operations:
Management fee revenue, net	$	366	$	336	$	685	$	632
Service agreement revenue	8		8		15		15
Total revenue from management operations	374		344		700		647
Cost of management operations	306		285		574		539
Income from management operations before taxes	68		59		126		108
Investment operations:
Net investment income	4		3		8		7
Net realized gains on investments	0		0		1		0
Net impairment losses recognized in earnings	0		0		0		0
Equity in earnings of limited partnerships	3		5		9		8
Income from investment operations before taxes	7		8		18		15
Income from operations before income taxes	75		67		144		123
Provision for income taxes	26		23		49		42
Net income attributable to Indemnity	$	49	$	44	$	95	$	81

Schedule of Indemnity's components of direct cash flows as included in the Consolidated Statements of Cash Flows

Indemnity’s components of direct cash flows as included in the Consolidated Statements of Cash Flows

	Indemnity Shareholder Interest
(in millions)	Six months ended June 30,
	2014			2013
Management fee received	$	659		$	604
Service agreement fee received	15			15
Net investment income received	11			11
Limited partnership distributions	8			12
Decrease in reimbursements collected from affiliates	(13		)	0
Commissions and bonuses paid to agents	(397		)	(356		)
Salaries and wages paid	(80		)	(76		)
Pension contribution and employee benefits paid	(29		)	(28		)
General operating expenses paid	(94		)	(83		)
Income taxes paid	(44		)	(42		)
Net cash provided by operating activities	36			57
Net cash provided by investing activities	57			15
Net cash used in financing activities	(79		)	(45		)
Net increase in cash and cash equivalents	14			27
Cash and cash equivalents at beginning of period	49			12
Cash and cash equivalents at end of period	$	63		$	39

XML

Fair Value (Details 4) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair value by pricing source
Available-for-sale securities	$ 10,138	$ 9,557
Indemnity
Fair value by pricing source
Available-for-sale securities	523	576
Exchange
Fair value by pricing source
Available-for-sale securities	9,615	8,981
Fair value measurements on a recurring basis
Fair value by pricing source
Total	13,635	12,875
Fair value measurements on a recurring basis | Indemnity
Fair value by pricing source
Available-for-sale securities	523	576
Total	541	594
Fair value measurements on a recurring basis | Indemnity | Fixed maturities
Fair value by pricing source
Available-for-sale securities	497	526
Fair value measurements on a recurring basis | Indemnity | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	496
Fair value measurements on a recurring basis | Indemnity | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	1
Fair value measurements on a recurring basis | Indemnity | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Indemnity | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	14	25
Fair value measurements on a recurring basis | Indemnity | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	12
Fair value measurements on a recurring basis | Indemnity | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	2
Fair value measurements on a recurring basis | Indemnity | Common stock
Fair value by pricing source
Available-for-sale securities	12	25
Fair value measurements on a recurring basis | Indemnity | Common stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	12
Fair value measurements on a recurring basis | Indemnity | Real estate
Fair value by pricing source
Other investments	18	18
Fair value measurements on a recurring basis | Indemnity | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	18
Fair value measurements on a recurring basis | Exchange
Fair value by pricing source
Available-for-sale securities	9,615	8,981
Total	13,094	12,281
Fair value measurements on a recurring basis | Exchange | Fixed maturities
Fair value by pricing source
Available-for-sale securities	8,701	8,162
Fair value measurements on a recurring basis | Exchange | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	8,646
Fair value measurements on a recurring basis | Exchange | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	48
Fair value measurements on a recurring basis | Exchange | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	7
Fair value measurements on a recurring basis | Exchange | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	717	621
Fair value measurements on a recurring basis | Exchange | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	679
Fair value measurements on a recurring basis | Exchange | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	37
Fair value measurements on a recurring basis | Exchange | Nonredeemable preferred stock | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	1
Fair value measurements on a recurring basis | Exchange | Common stock
Fair value by pricing source
Available-for-sale securities	197	198
Trading and available-for-sale securities	3,574
Fair value measurements on a recurring basis | Exchange | Common stock | Priced via pricing services
Fair value by pricing source
Trading and available-for-sale securities	3,559
Fair value measurements on a recurring basis | Exchange | Common stock | Priced via internal modeling
Fair value by pricing source
Trading and available-for-sale securities	15
Fair value measurements on a recurring basis | Exchange | Real estate
Fair value by pricing source
Other investments	102	98
Fair value measurements on a recurring basis | Exchange | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	102
Fair value measurements on a recurring basis | Level 1
Fair value by pricing source
Total	3,876	3,654
Fair value measurements on a recurring basis | Level 1 | Indemnity
Fair value by pricing source
Available-for-sale securities	14	27
Total	14	27
Fair value measurements on a recurring basis | Level 1 | Indemnity | Fixed maturities
Fair value by pricing source
Available-for-sale securities	0	0
Fair value measurements on a recurring basis | Level 1 | Indemnity | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Indemnity | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Indemnity | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Indemnity | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	2	2
Fair value measurements on a recurring basis | Level 1 | Indemnity | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	2
Fair value measurements on a recurring basis | Level 1 | Indemnity | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Indemnity | Common stock
Fair value by pricing source
Available-for-sale securities	12	25
Fair value measurements on a recurring basis | Level 1 | Indemnity | Common stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	12
Fair value measurements on a recurring basis | Level 1 | Indemnity | Real estate
Fair value by pricing source
Other investments	0	0
Fair value measurements on a recurring basis | Level 1 | Indemnity | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	0
Fair value measurements on a recurring basis | Level 1 | Exchange
Fair value by pricing source
Available-for-sale securities	500	440
Total	3,862	3,627
Fair value measurements on a recurring basis | Level 1 | Exchange | Fixed maturities
Fair value by pricing source
Available-for-sale securities	0	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	303	242
Fair value measurements on a recurring basis | Level 1 | Exchange | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	303
Fair value measurements on a recurring basis | Level 1 | Exchange | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Nonredeemable preferred stock | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Common stock
Fair value by pricing source
Available-for-sale securities	197	198
Trading and available-for-sale securities	3,559
Fair value measurements on a recurring basis | Level 1 | Exchange | Common stock | Priced via pricing services
Fair value by pricing source
Trading and available-for-sale securities	3,559
Fair value measurements on a recurring basis | Level 1 | Exchange | Common stock | Priced via internal modeling
Fair value by pricing source
Trading and available-for-sale securities	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Real estate
Fair value by pricing source
Other investments	0	0
Fair value measurements on a recurring basis | Level 1 | Exchange | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	0
Fair value measurements on a recurring basis | Level 2
Fair value by pricing source
Total	9,597	9,057
Fair value measurements on a recurring basis | Level 2 | Indemnity
Fair value by pricing source
Available-for-sale securities	508	547
Total	508	547
Fair value measurements on a recurring basis | Level 2 | Indemnity | Fixed maturities
Fair value by pricing source
Available-for-sale securities	496	524
Fair value measurements on a recurring basis | Level 2 | Indemnity | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	496
Fair value measurements on a recurring basis | Level 2 | Indemnity | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Indemnity | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Indemnity | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	12	23
Fair value measurements on a recurring basis | Level 2 | Indemnity | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	10
Fair value measurements on a recurring basis | Level 2 | Indemnity | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	2
Fair value measurements on a recurring basis | Level 2 | Indemnity | Common stock
Fair value by pricing source
Available-for-sale securities	0	0
Fair value measurements on a recurring basis | Level 2 | Indemnity | Common stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Indemnity | Real estate
Fair value by pricing source
Other investments	0	0
Fair value measurements on a recurring basis | Level 2 | Indemnity | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	0
Fair value measurements on a recurring basis | Level 2 | Exchange
Fair value by pricing source
Available-for-sale securities	9,089	8,510
Total	9,089	8,510
Fair value measurements on a recurring basis | Level 2 | Exchange | Fixed maturities
Fair value by pricing source
Available-for-sale securities	8,676	8,131
Fair value measurements on a recurring basis | Level 2 | Exchange | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	8,646
Fair value measurements on a recurring basis | Level 2 | Exchange | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	30
Fair value measurements on a recurring basis | Level 2 | Exchange | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Exchange | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	413	379
Fair value measurements on a recurring basis | Level 2 | Exchange | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	376
Fair value measurements on a recurring basis | Level 2 | Exchange | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	37
Fair value measurements on a recurring basis | Level 2 | Exchange | Nonredeemable preferred stock | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Exchange | Common stock
Fair value by pricing source
Available-for-sale securities	0	0
Trading and available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Exchange | Common stock | Priced via pricing services
Fair value by pricing source
Trading and available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Exchange | Common stock | Priced via internal modeling
Fair value by pricing source
Trading and available-for-sale securities	0
Fair value measurements on a recurring basis | Level 2 | Exchange | Real estate
Fair value by pricing source
Other investments	0	0
Fair value measurements on a recurring basis | Level 2 | Exchange | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	0
Fair value measurements on a recurring basis | Level 3
Fair value by pricing source
Total	162	164
Fair value measurements on a recurring basis | Level 3 | Indemnity
Fair value by pricing source
Available-for-sale securities	1	2
Total	19	20
Fair value measurements on a recurring basis | Level 3 | Indemnity | Fixed maturities
Fair value by pricing source
Available-for-sale securities	1	2
Fair value measurements on a recurring basis | Level 3 | Indemnity | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	1
Fair value measurements on a recurring basis | Level 3 | Indemnity | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	0	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Common stock
Fair value by pricing source
Available-for-sale securities	0	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Common stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Indemnity | Real estate
Fair value by pricing source
Other investments	18	18
Fair value measurements on a recurring basis | Level 3 | Indemnity | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	18
Fair value measurements on a recurring basis | Level 3 | Exchange
Fair value by pricing source
Available-for-sale securities	26	31
Total	143	144
Fair value measurements on a recurring basis | Level 3 | Exchange | Fixed maturities
Fair value by pricing source
Available-for-sale securities	25	31
Fair value measurements on a recurring basis | Level 3 | Exchange | Fixed maturities | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Exchange | Fixed maturities | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	18
Fair value measurements on a recurring basis | Level 3 | Exchange | Fixed maturities | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	7
Fair value measurements on a recurring basis | Level 3 | Exchange | Nonredeemable preferred stock
Fair value by pricing source
Available-for-sale securities	1	0
Fair value measurements on a recurring basis | Level 3 | Exchange | Nonredeemable preferred stock | Priced via pricing services
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Exchange | Nonredeemable preferred stock | Priced via market comparables/broker quotes
Fair value by pricing source
Available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Exchange | Nonredeemable preferred stock | Priced via internal modeling
Fair value by pricing source
Available-for-sale securities	1
Fair value measurements on a recurring basis | Level 3 | Exchange | Common stock
Fair value by pricing source
Available-for-sale securities	0	0
Trading and available-for-sale securities	15
Fair value measurements on a recurring basis | Level 3 | Exchange | Common stock | Priced via pricing services
Fair value by pricing source
Trading and available-for-sale securities	0
Fair value measurements on a recurring basis | Level 3 | Exchange | Common stock | Priced via internal modeling
Fair value by pricing source
Trading and available-for-sale securities	15
Fair value measurements on a recurring basis | Level 3 | Exchange | Real estate
Fair value by pricing source
Other investments	102	98
Fair value measurements on a recurring basis | Level 3 | Exchange | Real estate | Priced via unobservable inputs
Fair value by pricing source
Other investments	102
Fair value measurements on a nonrecurring basis
Fair value by pricing source
Total	$ 0

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Indemnity Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Changes in Indemnity's accumulated other comprehensive income (loss) by component attributable to the Indemnity shareholder interest
Other comprehensive income (loss)	$ 65	$ (197)	$ 137	$ (219)	$ (144)
Indemnity
Changes in Indemnity's accumulated other comprehensive income (loss) by component attributable to the Indemnity shareholder interest
Balance, beginning of period			(59)
Other comprehensive income before reclassifications, net of tax			5
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			(1)
Other comprehensive income (loss)			4		74
Balance, end of period	(55)		(55)		(59)
Indemnity | Unrealized holding gains (losses) on available-for-sale securities
Changes in Indemnity's accumulated other comprehensive income (loss) by component attributable to the Indemnity shareholder interest
Balance, beginning of period			6
Other comprehensive income before reclassifications, net of tax			5
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			(1)
Other comprehensive income (loss)			4
Balance, end of period	10		10
Indemnity | Postretirement plans
Changes in Indemnity's accumulated other comprehensive income (loss) by component attributable to the Indemnity shareholder interest
Balance, beginning of period			(65)
Other comprehensive income before reclassifications, net of tax			0
Amounts reclassified from accumulated other comprehensive income (loss), net of tax			0
Other comprehensive income (loss)			0
Balance, end of period	$ (65)		$ (65)

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Revenues
Premiums earned	$ 1,319	$ 1,215	$ 2,607	$ 2,390
Net investment income	111	104	220	207
Net realized investment gains	133	61	189	310
Net impairment losses recognized in earnings	0	(1)	0	(1)
Equity in earnings of limited partnerships	27	39	77	75
Other income	8	8	16	16
Total revenues	1,598	1,426	3,109	2,997
Benefits and expenses
Insurance losses and loss expenses	1,126	861	2,160	1,703
Policy acquisition and underwriting expenses	325	302	646	595
Total benefits and expenses	1,451	1,163	2,806	2,298
Income (loss) from operations before income taxes and noncontrolling interest	147	263	303	699
Provision for income taxes	44	86	91	232
Net income (loss)	103	177	212	467	1,048
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	54	133	117	386
Net income attributable to Indemnity	49	44	95	81
Indemnity
Revenues
Net investment income	4	3	8	7
Net realized investment gains	0	0	1	0
Equity in earnings of limited partnerships	3	5	9	8
Benefits and expenses
Income (loss) from operations before income taxes and noncontrolling interest	75	67	144	123
Provision for income taxes	26	23	49	42
Net income (loss)			95		163
Net income attributable to Indemnity	$ 49	$ 44	$ 95	$ 81
Class A | Indemnity
Net income attributable to Indemnity per share
Common stock - basic (in dollars per share)	$ 1.05	$ 0.95	$ 2.04	$ 1.73
Common stock - diluted (in dollars per share)	$ 0.94	$ 0.84	$ 1.82	$ 1.54
Weighted average shares outstanding attributable to Indemnity - Basic
Common stock - basic (in shares)	46,214,153	46,693,333	46,307,659	46,733,925
Weighted average shares outstanding attributable to Indemnity - Diluted
Common stock - diluted (in shares)	52,411,414	52,886,259	52,504,920	52,926,851
Dividends declared per share
Common stock (in dollars per share)	$ 0.6350	$ 0.5925	$ 1.2700	$ 1.1850	$ 2.4125
Class B | Indemnity
Net income attributable to Indemnity per share
Common stock - basic (in dollars per share)	$ 158.00	$ 142.00	$ 307.00	$ 259.00
Common stock - diluted (in dollars per share)	$ 158.00	$ 142.00	$ 307.00	$ 259.00
Weighted average shares outstanding attributable to Indemnity - Basic
Common stock - basic (in shares)	2,542	2,542	2,542	2,542
Weighted average shares outstanding attributable to Indemnity - Diluted
Common stock - diluted (in shares)	2,542	2,542	2,542	2,542
Dividends declared per share
Common stock (in dollars per share)	$ 95.2500	$ 88.8750	$ 190.5000	$ 177.7500	$ 361.8750

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Investments (Details 5) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Realized gains (losses) on investments
Net realized investment gains (losses)	$ 133	$ 61	$ 189	$ 310
Other-than-temporary impairments on investments
Net impairment losses recognized in earnings	0	(1)	0	(1)
Indemnity
Realized gains (losses) on investments
Net realized investment gains (losses)	0	0	1	0
Other-than-temporary impairments on investments
Other -than-temporary impairments on investments	(0.1)	(0.1)	(0.1)	(0.1)
Portion recognized in other comprehensive income	0	0	0	0
Indemnity | Fixed maturities
Available-for-sale securities:
Gross realized gains	0	0	0	0
Gross realized losses	0	0	0	0
Net realized gains (losses)	0	0	0	0
Indemnity | Equity securities
Available-for-sale securities:
Gross realized gains	0	0	1	0
Gross realized losses	0	0	0	0
Net realized gains (losses)	0	0	1	0
Exchange
Realized gains (losses) on investments
Net realized investment gains (losses)	133	61	188	310
Other-than-temporary impairments on investments
Other -than-temporary impairments on investments	(0.1)	(1.0)	(0.3)	(1.0)
Portion recognized in other comprehensive income	0	0	0	0
Exchange | Fixed maturities
Available-for-sale securities:
Gross realized gains	4	7	10	22
Gross realized losses	0	(3)	(1)	(5)
Net realized gains (losses)	4	4	9	17
Exchange | Equity securities
Available-for-sale securities:
Gross realized gains	2	2	10	4
Gross realized losses	(1)	0	(2)	0
Net realized gains (losses)	1	2	8	4
Exchange | Common stock
Trading securities:
Gross realized gains	52	54	122	156
Gross realized losses	(7)	(3)	(10)	(15)
Increases (decreases) in fair value	83	4	59	148
Net realized gains (losses) gains	$ 128	$ 55	$ 171	$ 289

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) (USD $) In Millions, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Cash and cash equivalents	$ 300	$ 452
Other assets	517	451
Indemnity
Fixed maturities, amortized cost	484	518
Equity securities, cost	25	50
Limited partnerships, cost	114	123
Cash and cash equivalents	63	49
Other assets	112	114
Treasury stock (in shares)	22,110,132	21,838,075
Exchange
Fixed maturities, amortized cost	8,149	7,801
Equity securities, cost	842	778
Trading securities, cost	2,314	2,198
Limited partnerships, cost	754	790
Cash and cash equivalents	237	403
Other assets	$ 405	$ 337
Class A | Indemnity
Common stock, stated value per share (in dollars per share)	$ 0.0292	$ 0.0292
Common stock, authorized (in shares)	74,996,930	74,996,930
Common stock, issued (in shares)	68,299,200	68,299,200
Common stock, outstanding (in shares)	46,189,068	46,461,125
Class B | Indemnity
Ratio for converting shares of Class B common stock into shares of Class A common stock (as a percent)	2400.00%	2400.00%
Common stock, stated value per share (in dollars per share)	$ 70	$ 70
Common stock, authorized (in shares)	3,070	3,070
Common stock, issued (in shares)	2,542	2,542
Common stock, outstanding (in shares)	2,542	2,542

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Indemnity Supplemental Information (Details 3) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Indemnity's components of direct cash flows as included in the Consolidated Statements of Cash Flows
Service agreement fee received	$ 15	$ 15
Net investment income received	235	222
Limited partnership distributions	64	79
Commissions and bonuses paid to agents	(397)	(356)
Income taxes paid	(98)	(149)
Net cash provided by (used in) operating activities	245	330
Net cash provided by (used in) investing activities	(332)	(335)
Net cash provided by (used in) financing activities	(65)	(30)
Net increase (decrease) in cash and cash equivalents	(152)	(35)
Cash and cash equivalents at beginning of period	452	400
Cash and cash equivalents at end of period	300	365
Indemnity
Indemnity's components of direct cash flows as included in the Consolidated Statements of Cash Flows
Management fee received	659	604
Service agreement fee received	15	15
Net investment income received	11	11
Limited partnership distributions	8	12
Decrease in reimbursements collected from affiliates	(13)	0
Commissions and bonuses paid to agents	(397)	(356)
Salaries and wages paid	(80)	(76)
Pension contribution and employee benefits paid	(29)	(28)
General operating expenses paid	(94)	(83)
Income taxes paid	(44)	(42)
Net cash provided by (used in) operating activities	36	57
Net cash provided by (used in) investing activities	57	15
Net cash provided by (used in) financing activities	(79)	(45)
Net increase (decrease) in cash and cash equivalents	14	27
Cash and cash equivalents at beginning of period	49	12
Cash and cash equivalents at end of period	$ 63	$ 39

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Variable Interest Entity (Details) (Indemnity, Management operations)	6 Months Ended
	Jun. 30, 2014
Indemnity | Management operations
Variable Interest Entity disclosures
Indemnity's maximum management fee rate as a percent of premiums written and assumed by the Exchange (as a percent)	25.00%

XML

Indemnity Supplemental Information

6 Months Ended

Jun. 30, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Indemnity Supplemental Information

Note 15. Indemnity Supplemental Information

Consolidating Statement of Financial Position

	Erie Insurance Group
	At June 30, 2014
(in millions)	Indemnity shareholder interest		Exchange noncontrolling interest		Reclassifications and eliminations			Erie Insurance Group
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$	497	$	8,701	$	—		$	9,198
Equity securities	26		914		—			940
Trading securities, at fair value	—		3,377		—			3,377
Limited partnerships	141		931		—			1,072
Other invested assets	1		20		—			21
Total investments	665		13,943		—			14,608
Cash and cash equivalents	63		237		—			300
Premiums receivable from policyholders	—		1,287		—			1,287
Reinsurance recoverable	—		168		—			168
Deferred income tax asset	1		0		—			1
Deferred acquisition costs	—		579		—			579
Other assets	112		405		—			517
Receivables from the Exchange and other affiliates	339		—		(339		)	—
Note receivable from EFL	25		—		(25		)	—
Total assets	$	1,205	$	16,619	$	(364	)	$	17,460
Liabilities
Losses and loss expense reserves	$	—	$	3,964	$	—		$	3,964
Life policy and deposit contract reserves	—		1,789		—			1,789
Unearned premiums	—		2,788		—			2,788
Deferred income tax liability	0		557		—			557
Other liabilities	450		455		(364		)	541
Total liabilities	450		9,553		(364		)	9,639
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	755		—		—			755
Noncontrolling interest in consolidated entity – Exchange	—		7,066		—			7,066
Total equity	755		7,066		—			7,821
Total liabilities, shareholders’ equity, and noncontrolling interest	$	1,205	$	16,619	$	(364	)	$	17,460

Consolidating Statement of Financial Position

	Erie Insurance Group
	At December 31, 2013
(in millions)	Indemnity shareholder interest		Exchange noncontrolling interest		Reclassifications and eliminations			Erie Insurance Group
Assets
Investments
Available-for-sale securities, at fair value:
Fixed maturities	$	526	$	8,162	$	—		$	8,688
Equity securities	50		819		—			869
Trading securities, at fair value	—		3,202		—			3,202
Limited partnerships	146		940		—			1,086
Other invested assets	1		20		—			21
Total investments	723		13,143		—			13,866
Cash and cash equivalents	49		403		—			452
Premiums receivable from policyholders	—		1,167		—			1,167
Reinsurance recoverable	—		172		—			172
Deferred income tax asset	2		0		—			2
Deferred acquisition costs	—		566		—			566
Other assets	114		337		—			451
Receivables from the Exchange and other affiliates	300		—		(300		)	—
Note receivable from EFL	25		—		(25		)	—
Total assets	$	1,213	$	15,788	$	(325	)	$	16,676
Liabilities
Losses and loss expense reserves	$	—	$	3,747	$	—		$	3,747
Life policy and deposit contract reserves	—		1,758		—			1,758
Unearned premiums	—		2,598		—			2,598
Deferred income tax liability	0		450		—			450
Other liabilities	479		419		(325		)	573
Total liabilities	479		8,972		(325		)	9,126
Shareholders’ equity and noncontrolling interest
Total Indemnity shareholders’ equity	734		—		—			734
Noncontrolling interest in consolidated entity – Exchange	—		6,816		—			6,816
Total equity	734		6,816		—			7,550
Total liabilities, shareholders’ equity, and noncontrolling interest	$	1,213	$	15,788	$	(325	)	$	16,676

Receivables from the Exchange and EFL and concentrations of credit risk – Financial instruments could potentially expose Indemnity to concentrations of credit risk, including unsecured receivables from the Exchange.  A majority of Indemnity’s revenue and receivables are from the Exchange and affiliates.  See also Note 4, “Variable Interest Entity.”

Management fees and expense allocation amounts due from the Exchange were $335 million and $296 million at June 30, 2014 and December 31, 2013, respectively.  The receivable from EFL for expense allocations and interest on the surplus note totaled $4 million at June 30, 2014 and December 31, 2013.

Note receivable from EFL – Indemnity is due $25 million from EFL in the form of a surplus note that was issued in 2003.  The note may be repaid only out of unassigned surplus of EFL.  Both principal and interest payments are subject to prior approval by the Pennsylvania Insurance Commissioner.  The note bears an annual interest rate of 6.7% and will be payable on demand on or after December 31, 2018, with interest scheduled to be paid semi-annually, subject to prior approval by the Pennsylvania Insurance Commissioner.  For each of the six months ended June 30, 2014 and 2013, Indemnity recognized interest income on the note of $0.8 million.

Income attributable to Indemnity shareholder interest

	Indemnity Shareholder Interest
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Management operations:
Management fee revenue, net	$	366	$	336	$	685	$	632
Service agreement revenue	8		8		15		15
Total revenue from management operations	374		344		700		647
Cost of management operations	306		285		574		539
Income from management operations before taxes	68		59		126		108
Investment operations:
Net investment income	4		3		8		7
Net realized gains on investments	0		0		1		0
Net impairment losses recognized in earnings	0		0		0		0
Equity in earnings of limited partnerships	3		5		9		8
Income from investment operations before taxes	7		8		18		15
Income from operations before income taxes	75		67		144		123
Provision for income taxes	26		23		49		42
Net income attributable to Indemnity	$	49	$	44	$	95	$	81

Indemnity’s components of direct cash flows as included in the Consolidated Statements of Cash Flows

	Indemnity Shareholder Interest
(in millions)	Six months ended June 30,
	2014			2013
Management fee received	$	659		$	604
Service agreement fee received	15			15
Net investment income received	11			11
Limited partnership distributions	8			12
Decrease in reimbursements collected from affiliates	(13		)	0
Commissions and bonuses paid to agents	(397		)	(356		)
Salaries and wages paid	(80		)	(76		)
Pension contribution and employee benefits paid	(29		)	(28		)
General operating expenses paid	(94		)	(83		)
Income taxes paid	(44		)	(42		)
Net cash provided by operating activities	36			57
Net cash provided by investing activities	57			15
Net cash used in financing activities	(79		)	(45		)
Net increase in cash and cash equivalents	14			27
Cash and cash equivalents at beginning of period	49			12
Cash and cash equivalents at end of period	$	63		$	39

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Segment Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Revenues
Premiums earned/life policy revenue	$ 1,319	$ 1,215	$ 2,607	$ 2,390
Net investment income	111	104	220	207
Net realized investment gains	133	61	189	310
Net impairment losses recognized in earnings	0	(1)	0	(1)
Equity in earnings of limited partnerships	27	39	77	75
Service agreement and other revenue	8	8	16	16
Total revenues	1,598	1,426	3,109	2,997
Benefits and expenses
Insurance losses and loss expenses	1,126	861	2,160	1,703
Policy acquisition and underwriting expenses	325	302	646	595
Total benefits and expenses	1,451	1,163	2,806	2,298
Income (loss) from operations before income taxes and noncontrolling interest	147	263	303	699
Provision for income taxes	44	86	91	232
Net income (loss)	103	177	212	467	1,048
Indemnity
Revenues
Net investment income	4	3	8	7
Net realized investment gains	0	0	1	0
Equity in earnings of limited partnerships	3	5	9	8
Benefits and expenses
Income (loss) from operations before income taxes and noncontrolling interest	75	67	144	123
Provision for income taxes	26	23	49	42
Net income (loss)			95		163
Exchange
Revenues
Net investment income	107	101	212	200
Net realized investment gains	133	61	188	310
Equity in earnings of limited partnerships	24	34	68	67
Benefits and expenses
Net income (loss)			117		885
Management operations | Indemnity
Segment information
Indemnity's maximum management fee rate as a percent of premiums written and assumed by the Exchange (as a percent)			25.00%
Revenues
Management fee revenue	366	336	685	632
Service agreement and other revenue	8	8	15	15
Total revenues	374	344	700	647
Benefits and expenses
Cost of management operations	306	285	574	539
Income (loss) from operations before income taxes and noncontrolling interest	68	59	126	108
Investment operations | Indemnity
Revenues
Net investment income	4	3	8	7
Net realized investment gains	0	0	1	0
Net impairment losses recognized in earnings	0	0	0	0
Equity in earnings of limited partnerships	3	5	9	8
Benefits and expenses
Income (loss) from operations before income taxes and noncontrolling interest	7	8	18	15
Operating segment | Management operations
Revenues
Management fee revenue	366	336	685	632
Service agreement and other revenue	8	8	15	15
Total revenues	374	344	700	647
Benefits and expenses
Cost of management operations	306	285	574	539
Total benefits and expenses	306	285	574	539
Income (loss) from operations before income taxes and noncontrolling interest	68	59	126	108
Provision for income taxes	24	21	44	38
Net income (loss)	44	38	82	70
Operating segment | Management operations | Indemnity
Segment information
Indemnity's maximum management fee rate as a percent of premiums written and assumed by the Exchange (as a percent)			25.00%
Operating segment | Property and casualty insurance operations
Revenues
Premiums earned/life policy revenue	1,298	1,196	2,566	2,352
Total revenues	1,298	1,196	2,566	2,352
Benefits and expenses
Insurance losses and loss expenses	1,101	837	2,108	1,654
Policy acquisition and underwriting expenses	380	348	745	676
Total benefits and expenses	1,481	1,185	2,853	2,330
Income (loss) from operations before income taxes and noncontrolling interest	(183)	11	(287)	22
Provision for income taxes	(64)	4	(100)	8
Net income (loss)	(119)	7	(187)	14
Operating segment | Life insurance operations
Revenues
Premiums earned/life policy revenue	22	20	42	39
Service agreement and other revenue	0	0	1	1
Total revenues	22	20	43	40
Benefits and expenses
Insurance losses and loss expenses	27	26	55	52
Policy acquisition and underwriting expenses	9	7	18	16
Total benefits and expenses	36	33	73	68
Income (loss) from operations before income taxes and noncontrolling interest	(14)	(13)	(30)	(28)
Provision for income taxes	(5)	(5)	(11)	(10)
Net income (loss)	(9)	(8)	(19)	(18)
Operating segment | Life insurance operations | Erie Family Life Insurance Company (EFL)
Segment information
Total investment revenues	24	26	53	52
Benefits and expenses
Income (loss) from operations before income taxes and noncontrolling interest	10	13	23	24
Operating segment | Investment operations
Revenues
Net investment income	116	107	228	213
Net realized investment gains	133	61	189	310
Net impairment losses recognized in earnings	0	(1)	0	(1)
Equity in earnings of limited partnerships	27	39	77	75
Total revenues	276	206	494	597
Benefits and expenses
Income (loss) from operations before income taxes and noncontrolling interest	276	206	494	597
Provision for income taxes	89	66	158	196
Net income (loss)	187	140	336	401
Eliminations
Revenues
Premiums earned/life policy revenue	(1)	(1)	(1)	(1)
Net investment income	(5)	(3)	(8)	(6)
Management fee revenue	(366)	(336)	(685)	(632)
Total revenues	(372)	(340)	(694)	(639)
Benefits and expenses
Cost of management operations	(306)	(285)	(574)	(539)
Insurance losses and loss expenses	(2)	(2)	(3)	(3)
Policy acquisition and underwriting expenses	(64)	(53)	(117)	(97)
Total benefits and expenses	$ (372)	$ (340)	$ (694)	$ (639)

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Basis of presentation

Basis of presentation

The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Indemnity together with its affiliate companies in which Indemnity holds a majority voting or economic interest.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of our financial position, results of operations, and cash flows for the interim periods have been included.  Operating results for the six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014.  The accompanying consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014.

Principles of consolidation

Principles of consolidation

We consolidate the Exchange as a variable interest entity for which Indemnity is the primary beneficiary.  All intercompany accounts and transactions have been eliminated in consolidation.  The required presentation of noncontrolling interests is reflected in the consolidated financial statements.  Noncontrolling interests represent the ownership interests of the Exchange, all of which are held by parties other than Indemnity (i.e. the Exchange’s subscribers (policyholders)).  Noncontrolling interests also include the Exchange subscribers’ ownership interest in EFL.

Presentation of assets and liabilities – While the assets of the Exchange are presented separately in the Consolidated Statements of Financial Position, the Exchange’s assets can only be used to satisfy the Exchange’s liabilities or for other unrestricted activities.  Accounting Standards Codification (“ASC”) 810, Consolidation, does not require separate presentation of the Exchange’s assets; however, because the shareholders of Indemnity have no rights to the assets of the Exchange and, conversely, the Exchange has no rights to the assets of Indemnity, we have presented the invested assets of the Exchange separately on the Consolidated Statements of Financial Position along with the remaining consolidated assets reflecting the Exchange’s portion parenthetically.  Liabilities are required under ASC 810, Consolidation, to be presented separately for the Exchange on the Consolidated Statements of Financial Position as the Exchange’s creditors do not have recourse to the general credit of Indemnity.

Rights of shareholders of Indemnity and subscribers (policyholders) of the Exchange – The shareholders of Indemnity, through the management fee, have a controlling financial interest in the Exchange; however, they have no other rights to or obligations arising from assets and liabilities of the Exchange.  The shareholders of Indemnity own its equity but have no rights or interest in the Exchange’s (noncontrolling interest) income or equity.  The noncontrolling interest equity represents the Exchange’s equity held for the interest of its subscribers (policyholders), who have no rights or interest in the Indemnity shareholder interest income or equity.

All intercompany assets, liabilities, revenues, and expenses between Indemnity and the Exchange have been eliminated in the Consolidated Financial Statements.

New accounting pronouncements

Pending accounting pronouncements

In January 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-01, Accounting for Investments in Qualified Affordable Housing Projects.  This guidance permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met.  Generally, investors in qualified affordable housing project investments expect to receive substantially all of their return through the receipt of tax credits and other tax benefits.  ASU No. 2014-01 allows for the recording of the investment performance net of taxes as a component of income tax expense to more fairly represent the economics of the investments and provide users with a better understanding of the returns from such investments.  The qualifications to make this accounting election were also made less restrictive.  ASU No. 2014-01 is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted.  While we are currently evaluating whether to make the accounting election and whether the election would be made for early adoption, such election is not expected to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 clarifies the principles for recognizing revenue and provides a common revenue standard for GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Insurance contracts are not within the scope of this guidance. ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early application is not permitted. We do not expect the adoption of ASU No. 2014-09 related to the management fee and service agreement revenue to have a material impact on our consolidated financial statements.

Earnings per share

Class A and Class B basic earnings per share and Class B diluted earnings per share are calculated under the two-class method. The two-class method allocates earnings to each class of stock based upon its dividend rights.  Class B shares are convertible into Class A shares at a conversion ratio of 2,400 to 1. See Note 11. “Indemnity Capital Stock”.

Class A diluted earnings per share are calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the effect of any potential common shares. Potential common shares include outstanding vested and not yet vested awards related to our outside directors’ stock compensation plan and any employee stock based awards.

Consolidation of variable interest entity

Erie Insurance Exchange

The Exchange is a reciprocal insurance exchange domiciled in Pennsylvania, for which Indemnity serves as attorney-in-fact.  Indemnity holds a variable interest in the Exchange due to the absence of decision-making capabilities by the equity owners (subscribers/policyholders) of the Exchange and due to the significance of the management fee the Exchange pays to Indemnity as its decision maker.  As a result, Indemnity is deemed to have a controlling financial interest in the Exchange and is considered to be its primary beneficiary.

Consolidation of the Exchange’s financial results is required given the significance of the management fee to the Exchange and because Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance.  The Exchange’s anticipated economic performance is the product of its underwriting results combined with its investment results.  The fees paid to Indemnity under the subscriber’s agreement impact the anticipated economic performance attributable to the Exchange’s results.  Indemnity earns a management fee from the Exchange for the services it provides as attorney-in-fact.  Indemnity’s management fee revenues are based upon all premiums written or assumed by the Exchange.  Indemnity’s Board of Directors determines the management fee rate to be paid by the Exchange to Indemnity.  This rate cannot exceed 25% of the direct and assumed written premiums of the Exchange, as defined by the subscriber’s agreement signed by each policyholder.  Management fee revenues and management fee expenses are eliminated upon consolidation.

The shareholders of Indemnity have no rights to the assets of the Exchange and no obligations arising from the liabilities of the Exchange.  Indemnity has no obligation related to any underwriting and/or investment losses experienced by the Exchange.  Indemnity would, however, be adversely impacted if the Exchange incurred significant underwriting and/or investment losses.  If the surplus of the Exchange were to decline significantly from its current level, its financial strength ratings could be reduced and, as a consequence, the Exchange could find it more difficult to retain its existing business and attract new business.  A decline in the business of the Exchange would have an adverse effect on the amount of the management fees Indemnity receives.  In addition, a decline in the surplus of the Exchange from its current level may impact the management fee rate received by Indemnity.  Indemnity also has an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for its management fee. If any of these events occurred, Indemnity’s financial position, financial performance, and/or cash flows could be adversely impacted.

All property and casualty and life insurance operations are owned by the Exchange, and Indemnity functions solely as the management company.

Indemnity has not provided financial or other support to the Exchange for any of the reporting periods presented.  At June 30, 2014, there are no explicit or implicit arrangements that would require Indemnity to provide future financial support to the Exchange.  Indemnity is not liable if the Exchange was to be in violation of its debt covenants or was unable to meet its obligation for unfunded commitments to limited partnerships.

Fair value of financial instruments

Our available-for-sale and trading securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.

Valuation techniques used to derive the fair value of our available-for-sale and trading securities are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources.  Unobservable inputs reflect our own assumptions regarding fair market value for these securities.  Although the majority of our prices are obtained from third party sources, we also perform an internal pricing review for securities with low trading volumes under current market conditions. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 – Unobservable inputs for the asset or liability.

Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service.  Our Level 1 category includes those securities valued using an exchange traded price provided by the pricing service.  The methodologies used by the pricing service that support a Level 2 classification of a financial instrument include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.  Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.

In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes.  In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.

We perform continuous reviews of the prices obtained from the pricing service.  This includes evaluating the methodology and inputs used by the pricing service to ensure that we determine the proper classification level of the financial instrument.  Price variances, including large periodic changes, are investigated and corroborated by market data.  We have reviewed the pricing methodologies of our pricing service as well as other observable inputs, such as data, and transaction volumes and believe that their prices adequately consider market activity in determining fair value.  Our review process continues to evolve based upon accounting guidance and requirements.

When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables.  When available, we obtain multiple quotes for the same security.  The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information.  Our evaluation includes the consideration of benchmark yields, reported trades, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.

For certain securities in an illiquid market, there may be no prices available from a pricing service and no comparable market quotes available.  In these situations, we value the security using an internally-developed, risk-adjusted discounted cash flow model.

Fair value of financial instruments, transfers between levels

We review the fair value hierarchy classifications each reporting period.  Transfers between hierarchy levels may occur due to changes in the available market observable inputs.  Transfers in and out of level classifications are reported as having occurred at the beginning of the quarter in which the transfers occurred.

Investments - Limited partnerships

Limited partnership investments, excluding certain real estate limited partnerships recorded at fair value, are generally reported on a one-quarter lag, therefore our year-to-date limited partnership results through June 30, 2014 are comprised of partnership financial results for the fourth quarter of 2013 and first quarter of 2014.  Given the lag in reporting, our limited partnership results do not reflect the market conditions of the second quarter of 2014.  Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

Deferred taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Commitments and contingencies

We are involved in litigation arising in the ordinary course of conducting business.  In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated.  When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss.  To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results of operations, or cash flows.  Legal fees are expensed as incurred.  We believe that our accruals for legal proceedings are appropriate and, individually and in the aggregate, are not expected to be material to our consolidated financial condition, operations, or cash flows.

We review all litigation on an ongoing basis when making accrual and disclosure decisions.  For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages.  Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated.  If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable.  In the event that a legal proceeding results in a substantial judgment against, or settlement by, us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse effect on the financial condition, results of operations, or cash flows of the Indemnity shareholder interest or the consolidated financial statements of Erie Indemnity Company.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities
Premiums collected	$ 2,679	$ 2,450
Net investment income received	235	222
Limited partnership distributions	64	79
Service agreement fee received	15	15
Commissions and bonuses paid to agents	(397)	(356)
Losses paid	(1,630)	(1,359)
Loss expenses paid	(251)	(227)
Other underwriting and acquisition costs paid	(372)	(345)
Income taxes paid	(98)	(149)
Net cash provided by (used in) operating activities	245	330
Purchase of investments:
Fixed maturities	(1,090)	(1,240)
Preferred stock	(168)	(54)
Common stock	(550)	(700)
Limited partnerships	(46)	(52)
Sales/maturities of investments:
Fixed maturity sales	371	330
Fixed maturity calls/maturities	413	617
Preferred stock	119	42
Common stock	565	654
Sale of and returns on limited partnerships	70	86
Net purchase of property and equipment	(17)	(19)
Net collections on agent loans	1	1
Net cash provided by (used in) investing activities	(332)	(335)
Cash flows from financing activities
Annuity deposits and interest	45	47
Annuity surrenders and withdrawals	(39)	(39)
Universal life deposits and interest	14	12
Universal life surrenders	(6)	(5)
Purchase of treasury stock	(20)	(17)
Dividends paid to shareholders	(59)	(28)
Net cash provided by (used in) financing activities	(65)	(30)
Net increase (decrease) in cash and cash equivalents	(152)	(35)
Cash and cash equivalents at beginning of period	452	400
Cash and cash equivalents at end of period	$ 300	$ 365

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Net income	$ 103	$ 177	$ 212	$ 467
Other comprehensive income (loss)
Change in unrealized holding gains (losses) on available-for-sale securities, net of tax (expense) benefit of $(37), $105, $(80), and $111 respectively	68	(194)	148	(206)
Reclassification adjustment for gross gains included in net income, net of tax benefit of $2, $2, $7, and $7, respectively	(3)	(3)	(11)	(13)
Other comprehensive income (loss)	65	(197)	137	(219)
Comprehensive income (loss)	168	(20)	349	248
Less: Comprehensive income (loss) attributable to noncontrolling interest in consolidated entity – Exchange	118	(60)	250	172
Total comprehensive income – Indemnity	$ 50	$ 40	$ 99	$ 76

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Postretirement Benefits

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Postretirement Benefits

Note 10.   Postretirement Benefits

Pension plans

Our pension plans consist of a noncontributory defined benefit pension plan covering substantially all employees and an unfunded supplemental employee retirement plan for certain members of executive and senior management of the Erie Insurance Group.  The gross liability for postretirement benefits is presented in the Consolidated Statements of Financial Position as part of other liabilities.  A portion of annual expenses related to our postretirement benefit plans is allocated to related entities within the Erie Insurance Group. Although Indemnity is the sponsor of these postretirement plans and records the funded status of these plans, the Exchange and EFL reimburse Indemnity for approximately 55% of the annual benefit expense of these plans, which represents pension benefits for Indemnity employees performing claims and EFL functions.

Prior to 2003, the employee pension plan purchased annuities from EFL for certain plan participants that were receiving benefit payments under the pension plan. These are nonparticipating annuity contracts under which EFL has unconditionally contracted to provide specified benefits to beneficiaries; however, the pension plan remains the primary obligor to the beneficiaries and a contingent liability,$26 million at June 30, 2014, exists in the event EFL does not honor the annuity contracts.

The cost of our pension plans are as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Service cost for benefits earned	$	5		$	6		$	11		$	13
Interest cost on benefits obligation	7			7			14			13
Expected return on plan assets	(8		)	(7		)	(16		)	(15		)
Prior service cost amortization	1			1			1			1
Net actuarial loss amortization	1			3			3			7
Pension plan cost (1)	$	6		$	10		$	13		$	19

(1) Pension plan costs represent the total cost for the Erie Insurance Group before reimbursements to Indemnity from the Exchange and EFL.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 18, 2014 Class A Common Stock	Jul. 18, 2014 Class B Common Stock
Entity Registrant Name	ERIE INDEMNITY CO
Entity Central Index Key	0000922621
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		46,189,068	2,542

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Indemnity Capital Stock

6 Months Ended

Jun. 30, 2014

Class of Stock Disclosures [Abstract]

Indemnity Capital Stock

Note 11.  Indemnity Capital Stock

Class A and B common stock

Holders of Class B shares may, at their option, convert their shares into Class A shares at the rate of 2,400 Class A shares per Class B share.  There were no conversions of Class B shares to Class A shares during the six months ended June 30, 2014 and the year ended December 31, 2013. There is no provision for conversion of Class A shares to Class B shares, and, Class B shares surrendered for conversion cannot be reissued.

Stock repurchase program

In October 2011, our Board of Directors approved a continuation of the current stock repurchase program for a total of $150 million, with no time limitation.  Indemnity had approximately $18 million of repurchase authority remaining under this program at June 30, 2014.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Statement of Comprehensive Income [Abstract]
Change in unrealized holding gains (losses) on available-for-sale securities, tax (expense) benefit	$ (37)	$ 105	$ (80)	$ 111
Reclassification adjustment for gross gains included in net income, tax benefit	$ 2	$ 2	$ 7	$ 7

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Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

Note 5. Segment Information

Our reportable segments include management operations, property and casualty insurance operations, life insurance operations, and investment operations.  Accounting policies for segments are the same as those described in the summary of significant accounting policies.  See Item 8. “Financial Statements and Supplementary Data, Note 2. Significant Accounting Policies,” in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 27, 2014.  Assets are not allocated to the segments, but rather, are reviewed in total for purposes of decision-making.  No single customer or agent provides 10% or more of revenues.

Management operations

Our management operations segment consists of Indemnity serving as attorney-in-fact for the Exchange.  Indemnity operates in this capacity solely for the Exchange.  We evaluate profitability of our management operations segment principally on the gross margin from management operations.  Indemnity earns a management fee from the Exchange for providing sales, underwriting, and policy issuance services.  Management fee revenue, which is eliminated upon consolidation, is calculated as a percentage not to exceed 25% of all the direct premiums written by the Exchange and the other members of the Property and Casualty Group, which are assumed by the Exchange under an intercompany pooling arrangement.  The Property and Casualty Group issues policies with annual terms only.  Management fees are recorded upon policy issuance or renewal, as substantially all of the services required to be performed by Indemnity have been satisfied at that time.  Certain activities are performed and related costs are incurred by us subsequent to policy issuance in connection with the services provided to the Exchange; however, these activities are inconsequential and perfunctory.  Although these management fee revenues and expenses are eliminated upon consolidation, the amount of the fee directly impacts the allocation of our consolidated net income between the noncontrolling interest, which bears the management fee expense and represents the interests of the Exchange subscribers (policyholders), and Indemnity’s interest, which earns the management fee revenue and represents the Indemnity shareholder interest in net income.

Property and casualty insurance operations

Our property and casualty insurance operations segment includes personal and commercial lines.  Personal lines consist primarily of personal auto and homeowners and are marketed to individuals.  Commercial lines consist primarily of commercial multi-peril, commercial auto, and workers compensation and are marketed to small- and medium-sized businesses.  Our property and casualty policies are sold by independent agents.  Our property and casualty insurance underwriting operations are conducted through the Exchange and its subsidiaries and include assumed voluntary reinsurance from nonaffiliated domestic and foreign sources, assumed involuntary, and ceded reinsurance business.  The Exchange exited the assumed voluntary reinsurance business effective December 31, 2003, and therefore unaffiliated assumed voluntary reinsurance includes only run-off activity of the previously assumed voluntary reinsurance business.  We evaluate profitability of the property and casualty insurance operations principally based upon net underwriting results represented by the combined ratio.

Life insurance operations

Our life insurance operations segment includes traditional and universal life insurance products and fixed annuities marketed to individuals using the same independent agency force utilized by our property and casualty insurance operations.  We evaluate profitability of the life insurance segment principally based upon segment net income, including investments, which for segment purposes are reflected in the investment operations segment.  At the same time, we recognize that investment-related income is integral to the evaluation of the life insurance segment because of the long duration of life products.  For the second quarters of 2014 and 2013, investment activities on life insurance related assets generated revenues of $24 million and $26 million, respectively, resulting in EFL reporting income before income taxes of $10 million and $13 million, respectively, before intercompany eliminations. For the six months ended June 30, 2014 and June 30, 2013, investment activities on life insurance related assets generated revenues of $53 million and $52 million, respectively, resulting in EFL reporting income before income taxes of $23 million and $24 million, respectively, before intercompany eliminations.

Investment operations

The investment operations segment includes returns from our fixed maturity, equity security and limited partnership investment portfolios to support our underwriting business.  The Indemnity and Exchange portfolios are managed with the objective of maximizing after-tax returns on a risk-adjusted basis, while the EFL portfolio is managed to be closely aligned to its liabilities and to maintain a sufficient yield to meet profitability targets.  Management actively evaluates the portfolios for impairments. We record impairment writedowns on investments in instances where the fair value of the investment is substantially below cost, and we conclude that the decline in fair value is other-than-temporary.  Investment related income for the life operations is included in the investment segment results.

The following tables summarize the components of the Consolidated Statements of Operations by reportable business segment:

	Erie Insurance Group
(in millions)	Three months ended June 30, 2014
	Management operations		Property and casualty insurance operations			Life insurance operations			Investment operations		Eliminations			Consolidated
Premiums earned/life policy revenue			$	1,298		$	22				$	(1	)	$	1,319
Net investment income									$	116	(5		)	111
Net realized investment gains									133					133
Net impairment losses recognized in earnings									0					0
Equity in earnings of limited partnerships									27					27
Management fee revenue	$	366									(366		)	—
Service agreement and other revenue	8					0								8
Total revenues	374		1,298			22			276		(372		)	1,598
Cost of management operations	306										(306		)	—
Insurance losses and loss expenses			1,101			27					(2		)	1,126
Policy acquisition and underwriting expenses			380			9					(64		)	325
Total benefits and expenses	306		1,481			36			—		(372		)	1,451
Income (loss) before income taxes	68		(183		)	(14		)	276		—			147
Provision for income taxes	24		(64		)	(5		)	89		—			44
Net income (loss)	$	44	$	(119	)	$	(9	)	$	187	—			$	103

	Erie Insurance Group
(in millions)	Three months ended June 30, 2013
	Management operations		Property and casualty insurance operations		Life insurance operations			Investment operations			Eliminations			Consolidated
Premiums earned/life policy revenue			$	1,196	$	20					$	(1	)	$	1,215
Net investment income								$	107		(3		)	104
Net realized investment gains								61						61
Net impairment losses recognized in earnings								(1		)				(1		)
Equity in earnings of limited partnerships								39						39
Management fee revenue	$	336									(336		)	—
Service agreement and other revenue	8				0									8
Total revenues	344		1,196		20			206			(340		)	1,426
Cost of management operations	285										(285		)	—
Insurance losses and loss expenses			837		26						(2		)	861
Policy acquisition and underwriting expenses			348		7						(53		)	302
Total benefits and expenses	285		1,185		33			—			(340		)	1,163
Income (loss) before income taxes	59		11		(13		)	206			—			263
Provision for income taxes	21		4		(5		)	66			—			86
Net income (loss)	$	38	$	7	$	(8	)	$	140		$	—		$	177

	Erie Insurance Group
(in millions)	Six months ended June 30, 2014
	Management operations		Property and casualty insurance operations			Life insurance operations			Investment operations		Eliminations			Consolidated
Premiums earned/life policy revenue			$	2,566		$	42				$	(1	)	$	2,607
Net investment income									$	228	(8		)	220
Net realized investment gains									189					189
Net impairment losses recognized in earnings									0					0
Equity in earnings of limited partnerships									77					77
Management fee revenue	$	685									(685		)	—
Service agreement and other revenue	15					1								16
Total revenues	700		2,566			43			494		(694		)	3,109
Cost of management operations	574										(574		)	—
Insurance losses and loss expenses			2,108			55					(3		)	2,160
Policy acquisition and underwriting expenses			745			18					(117		)	646
Total benefits and expenses	574		2,853			73			—		(694		)	2,806
Income (loss) before income taxes	126		(287		)	(30		)	494		—			303
Provision for income taxes	44		(100		)	(11		)	158		—			91
Net income (loss)	$	82	$	(187	)	$	(19	)	$	336	$	—		$	212

	Erie Insurance Group
(in millions)	Six months ended June 30, 2013
	Management operations		Property and casualty insurance operations		Life insurance operations			Investment operations			Eliminations			Consolidated
Premiums earned/life policy revenue			$	2,352	$	39					$	(1	)	$	2,390
Net investment income								$	213		(6		)	207
Net realized investment gains								310						310
Net impairment losses recognized in earnings								(1		)				(1		)
Equity in earnings of limited partnerships								75						75
Management fee revenue	$	632									(632		)	—
Service agreement and other revenue	15				1									16
Total revenues	647		2,352		40			597			(639		)	2,997
Cost of management operations	539										(539		)	—
Insurance losses and loss expenses			1,654		52						(3		)	1,703
Policy acquisition and underwriting expenses			676		16						(97		)	595
Total benefits and expenses	539		2,330		68			—			(639		)	2,298
Income (loss) before income taxes	108		22		(28		)	597			—			699
Provision for income taxes	38		8		(10		)	196			—			232
Net income (loss)	$	70	$	14	$	(18	)	$	401		$	—		$	467

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Variable Interest Entity

6 Months Ended

Jun. 30, 2014

Variable Interest Entity [Abstract]

Variable Interest Entity

Note 4.  Variable Interest Entity

Erie Insurance Exchange

The Exchange is a reciprocal insurance exchange domiciled in Pennsylvania, for which Indemnity serves as attorney-in-fact.  Indemnity holds a variable interest in the Exchange due to the absence of decision-making capabilities by the equity owners (subscribers/policyholders) of the Exchange and due to the significance of the management fee the Exchange pays to Indemnity as its decision maker.  As a result, Indemnity is deemed to have a controlling financial interest in the Exchange and is considered to be its primary beneficiary.

Consolidation of the Exchange’s financial results is required given the significance of the management fee to the Exchange and because Indemnity has the power to direct the activities of the Exchange that most significantly impact the Exchange’s economic performance.  The Exchange’s anticipated economic performance is the product of its underwriting results combined with its investment results.  The fees paid to Indemnity under the subscriber’s agreement impact the anticipated economic performance attributable to the Exchange’s results.  Indemnity earns a management fee from the Exchange for the services it provides as attorney-in-fact.  Indemnity’s management fee revenues are based upon all premiums written or assumed by the Exchange.  Indemnity’s Board of Directors determines the management fee rate to be paid by the Exchange to Indemnity.  This rate cannot exceed 25% of the direct and assumed written premiums of the Exchange, as defined by the subscriber’s agreement signed by each policyholder.  Management fee revenues and management fee expenses are eliminated upon consolidation.

The shareholders of Indemnity have no rights to the assets of the Exchange and no obligations arising from the liabilities of the Exchange.  Indemnity has no obligation related to any underwriting and/or investment losses experienced by the Exchange.  Indemnity would, however, be adversely impacted if the Exchange incurred significant underwriting and/or investment losses.  If the surplus of the Exchange were to decline significantly from its current level, its financial strength ratings could be reduced and, as a consequence, the Exchange could find it more difficult to retain its existing business and attract new business.  A decline in the business of the Exchange would have an adverse effect on the amount of the management fees Indemnity receives.  In addition, a decline in the surplus of the Exchange from its current level may impact the management fee rate received by Indemnity.  Indemnity also has an exposure to a concentration of credit risk related to the unsecured receivables due from the Exchange for its management fee. If any of these events occurred, Indemnity’s financial position, financial performance, and/or cash flows could be adversely impacted.

All property and casualty and life insurance operations are owned by the Exchange, and Indemnity functions solely as the management company.

Indemnity has not provided financial or other support to the Exchange for any of the reporting periods presented.  At June 30, 2014, there are no explicit or implicit arrangements that would require Indemnity to provide future financial support to the Exchange.  Indemnity is not liable if the Exchange was to be in violation of its debt covenants or was unable to meet its obligation for unfunded commitments to limited partnerships.

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events

Note 16. Subsequent Events

No items were identified in the period subsequent to the financial statement date that required adjustment or disclosure.

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Indemnity Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Indemnity Accumulated Other Comprehensive Loss

Note 12.  Indemnity Accumulated Other Comprehensive Loss

Changes in Indemnity's accumulated other comprehensive loss by component attributable to the Indemnity shareholder interest is presented as follows for the six months ended June 30, 2014:

	Indemnity Shareholder Interest
(in millions)	Unrealized holding gains (losses) on available-for-sale securities			Postretirement plans(2)			Total
Balance at December 31, 2013	$	6		$	(65	)	$	(59	)
Other comprehensive income before reclassifications, net of tax	5			0			5
Amounts reclassified from accumulated other comprehensive income (loss), net of tax(1)	(1		)	0			(1		)
Net current period other comprehensive income, net of tax	4			0			4
Balance at June 30, 2014	$	10		$	(65	)	$	(55	)

(1) See the following table for details about these reclassifications.

(2) There are no amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.

Amounts reclassified out of accumulated other comprehensive income (loss) and the related affected line item in the Consolidated Statements of Operations where net income is presented are as follows for the three and six months ended June 30, 2014:

	Erie Insurance Group
	Three months ended		Six months ended
	June 30, 2014		June 30, 2014
(in millions)	Amounts reclassified from accumulated other comprehensive income (loss)(1)
Unrealized holding gains (losses) on available-for-sale securities:
Net realized investment gains	$	5	$	18
Net impairment losses recognized in earnings	0		0
Income from operations before income taxes and noncontrolling interest	5		18
Provision for income taxes	2		7
Net income	3		11
Less: Net income attributable to noncontrolling interest in consolidated entity – Exchange	3		10
Net income attributable to Indemnity	$	0	$	1
Amortization of postretirement plan items(2):
Net income attributable to Indemnity	$	0	$	0
Net income attributable to Indemnity	$	0	$	1

(1) Positive amounts indicate net income, while negative amounts indicate net loss.

(2) There are no amounts reclassified out of accumulated other comprehensive loss related to postretirement plan items during interim periods.

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Bank Line of Credit

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Bank Line of Credit

Note 8.  Bank Line of Credit

As of June 30, 2014, Indemnity has access to a $100 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on November 3, 2018. As of June 30, 2014, a total of $98.2 million remains available under the facility due to $1.8 million outstanding letters of credit, which reduce the availability for letters of credit to $23.2 million.  Indemnity had no borrowings outstanding on its line of credit as of June 30, 2014.  Bonds with a fair value of $113 million were pledged as collateral on the line at June 30, 2014.

As of June 30, 2014, the Exchange has access to a $300 million bank revolving line of credit with a $25 million letter of credit sublimit that expires on October 25, 2018. As of June 30, 2014, a total of $298.9 million remains available under the facility due to $1.1 million outstanding letters of credit, which reduce the availability for letters of credit to $23.9 million.  The Exchange had no borrowings outstanding on its line of credit as of June 30, 2014.  Bonds with a fair value of $331 million were pledged as collateral on the line at June 30, 2014.

Both lines have securities pledged as collateral that have no trading restrictions and are reported as available-for-sale fixed maturities in the Consolidated Statements of Financial Position as of June 30, 2014.  The banks require compliance with certain covenants, which include leverage ratios for Indemnity’s line of credit and statutory surplus and risk based capital ratios for the Exchange’s line of credit.  We are in compliance with all covenants at June 30, 2014.

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Fair Value

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value

Note 6. Fair Value

Our available-for-sale and trading securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.

Valuation techniques used to derive the fair value of our available-for-sale and trading securities are based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources.  Unobservable inputs reflect our own assumptions regarding fair market value for these securities.  Although the majority of our prices are obtained from third party sources, we also perform an internal pricing review for securities with low trading volumes under current market conditions. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 – Unobservable inputs for the asset or liability.

Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service.  Our Level 1 category includes those securities valued using an exchange traded price provided by the pricing service.  The methodologies used by the pricing service that support a Level 2 classification of a financial instrument include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.  Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.

In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes.  In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.

We perform continuous reviews of the prices obtained from the pricing service.  This includes evaluating the methodology and inputs used by the pricing service to ensure that we determine the proper classification level of the financial instrument.  Price variances, including large periodic changes, are investigated and corroborated by market data.  We have reviewed the pricing methodologies of our pricing service as well as other observable inputs, such as data, and transaction volumes and believe that their prices adequately consider market activity in determining fair value.  Our review process continues to evolve based upon accounting guidance and requirements.

When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables.  When available, we obtain multiple quotes for the same security.  The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information.  Our evaluation includes the consideration of benchmark yields, reported trades, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data.

For certain securities in an illiquid market, there may be no prices available from a pricing service and no comparable market quotes available.  In these situations, we value the security using an internally-developed, risk-adjusted discounted cash flow model.

The following table represents our consolidated fair value measurements on a recurring basis by asset class and level of input at June 30, 2014:

	Erie Insurance Group
	June 30, 2014
	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	$	241	$	0	$	241	$	0
Corporate debt securities	256		0		255		1
Collateralized debt obligations	0		0		0		0
Total fixed maturities	497		0		496		1
Nonredeemable preferred stock	14		2		12		0
Common stock	12		12		0		0
Total available-for-sale securities	523		14		508		1
Other investments (1)	18		0		0		18
Total – Indemnity	$	541	$	14	$	508	$	19
Exchange
Available-for-sale securities:
U.S. treasury	$	31	$	0	$	31	$	0
Government sponsored enterprises	4		0		4		0
States & political subdivisions	1,519		0		1,519		0
Foreign government securities	15		0		15		0
Corporate debt securities	6,866		0		6,841		25
Residential mortgage-backed securities	146		0		146		0
Commercial mortgage-backed securities	34		0		34		0
Collateralized debt obligations	14		0		14		0
Other debt securities	72		0		72		0
Total fixed maturities	8,701		0		8,676		25
Nonredeemable preferred stock	717		303		413		1
Common stock	197		197		0		0
Total available-for-sale securities	9,615		500		9,089		26
Trading securities:
Common stock	3,377		3,362		0		15
Total trading securities	3,377		3,362		0		15
Other investments (1)	102		0		0		102
Total – Exchange	$	13,094	$	3,862	$	9,089	$	143
Total – Erie Insurance Group	$	13,635	$	3,876	$	9,597	$	162

(1)Other investments measured at fair value represent four real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. These investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if they represent the NAV at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of June 30, 2014. During the six months ended June 30, 2014, Indemnity made no contributions and received distributions totaling $1.8 million, and the Exchange made no contributions and received distributions totaling $6.9 million for these investments. As of June 30, 2014, the amount of unfunded commitments related to the investments was $1.5 million for Indemnity and $4.5 million for the Exchange.

Level 3 Assets – Quarterly Change:

	Erie Insurance Group
(in millions)	Beginning balance at March 31, 2014		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales			Transfers in and (out) of Level 3 (2)		Ending balance at June 30, 2014
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0	$	0	$	0		$	0	$	1
Collateralized debt obligations	0		0		0		0		0			0		0
Total fixed maturities	1		0		0		0		0			0		1
Total available-for-sale securities	1		0		0		0		0			0		1
Other investments	18		1		0		0		(1		)	0		18
Total Level 3 assets – Indemnity	$	19	$	1	$	0	$	0	$	(1	)	$	0	$	19
Exchange
Available-for-sale securities:
Corporate debt securities	$	26	$	0	$	0	$	0	$	(1	)	$	0	$	25
Collateralized debt obligations	0		0		0		0		0			0		0
Total fixed maturities	26		0		0		0		(1		)	0		25
Nonredeemable preferred stock	1		0		0		0		0			0		1
Total available-for-sale securities	27		0		0		0		(1		)	0		26
Trading securities:
Common stock	15		0		0		0		0			0		15
Total trading securities	15		0		0		0		0			0		15
Other investments	98		6		0		0		(2		)	0		102
Total Level 3 assets – Exchange	$	140	$	6	$	0	$	0	$	(3	)	$	0	$	143
Total Level 3 assets – Erie Insurance Group	$	159	$	7	$	0	$	0	$	(4	)	$	0	$	162

(1) These amounts are reported in the Consolidated Statement of Operations. There is $7 million included in equity in earnings of limited partnerships for the three months ended June 30, 2014 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.

We review the fair value hierarchy classifications each reporting period.  Transfers between hierarchy levels may occur due to changes in the available market observable inputs.  Transfers in and out of level classifications are reported as having occurred at the beginning of the quarter in which the transfers occurred.

For Indemnity, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 for the three months ended June 30, 2014.

For the Exchange, Level 1 to Level 2 transfers totaled $11 million due to trading activity levels for one preferred stock holding, and there were no transfers from Level 2 to Level 1 or between Level 2 and Level 3 for the three months ended June 30, 2014.

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group
(in millions)	Beginning balance at December 31, 2013		Included in earnings (1)		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2014
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	1		0		0			0		(1		)	0			0
Total fixed maturities	2		0		0			0		(1		)	0			1
Total available-for-sale securities	2		0		0			0		(1		)	0			1
Other investments	18		2		0			0		(2		)	0			18
Total Level 3 assets – Indemnity	$	20	$	2	$	0		$	0	$	(3	)	$	0		$	19
Exchange
Available-for-sale securities:
Corporate debt securities	$	26	$	0	$	0		$	0	$	(1	)	$	0		$	25
Collateralized debt obligations	5		1		(1		)	0		(3		)	(2		)	0
Total fixed maturities	31		1		(1		)	0		(4		)	(2		)	25
Nonredeemable preferred stock	0		0		0			1		0			0			1
Total available-for-sale securities	31		1		(1		)	1		(4		)	(2		)	26
Trading securities:
Common stock	15		0		0			0		0			0			15
Total trading securities	15		0		0			0		0			0			15
Other investments	98		11		0			0		(7		)	0			102
Total Level 3 assets – Exchange	$	144	$	12	$	(1	)	$	1	$	(11	)	$	(2	)	$	143
Total Level 3 assets – Erie Insurance Group	$	164	$	14	$	(1	)	$	1	$	(14	)	$	(2	)	$	162

(1) These amounts are reported in the Consolidated Statement of Operations. There is $1 million included in net realized investment gains (losses) and $13 million included in equity in earnings of limited partnerships for the six months ended June 30, 2014 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.

For Indemnity, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 for the six months ended June 30, 2014.

For the Exchange, Level 1 to Level 2 transfers totaled $14 million due to trading activity levels for two preferred stock holdings, and there were no transfers from Level 2 to Level 1 for the six months ended June 30, 2014. There were no Level 2 to Level 3 transfers, and Level 3 to Level 2 transfers totaled $2 million for one fixed maturity holding as a result of using observable market data to determine the fair value at June 30, 2014.

Quantitative and Qualitative Disclosures about Unobservable Inputs

	Erie Insurance Group
	June 30, 2014
(dollars in millions)	Fair value		No. of holdings	Valuation techniques	Unobservable input	Range	Weighted average
Indemnity
Corporate debt securities (1)	$	1	1	Market approach	Non-binding broker quote	114
Collateralized debt obligations (2)	0		1	Income approach	Projected maturity date	Dec 2014
					Repayment at maturity	1%
					Discount rate	15%
Other investments (4)	18		2
Total Level 3 assets – Indemnity	$	19	4
Exchange
Corporate debt securities (1)(3)	$	25	7	Market approach	Non-binding broker quote	109-117	111
					Comparable transaction EBITDA multiples	8.0 - 12.1x	8.0x
					Comparable security yield	6%
Collateralized debt obligations (2)	0		2	Income approach	Projected maturity date	Dec 2014 - Oct 2035
					Repayment at maturity	1 - 100%	64%
					Discount rate	15 - 18%	17%
Nonredeemable preferred stock (5)	1		1	Market approach	Comparable company price-to-sales ratio	12.0 - 22.0x	19.0x
Common stock (3)	15		4	Market approach	Comparable transaction EBITDA multiples	8.0 - 12.1x	8.0x
					Discount for lack of marketability	5 - 30%	10%
Other investments (4)	102		4
Total Level 3 assets – Exchange	$	143	18
Total Level 3 assets – Erie Insurance Group	$	162	22

(1) Corporate debt securities – The unobservable input used in the fair value measurement of certain corporate debt securities is the likelihood of repayment by the underlying entity when there is no market for trading these securities.  When available, we obtain non-binding broker quotes to value such securities. When a non-binding broker quote was the only input available, it was considered unobservable.

(2) Collateralized-debt-obligation securities – The unobservable inputs used in the fair value measurement of certain collateralized-debt-obligation securities are the repayment at maturity of underlying collateral available to pay note holders, the projected maturity of the underlying security, and a discount rate appropriate for the security.  Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.  Generally, a change in the assumption used for the performance of the underlying collateral is accompanied by an opposite change in the maturity and a directionally opposite change in the discount rate used to value the security. 

(3) Common stock investments and Corporate debt securities – The unobservable inputs used in the fair value measurement of direct private equity common stock investments and certain corporate debt securities are comparable private transaction earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples, the average EBITDA multiple for comparable publicly traded companies and the amount of discount applied to the price due to the illiquidity of the securities being valued.  Significant changes in any of those inputs in isolation could result in a significantly higher or lower fair value measurement.

(4) Other investments – Other investments represent certain limited partnerships that are recorded at fair value and are based upon net asset value (NAV) provided by the general partner where the unobservable inputs are not reasonably available to us.

(5) Nonredeemable preferred stock - The unobservable input used in the fair value measurement of a private nonredeemable preferred stock security is the price to sales ratio for comparable publicly traded companies. 

Securities valued using unobservable inputs shown above totaled $162 million at June 30, 2014. In total, Level 3 assets represent less than 1.2% of the total assets measured at fair value on a recurring basis for the Erie Insurance Group.

The following table represents our consolidated fair value measurements on a recurring basis by asset class and level of input at December 31, 2013:

	Erie Insurance Group
	December 31, 2013
	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	$	243	$	0	$	243	$	0
Corporate debt securities	282		0		281		1
Collateralized debt obligations	1		0		0		1
Total fixed maturities	526		0		524		2
Nonredeemable preferred stock	25		2		23		0
Common stock	25		25		0		0
Total available-for-sale securities	576		27		547		2
Other investments (1)	18		0		0		18
Total – Indemnity	$	594	$	27	$	547	$	20
Exchange
Available-for-sale securities:
U.S. government & agencies	$	172	$	0	$	172	$	0
States & political subdivisions	1,470		0		1,470		0
Foreign government securities	15		0		15		0
Corporate debt securities	6,211		0		6,185		26
Residential mortgage-backed securities	156		0		156		0
Commercial mortgage-backed securities	47		0		47		0
Collateralized debt obligations	16		0		11		5
Other debt securities	75		0		75		0
Total fixed maturities	8,162		0		8,131		31
Nonredeemable preferred stock	621		242		379		0
Common stock	198		198		0		0
Total available-for-sale securities	8,981		440		8,510		31
Trading securities:
Common stock	3,202		3,187		0		15
Total trading securities	3,202		3,187		0		15
Other investments (1)	98		0		0		98
Total – Exchange	$	12,281	$	3,627	$	8,510	$	144
Total – Erie Insurance Group	$	12,875	$	3,654	$	9,057	$	164

(1)Other investments measured at fair value represent four real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. These investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if they represent the NAV at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of December 31, 2013. During the year ended December 31, 2013, Indemnity made no contributions and received distributions totaling $2.4 million, and the Exchange made no contributions and received distributions totaling $21.7 million for these investments. As of December 31, 2013, the amount of unfunded commitments related to the investments was $1.5 million for Indemnity and $4.5 million for the Exchange.

Level 3 Assets – Quarterly Change:

	Erie Insurance Group
(in millions)	Beginning balance at March 31, 2013		Included in earnings (1)		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2013
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	2		0		0			0		(1		)	0			1
Total fixed maturities	3		0		0			0		(1		)	0			2
Total available-for-sale securities	3		0		0			0		(1		)	0			2
Other investments	20		0		0			0		0			0			20
Total Level 3 assets – Indemnity	$	23	$	0	$	0		$	0	$	(1	)	$	0		$	22
Exchange
Available-for-sale securities:
Corporate debt securities	58		0		(1		)	1		(2		)	(23		)	33
Commercial mortgage-backed securities	5		0		0			0		(1		)	0			4
Collateralized debt obligations	14		1		(1		)	0		(2		)	0			12
Total fixed maturities	77		1		(2		)	1		(5		)	(23		)	49
Nonredeemable preferred stock	12		2		(1		)	0		(6		)	0			7
Total available-for-sale securities	89		3		(3		)	1		(11		)	(23		)	56
Trading securities:
Common stock	7		0		0			0		0			0			7
Total trading securities	7		0		0			0		0			0			7
Other investments	112		2		0			0		(1		)	0			113
Total Level 3 assets – Exchange	$	208	$	5	$	(3	)	$	1	$	(12	)	$	(23	)	$	176
Total Level 3 assets – Erie Insurance Group	$	231	$	5	$	(3	)	$	1	$	(13	)	$	(23	)	$	198

(1) These amounts are reported in the Consolidated Statement of Operations. There is $3 million included in net realized investment gains (losses) and $2 million included in equity in earnings of limited partnerships for the three months ended June 30, 2013 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.

We review the fair value hierarchy classifications each reporting period.  Transfers between hierarchy levels may occur due to changes in the available market observable inputs.  Transfers in and out of level classifications are reported as having occurred at the beginning of the quarter in which the transfers occurred.

For Indemnity, there were no transfers between Level 1 and Level 2 or between Level 2 and Level 3 for the three months ended June 30, 2013.

For the Exchange, there were no transfers between Level 1 and Level 2 or from Level 2 to Level 3 for the three months ended June 30, 2013. Level 3 to Level 2 transfers totaled $23 million for three fixed maturity holdings. These transfers out of Level 3 were primarily the result of using observable market data to determine the fair value at June 30, 2013.

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group
(in millions)	Beginning balance at December 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, 2013
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0		$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	3		0			0			0		(2		)	0			1
Total fixed maturities	4		0			0			0		(2		)	0			2
Total available-for-sale securities	4		0			0			0		(2		)	0			2
Other investments	19		1			0			0		0			0			20
Total Level 3 assets – Indemnity	$	23	$	1		$	0		$	0	$	(2	)	$	0		$	22
Exchange
Available-for-sale securities:
Corporate debt securities	$	43	$	0		$	(1	)	$	1	$	(2	)	$	(8	)	$	33
Commercial mortgage-backed securities	0		0			(1		)	0		(1		)	6			4
Collateralized debt obligations	16		1			0			0		(7		)	2			12
Total fixed maturities	59		1			(2		)	1		(10		)	0			49
Nonredeemable preferred stock	0		0			3			4		0			0			7
Total available-for-sale securities	59		1			1			5		(10		)	0			56
Trading securities:
Common stock	15		(3		)	0			0		(5		)	0			7
Total trading securities	15		(3		)	0			0		(5		)	0			7
Other investments	109		7			0			0		(3		)	0			113
Total Level 3 assets – Exchange	$	183	$	5		$	1		$	5	$	(18	)	$	0		$	176
Total Level 3 assets – Erie Insurance Group	$	206	$	6		$	1		$	5	$	(20	)	$	0		$	198

(1) These amounts are reported in the Consolidated Statement of Operations. There is $(2) million of losses included in net realized investment (losses) and $8 million included in equity in earnings of limited partnerships for the six months ended June 30, 2013 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.

For Indemnity, there were no Level 1 to Level 2 transfers for the six months ended June 30, 2013. Level 2 to Level 1 transfers totaled $1 million, due to trading activity levels related to one preferred stock holding, and there were no transfers between Levels 2 and 3.

For the Exchange, Level 1 to Level 2 transfers totaled $5 million and Level 2 to Level 1 transfers totaled $44 million due to trading activity levels related to one preferred stock holding and five preferred stock holdings, respectively, for the six months ended June 30, 2013. Level 2 to Level 3 transfers totaled $18 million for five fixed maturity holdings and Level 3 to Level 2 transfers totaled $18 million for two fixed maturity holdings. These transfers in and out of Level 3 were primarily the result of using non-binding and binding broker quotes, respectively, to determine the fair value at June 30, 2013.

The following table presents our consolidated fair value measurements on a recurring basis by pricing source at June 30, 2014:

	Erie Insurance Group
(in millions)	June 30, 2014
	Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services	$	496	$	0	$	496	$	0
Priced via market comparables/broker quotes (1)	1		0		0		1
Priced via internal modeling	0		0		0		0
Total fixed maturities	497		0		496		1
Nonredeemable preferred stock:
Priced via pricing services	12		2		10		0
Priced via market comparables/broker quotes (1)	2		0		2		0
Total nonredeemable preferred stock	14		2		12		0
Common stock:
Priced via pricing services	12		12		0		0
Total common stock	12		12		0		0
Other investments:
Priced via unobservable inputs (2)	18		0		0		18
Total other investments	18		0		0		18
Total – Indemnity	$	541	$	14	$	508	$	19
Exchange
Fixed maturities:
Priced via pricing services	$	8,646	$	0	$	8,646	$	0
Priced via market comparables/broker quotes (1)	48		0		30		18
Priced via internal modeling	7		0		0		7
Total fixed maturities	8,701		0		8,676		25
Nonredeemable preferred stock:
Priced via pricing services	679		303		376		0
Priced via market comparables/broker quotes (1)	37		0		37		0
Priced via internal modeling	1		0		0		1
Total nonredeemable preferred stock	717		303		413		1
Common stock:
Priced via pricing services	3,559		3,559		0		0
Priced via internal modeling	15		0		0		15
Total common stock	3,574		3,559		0		15
Other investments:
Priced via unobservable inputs (2)	102		0		0		102
Total other investments	102		0		0		102
Total – Exchange	$	13,094	$	3,862	$	9,089	$	143
Total – Erie Insurance Group	$	13,635	$	3,876	$	9,597	$	162

(1) When a non-binding broker quote was the only price available, the security was classified as Level 3.

(2) Other investments measured at fair value represent real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner.

There were no assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2014.

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Investments

6 Months Ended

Jun. 30, 2014

Investments [Abstract]

Investments

Note 7.  Investments

Available-for-sale securities

The following table summarizes the cost and fair value of our available-for-sale securities at June 30, 2014:

	Erie Insurance Group
	June 30, 2014
(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	230	$	11	$	0	$	241
Corporate debt securities	254		2		0		256
Collateralized debt obligations	0		0		0		0
Total fixed maturities	484		13		0		497
Nonredeemable preferred stock	12		2		0		14
Common stock	13		0		1		12
Total available-for-sale securities – Indemnity	$	509	$	15	$	1	$	523
Exchange
Available-for-sale securities:
U.S. treasury	$	31	$	0	$	0	$	31
Government sponsored enterprises	3		1		0		4
States & political subdivisions	1,438		83		2		1,519
Foreign government securities	15		0		0		15
Corporate debt securities	6,409		465		8		6,866
Residential mortgage-backed securities	145		3		2		146
Commercial mortgage-backed securities	32		2		0		34
Collateralized debt obligations	7		7		0		14
Other debt securities	69		3		0		72
Total fixed maturities	8,149		564		12		8,701
Nonredeemable preferred stock	646		73		2		717
Common stock	196		2		1		197
Total available-for-sale securities – Exchange	$	8,991	$	639	$	15	$	9,615
Total available-for-sale securities – Erie Insurance Group	$	9,500	$	654	$	16	$	10,138

The following table summarizes the cost and fair value of our available-for-sale securities at December 31, 2013:

	Erie Insurance Group
	December 31, 2013
(in millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Indemnity
Available-for-sale securities:
States & political subdivisions	$	237	$	7	$	1	$	243
Corporate debt securities	280		2		0		282
Collateralized debt obligations	1		0		0		1
Total fixed maturities	518		9		1		526
Nonredeemable preferred stock	24		2		1		25
Common stock	26		0		1		25
Total available-for-sale securities – Indemnity	$	568	$	11	$	3	$	576
Exchange
Available-for-sale securities:
U.S. government & agencies	$	171	$	1	$	0	$	172
States & political subdivisions	1,430		55		15		1,470
Foreign government securities	15		0		0		15
Corporate debt securities	5,902		354		45		6,211
Residential mortgage-backed securities	157		3		4		156
Commercial mortgage-backed securities	45		2		0		47
Collateralized debt obligations	8		8		0		16
Other debt securities	73		3		1		75
Total fixed maturities	7,801		426		65		8,162
Nonredeemable preferred stock	577		55		11		621
Common stock	201		0		3		198
Total available-for-sale securities – Exchange	$	8,579	$	481	$	79	$	8,981
Total available-for-sale securities – Erie Insurance Group	$	9,147	$	492	$	82	$	9,557

The amortized cost and estimated fair value of fixed maturities at June 30, 2014 are shown below by remaining contractual term to maturity.  Mortgage-backed securities are allocated based upon their stated maturity dates.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Erie Insurance Group
	June 30, 2014
(in millions)	Amortized		Estimated
	cost		fair value
Indemnity
Due in one year or less	$	69	$	69
Due after one year through five years	229		232
Due after five years through ten years	113		118
Due after ten years	73		78
Total fixed maturities – Indemnity	$	484	$	497
Exchange
Due in one year or less	377		384
Due after one year through five years	3,155		3,365
Due after five years through ten years	3,094		3,303
Due after ten years	1,523		1,649
Total fixed maturities – Exchange	$	8,149	$	8,701
Total fixed maturities – Erie Insurance Group	$	8,633	$	9,198

Available-for-sale securities in a gross unrealized loss position at June 30, 2014 are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	June 30, 2014
(dollars in millions)	Less than 12 months				12 months or longer				Total
Indemnity	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair  value		Unrealized losses		No. of holdings
Available-for-sale securities:
States & political subdivisions	$	3	$	0	$	7	$	0	$	10	$	0	4
Corporate debt securities	49		0		6		0		55		0		172
Total fixed maturities	52		0		13		0		65		0		176
Nonredeemable preferred stock	0		0		2		0		2		0		2
Common stock	0		0		12		1		12		1		1
Total available-for-sale securities – Indemnity	$	52	$	0	$	27	$	1	$	79	$	1	179
Quality breakdown of fixed maturities:
Investment grade	$	11	$	0	$	13	$	0	$	24	$	0	7
Non-investment grade	41		0		0		0		41		0		169
Total fixed maturities – Indemnity	$	52	$	0	$	13	$	0	$	65	$	0	176
Exchange
Available-for-sale securities:
U.S. treasury	$	0	$	0	$	0	$	0	$	0	$	0	1
States & political subdivisions	38		0		111		2		149		2		36
Foreign government securities	0		0		5		0		5		0		1
Corporate debt securities	312		2		279		6		591		8		376
Residential mortgage-backed securities	15		0		51		2		66		2		12
Commercial mortgage-backed securities	1		0		0		0		1		0		1
Other debt securities	4		0		7		0		11		0		3
Total fixed maturities	370		2		453		10		823		12		430
Nonredeemable preferred stock	42		0		40		2		82		2		14
Common stock	0		0		131		1		131		1		2
Total available-for-sale securities – Exchange	$	412	$	2	$	624	$	13	$	1,036	$	15	446
Quality breakdown of fixed maturities:
Investment grade	$	203	$	1	$	429	$	9	$	632	$	10	131
Non-investment grade	167		1		24		1		191		2		299
Total fixed maturities – Exchange	$	370	$	2	$	453	$	10	$	823	$	12	430

The above securities for Indemnity and the Exchange have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest.  The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost.  Any securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.

Available-for-sale securities in a gross unrealized loss position at December 31, 2013 are as follows.  Data is provided by length of time for securities in a gross unrealized loss position.

	Erie Insurance Group
	December 31, 2013
(dollars in millions)	Less than 12 months				12 months or longer				Total
Indemnity	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses		No. of holdings
Available-for-sale securities:
States & political subdivisions	$	58	$	1	$	0	$	0	$	58	$	1	21
Corporate debt securities	54		0		10		0		64		0		11
Total fixed maturities	112		1		10		0		122		1		32
Nonredeemable preferred stock	5		1		3		0		8		1		4
Common stock	12		1		13		0		25		1		2
Total available-for-sale securities – Indemnity	$	129	$	3	$	26	$	0	$	155	$	3	38
Quality breakdown of fixed maturities:
Investment grade	$	112	$	1	$	10	$	0	$	122	$	1	32
Non-investment grade	0		0		0		0		0		0		0
Total fixed maturities – Indemnity	$	112	$	1	$	10	$	0	$	122	$	1	32
Exchange
Available-for-sale securities:
U.S. government & agencies	$	1	$	0	$	0	$	0	$	1	$	0	2
States & political subdivisions	408		13		18		2		426		15		100
Foreign government securities	5		0		0		0		5		0		1
Corporate debt securities	1,251		43		36		2		1,287		45		237
Residential mortgage-backed securities	71		4		8		0		79		4		12
Commercial mortgage-backed securities	5		0		0		0		5		0		1
Other debt securities	30		1		0		0		30		1		5
Total fixed maturities	1,771		61		62		4		1,833		65		358
Nonredeemable preferred stock	182		10		13		1		195		11		27
Common stock	97		3		101		0		198		3		3
Total available-for-sale securities – Exchange	$	2,050	$	74	$	176	$	5	$	2,226	$	79	388
Quality breakdown of fixed maturities:
Investment grade	$	1,707	$	57	$	62	$	4	$	1,769	$	61	344
Non-investment grade	64		4		0		0		64		4		14
Total fixed maturities – Exchange	$	1,771	$	61	$	62	$	4	$	1,833	$	65	358

The above securities for Indemnity and the Exchange have been evaluated and determined to be temporary impairments for which we expect to recover our entire principal plus interest.  The primary components of this analysis include a general review of market conditions and financial performance of the issuer along with the extent and duration at which fair value is less than cost.  Any securities that we intend to sell or will more likely than not be required to sell before recovery are included in other-than-temporary impairments with the impairment charges recognized in earnings.

Net investment income

Interest and dividend income are recognized as earned and recorded to net investment income.  Investment income, net of expenses, was generated from the following portfolios:

	Erie Insurance Group
(in millions)	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity
Fixed maturities	$	3	$	3	$	6	$	6
Equity securities	0		0		1		1
Cash equivalents and other	1		1		1		1
Total investment income	4		4		8		8
Less: investment expenses	0		1		0		1
Investment income, net of expenses – Indemnity	$	4	$	3	$	8	$	7
Exchange
Fixed maturities	$	85	$	83	$	171	$	166
Equity securities	30		27		59		51
Cash equivalents and other	1		0		1		0
Total investment income	116		110		231		217
Less: investment expenses	9		9		19		17
Investment income, net of expenses – Exchange	$	107	$	101	$	212	$	200
Investment income, net of expenses – Erie Insurance Group	$	111	$	104	$	220	$	207

Realized investment gains (losses)

Realized gains and losses on sales of securities are recognized in income based upon the specific identification method. Realized gains (losses) on investments were as follows:

	Erie Insurance Group
(in millions)	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Indemnity
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	0		$	0		$	0		$	0
Gross realized losses	0			0			0			0
Net realized gains	0			0			0			0
Equity securities:
Gross realized gains	0			0			1			0
Gross realized losses	0			0			0			0
Net realized gains	0			0			1			0
Net realized investment gains – Indemnity	$	0		$	0		$	1		$	0
Exchange
Available-for-sale securities:
Fixed maturities:
Gross realized gains	$	4		$	7		$	10		$	22
Gross realized losses	0			(3		)	(1		)	(5		)
Net realized gains	4			4			9			17
Equity securities:
Gross realized gains	2			2			10			4
Gross realized losses	(1		)	0			(2		)	0
Net realized gains	1			2			8			4
Trading securities:
Common stock:
Gross realized gains	52			54			122			156
Gross realized losses	(7		)	(3		)	(10		)	(15		)
Increases in fair value(1)	83			4			59			148
Net realized gains	128			55			171			289
Net realized investment gains – Exchange	$	133		$	61		$	188		$	310
Net realized investment gains – Erie Insurance Group	$	133		$	61		$	189		$	310

(1) The fair value on our common stock portfolio is based upon exchange traded prices provided by a nationally recognized pricing service.

Net impairment losses

Net impairment losses recorded in earnings for Indemnity were $0.1 million for the second quarter and six months ended June 30, 2014 and June 30, 2013. Net impairment losses recorded in earnings for the Exchange were $0.1 million for the second quarter and $0.3 million for the six months ended June 30, 2014, compared to net impairment losses of $1 million for the second quarter and the six months ended June 30, 2013.

In considering if fixed maturity securities were credit-impaired, some of the factors considered include: potential for the default of interest and/or principal, level of subordination, collateral of the issue, compliance with financial covenants, credit ratings and industry conditions.  We have the intent to sell all credit-impaired fixed maturity securities, therefore the entire amount of the impairment charges were included in earnings and no non-credit impairments were recognized in other comprehensive income.

Limited partnerships

Limited partnership investments, excluding certain real estate limited partnerships recorded at fair value, are generally reported on a one-quarter lag, therefore our year-to-date limited partnership results through June 30, 2014 are comprised of partnership financial results for the fourth quarter of 2013 and first quarter of 2014.  Given the lag in reporting, our limited partnership results do not reflect the market conditions of the second quarter of 2014.  Cash contributions made to and distributions received from the partnerships are recorded in the period in which the transaction occurs.

Amounts included in equity in earnings of limited partnerships by method of accounting are included below:

(in millions)	Erie Insurance Group
	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Indemnity
Equity in earnings of limited partnerships accounted for under the equity method	$	2	$	5	$	7	$	7
Change in fair value of limited partnerships accounted for under the fair value option	1		0		2		1
Equity in earnings of limited partnerships – Indemnity	$	3	$	5	$	9	$	8
Exchange
Equity in earnings of limited partnerships accounted for under the equity method	$	18	$	31	$	57	$	60
Change in fair value of limited partnerships accounted for under the fair value option	6		3		11		7
Equity in earnings of limited partnerships – Exchange	$	24	$	34	$	68	$	67
Equity in earnings of limited partnerships – Erie Insurance Group	$	27	$	39	$	77	$	75

We have provided summarized financial information in the following tables for the six months ended June 30, 2014 and for the year ended December 31, 2013.  Amounts provided in the tables are presented using the latest available financial statements received from the partnerships for the respective periods.  Limited partnership financial information has been presented based upon the investment percentage in the partnerships for the Erie Insurance Group consistent with how management evaluates the investments.

As these investments are generally reported on a one-quarter lag, our limited partnership results through June 30, 2014 include partnership financial results for the fourth quarter of 2013 and the first quarter of 2014.

	Erie Insurance Group
	As of and for the six months ended June 30, 2014
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded		Income (loss) recognized due to valuation adjustments by the partnerships			Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	24	$	39	$	(3	)	$	4
Greater than or equal to 10% but less than 50%	3	19		3			0
Greater than 50%	0	0		0			0
Total private equity	27	58		0			4
Mezzanine debt:
Less than 10%	11	12		0			1
Greater than or equal to 10% but less than 50%	3	6		0			0
Greater than 50%	1	0		0			0
Total mezzanine debt	15	18		0			1
Real estate:
Less than 10%	11	44		2			1
Greater than or equal to 10% but less than 50%	3	15		1			0
Greater than 50%	2	6		0			0
Total real estate	16	65		3			1
Total limited partnerships – Indemnity	58	$	141	$	3		$	6
Exchange
Private equity:
Less than 10%	42	$	368	$	(7	)	$	24
Greater than or equal to 10% but less than 50%	3	80		15			1
Greater than 50%	0	0		0			0
Total private equity	45	448		8			25
Mezzanine debt:
Less than 10%	20	113		1			9
Greater than or equal to 10% but less than 50%	4	23		(2		)	2
Greater than 50%	3	31		0			1
Total mezzanine debt	27	167		(1		)	12
Real estate:
Less than 10%	20	215		8			10
Greater than or equal to 10% but less than 50%	6	77		3			1
Greater than 50%	2	24		(14		)	16
Total real estate	28	316		(3		)	27
Total limited partnerships – Exchange	100	$	931	$	4		$	64
Total limited partnerships – Erie Insurance Group		$	1,072	$	7		$	70

Per the limited partnership financial statements, total partnership assets were $47 billion and total partnership liabilities were $4 billion at June 30, 2014 (as recorded in the March 31, 2014 limited partnership financial statements).  For the six months period comparable to that presented in the preceding table (fourth quarter of 2013 and first quarter of 2014), total partnership valuation adjustment gains were $0.5 billion and total partnership net income was $3 billion.

As these investments are generally reported on a one-quarter lag, our limited partnership results through December 31, 2013 include partnership financial results for the fourth quarter of 2012 and the first three quarters of 2013.

	Erie Insurance Group
	As of and for the year ended December 31, 2013
(dollars in millions) Investment percentage in limited partnerships	Number of partnerships	Asset recorded		Income (loss) recognized due to valuation adjustments by the partnerships			Income (1oss) recorded
Indemnity
Private equity:
Less than 10%	26	$	46	$	(6	)	$	9
Greater than or equal to 10% but less than 50%	3	16		3			0
Greater than 50%	0	0		0			0
Total private equity	29	62		(3		)	9
Mezzanine debt:
Less than 10%	11	14		0			1
Greater than or equal to 10% but less than 50%	3	6		0			2
Greater than 50%	1	0		0			0
Total mezzanine debt	15	20		0			3
Real estate:
Less than 10%	12	44		0			5
Greater than or equal to 10% but less than 50%	3	14		(1		)	4
Greater than 50%	2	6		1			4
Total real estate	17	64		0			13
Total limited partnerships – Indemnity	61	$	146	$	(3	)	$	25
Exchange
Private equity:
Less than 10%	44	$	396	$	(24	)	$	79
Greater than or equal to 10% but less than 50%	3	67		13			2
Greater than 50%	0	0		0			0
Total private equity	47	463		(11		)	81
Mezzanine debt:
Less than 10%	19	117		1			13
Greater than or equal to 10% but less than 50%	4	23		(3		)	7
Greater than 50%	3	32		1			3
Total mezzanine debt	26	172		(1		)	23
Real estate:
Less than 10%	22	211		(10		)	34
Greater than or equal to 10% but less than 50%	6	71		(2		)	10
Greater than 50%	2	23		(1		)	16
Total real estate	30	305		(13		)	60
Total limited partnerships – Exchange	103	$	940	$	(25	)	$	164
Total limited partnerships – Erie Insurance Group		$	1,086	$	(28	)	$	189

Per the limited partnership financial statements, total partnership assets were $50 billion and total partnership liabilities were $5 billion at December 31, 2013 (as recorded in the September 30, 2013 limited partnership financial statements).  For the twelve month period comparable to that presented in the preceding table (fourth quarter of 2012 and first three quarters of 2013), total partnership valuation adjustment gains were $2 billion and total partnership net income was $7 billion.

See also Note 14. “Commitments and Contingencies,” for investment commitments related to limited partnerships.

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Note 9.  Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

At June 30, 2014, we recorded a net deferred tax liability of $556 million on our Consolidated Statements of Financial Position.  Of this amount, $1 million is a net deferred tax asset attributable to Indemnity and $557 million is a net deferred tax liability attributable to the Exchange.  There was no deferred tax valuation allowance recorded at June 30, 2014.  Our effective tax rate is calculated after consideration of permanent differences related to our investment revenues.  Given that these amounts represent over 98% of the total permanent differences, the effective tax rate is approximately 35% for both Indemnity and the Exchange when the investment related permanent differences are excluded.

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Indemnity Earnings Per Share (Details) (Indemnity, USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Class A
Income available to stockholders (Basic EPS:)
Allocated net income (numerator) (in dollars)	$ 49	$ 44	$ 94	$ 80
Weighted shares (denominator) (in shares)	46,214,153	46,693,333	46,307,659	46,733,925
Per-share amount (in dollars per share)	$ 1.05	$ 0.95	$ 2.04	$ 1.73
Dilutive effect of stock-based awards
Allocated net income (numerator) (in dollars)	0	0	0	0
Weighted shares (denominator) (in shares)	96,461	92,126	96,461	92,126
Assumed conversion of Class B shares
Allocated net income (numerator) (in dollars)	0	0	1	1
Weighted shares (denominator) (in shares)	6,100,800	6,100,800	6,100,800	6,100,800
Income available to stockholders on equivalent shares (Diluted EPS:)
Allocated net income (numerator) (in dollars)	49	44	95	81
Weighted shares (denominator) (in shares)	52,411,414	52,886,259	52,504,920	52,926,851
Per-share amount (in dollars per share)	$ 0.94	$ 0.84	$ 1.82	$ 1.54
Class B
Reconciliation of the numerators and denominators used in the basic and diluted per-share computations
Ratio for converting shares of Class B common stock into shares of Class A common stock (as a percent)	2400.00%		2400.00%		2400.00%
Income available to stockholders (Basic EPS:)
Allocated net income (numerator) (in dollars)	0	0	1	1
Weighted shares (denominator) (in shares)	2,542	2,542	2,542	2,542
Per-share amount (in dollars per share)	$ 158.00	$ 142.00	$ 307.00	$ 259.00
Income available to stockholders on equivalent shares (Diluted EPS:)
Allocated net income (numerator) (in dollars)	$ 0	$ 0	$ 1	$ 1
Weighted shares (denominator) (in shares)	2,542	2,542	2,542	2,542
Per-share amount (in dollars per share)	$ 158.00	$ 142.00	$ 307.00	$ 259.00

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Indemnity Capital Stock (Details) (Indemnity)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Class A
Common Stock
Class A common stock shares issued upon conversion of Class B common stock shares (in shares)	0	0
Class B
Common Stock
Ratio for converting shares of Class B common stock into shares of Class A common stock (as a percent)	2400.00%	2400.00%
Class B common stock shares converted into Class A common stock shares (in shares)	0	0

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 14.  Commitments and Contingencies

Indemnity has contractual commitments to invest up to $26 million related to its limited partnership investments at June 30, 2014.  These commitments are split among private equity securities of $11 million, mezzanine debt securities of $9 million, and real estate activities of $6 million.  These commitments will be funded as required by the partnership agreements.

The Exchange, including EFL, has contractual commitments to invest up to $445 million related to its limited partnership investments at June 30, 2014.  These commitments are split among private equity securities of $146 million, mezzanine debt securities of $173 million, and real estate activities of $126 million.  These commitments will be funded as required by the partnership agreements.

We are involved in litigation arising in the ordinary course of conducting business.  In accordance with current accounting standards for loss contingencies and based upon information currently known to us, we establish reserves for litigation when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss or range of loss can be reasonably estimated.  When no amount within the range of loss is a better estimate than any other amount, we accrue the minimum amount of the estimable loss.  To the extent that such litigation against us may have an exposure to a loss in excess of the amount we have accrued, we believe that such excess would not be material to our consolidated financial condition, results of operations, or cash flows.  Legal fees are expensed as incurred.  We believe that our accruals for legal proceedings are appropriate and, individually and in the aggregate, are not expected to be material to our consolidated financial condition, operations, or cash flows.

We review all litigation on an ongoing basis when making accrual and disclosure decisions.  For certain legal proceedings, we cannot reasonably estimate losses or a range of loss, if any, particularly for proceedings that are in their early stages of development or where the plaintiffs seek indeterminate damages.  Various factors, including, but not limited to, the outcome of potentially lengthy discovery and the resolution of important factual questions, may need to be determined before probability can be established or before a loss or range of loss can be reasonably estimated.  If the loss contingency in question is not both probable and reasonably estimable, we do not establish an accrual and the matter will continue to be monitored for any developments that would make the loss contingency both probable and reasonably estimable.  In the event that a legal proceeding results in a substantial judgment against, or settlement by, us, there can be no assurance that any resulting liability or financial commitment would not have a material adverse effect on the financial condition, results of operations, or cash flows of the Indemnity shareholder interest or the consolidated financial statements of Erie Indemnity Company.

We are subject to escheatment laws and regulations requiring the identification, reporting and payment to the state of unclaimed or abandoned funds of our policyholders, annuitants, claimants and shareholders. We are also subject to audit and examination for compliance with these requirements.

In August 2012, we were notified that we would be subject to an audit of our compliance with the unclaimed property laws of a number of jurisdictions both within and outside our operating territory. The audit commenced in April 2013 and is ongoing. Additionally, EFL has been named in a lawsuit filed by the State Treasurer of West Virginia. The Complaint alleges that EFL has failed to comply with the West Virginia Uniform Unclaimed Property Act. EFL filed a motion to dismiss and a favorable decision was rendered in December 2013 with the Court dismissing the Complaint with prejudice. The State Treasurer appealed the dismissal of the lawsuit in January 2014.

It is probable that ongoing inquiries, audits, and other regulatory activity will result in the payment of additional death claims and escheatment of funds, as well as possible fines. EFL will incur expenses to identify death claims, confirm that benefits are due and notify the beneficiaries. At this time, we are not able to reasonably estimate the possible loss or range of loss related to this issue due to the early stage of development.

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Schedule of components of the Consolidated Statements of Operations by reportable business segment

The following tables summarize the components of the Consolidated Statements of Operations by reportable business segment:

	Erie Insurance Group
(in millions)	Three months ended June 30, 2014
	Management operations		Property and casualty insurance operations			Life insurance operations			Investment operations		Eliminations			Consolidated
Premiums earned/life policy revenue			$	1,298		$	22				$	(1	)	$	1,319
Net investment income									$	116	(5		)	111
Net realized investment gains									133					133
Net impairment losses recognized in earnings									0					0
Equity in earnings of limited partnerships									27					27
Management fee revenue	$	366									(366		)	—
Service agreement and other revenue	8					0								8
Total revenues	374		1,298			22			276		(372		)	1,598
Cost of management operations	306										(306		)	—
Insurance losses and loss expenses			1,101			27					(2		)	1,126
Policy acquisition and underwriting expenses			380			9					(64		)	325
Total benefits and expenses	306		1,481			36			—		(372		)	1,451
Income (loss) before income taxes	68		(183		)	(14		)	276		—			147
Provision for income taxes	24		(64		)	(5		)	89		—			44
Net income (loss)	$	44	$	(119	)	$	(9	)	$	187	—			$	103

	Erie Insurance Group
(in millions)	Three months ended June 30, 2013
	Management operations		Property and casualty insurance operations		Life insurance operations			Investment operations			Eliminations			Consolidated
Premiums earned/life policy revenue			$	1,196	$	20					$	(1	)	$	1,215
Net investment income								$	107		(3		)	104
Net realized investment gains								61						61
Net impairment losses recognized in earnings								(1		)				(1		)
Equity in earnings of limited partnerships								39						39
Management fee revenue	$	336									(336		)	—
Service agreement and other revenue	8				0									8
Total revenues	344		1,196		20			206			(340		)	1,426
Cost of management operations	285										(285		)	—
Insurance losses and loss expenses			837		26						(2		)	861
Policy acquisition and underwriting expenses			348		7						(53		)	302
Total benefits and expenses	285		1,185		33			—			(340		)	1,163
Income (loss) before income taxes	59		11		(13		)	206			—			263
Provision for income taxes	21		4		(5		)	66			—			86
Net income (loss)	$	38	$	7	$	(8	)	$	140		$	—		$	177

	Erie Insurance Group
(in millions)	Six months ended June 30, 2014
	Management operations		Property and casualty insurance operations			Life insurance operations			Investment operations		Eliminations			Consolidated
Premiums earned/life policy revenue			$	2,566		$	42				$	(1	)	$	2,607
Net investment income									$	228	(8		)	220
Net realized investment gains									189					189
Net impairment losses recognized in earnings									0					0
Equity in earnings of limited partnerships									77					77
Management fee revenue	$	685									(685		)	—
Service agreement and other revenue	15					1								16
Total revenues	700		2,566			43			494		(694		)	3,109
Cost of management operations	574										(574		)	—
Insurance losses and loss expenses			2,108			55					(3		)	2,160
Policy acquisition and underwriting expenses			745			18					(117		)	646
Total benefits and expenses	574		2,853			73			—		(694		)	2,806
Income (loss) before income taxes	126		(287		)	(30		)	494		—			303
Provision for income taxes	44		(100		)	(11		)	158		—			91
Net income (loss)	$	82	$	(187	)	$	(19	)	$	336	$	—		$	212

	Erie Insurance Group
(in millions)	Six months ended June 30, 2013
	Management operations		Property and casualty insurance operations		Life insurance operations			Investment operations			Eliminations			Consolidated
Premiums earned/life policy revenue			$	2,352	$	39					$	(1	)	$	2,390
Net investment income								$	213		(6		)	207
Net realized investment gains								310						310
Net impairment losses recognized in earnings								(1		)				(1		)
Equity in earnings of limited partnerships								75						75
Management fee revenue	$	632									(632		)	—
Service agreement and other revenue	15				1									16
Total revenues	647		2,352		40			597			(639		)	2,997
Cost of management operations	539										(539		)	—
Insurance losses and loss expenses			1,654		52						(3		)	1,703
Policy acquisition and underwriting expenses			676		16						(97		)	595
Total benefits and expenses	539		2,330		68			—			(639		)	2,298
Income (loss) before income taxes	108		22		(28		)	597			—			699
Provision for income taxes	38		8		(10		)	196			—			232
Net income (loss)	$	70	$	14	$	(18	)	$	401		$	—		$	467

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Income taxes
Net deferred income tax liability, consolidated	$ 556
Net deferred income tax asset	1	2
Net deferred income tax liability	557	450
Deferred tax asset valuation allowance	0
Indemnity
Income taxes
Net deferred income tax asset	1	2
Net deferred income tax liability	0	0
Effective tax rate when investment related permanent tax differences are excluded (as a percent)	35.00%
Exchange
Income taxes
Net deferred income tax asset	0	0
Net deferred income tax liability	$ 557	$ 450
Effective tax rate when investment related permanent tax differences are excluded (as a percent)	35.00%
Minimum | Indemnity
Income taxes
Percent of total permanent tax differences related to investment revenues (as a percent)	98.00%
Minimum | Exchange
Income taxes
Percent of total permanent tax differences related to investment revenues (as a percent)	98.00%

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Investments (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Available-for-sale securities
Amortized cost	$ 9,500	$ 9,147
Gross unrealized gains	654	492
Gross unrealized losses	16	82
Estimated fair value, fixed maturities	9,198	8,688
Estimated fair value, equity securities	940	869
Estimated fair value	10,138	9,557
Indemnity
Available-for-sale securities
Amortized cost, fixed maturities	484	518
Amortized cost, equity securities	25	50
Amortized cost	509	568
Gross unrealized gains	15	11
Gross unrealized losses	1	3
Estimated fair value, fixed maturities	497	526
Estimated fair value, equity securities	26	50
Estimated fair value	523	576
Indemnity | Fixed maturities
Available-for-sale securities
Amortized cost, fixed maturities	484	518
Gross unrealized gains	13	9
Gross unrealized losses	0	1
Estimated fair value, fixed maturities	497	526
Indemnity | States & political subdivisions
Available-for-sale securities
Amortized cost, fixed maturities	230	237
Gross unrealized gains	11	7
Gross unrealized losses	0	1
Estimated fair value, fixed maturities	241	243
Indemnity | Corporate debt securities
Available-for-sale securities
Amortized cost, fixed maturities	254	280
Gross unrealized gains	2	2
Gross unrealized losses	0	0
Estimated fair value, fixed maturities	256	282
Indemnity | Collateralized debt obligations
Available-for-sale securities
Amortized cost, fixed maturities	0	1
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Estimated fair value, fixed maturities	0	1
Indemnity | Nonredeemable preferred stock
Available-for-sale securities
Amortized cost, equity securities	12	24
Gross unrealized gains	2	2
Gross unrealized losses	0	1
Estimated fair value, equity securities	14	25
Indemnity | Common stock
Available-for-sale securities
Amortized cost, equity securities	13	26
Gross unrealized gains	0	0
Gross unrealized losses	1	1
Estimated fair value, equity securities	12	25
Exchange
Available-for-sale securities
Amortized cost, fixed maturities	8,149	7,801
Amortized cost, equity securities	842	778
Amortized cost	8,991	8,579
Gross unrealized gains	639	481
Gross unrealized losses	15	79
Estimated fair value, fixed maturities	8,701	8,162
Estimated fair value, equity securities	914	819
Estimated fair value	9,615	8,981
Exchange | Fixed maturities
Available-for-sale securities
Amortized cost, fixed maturities	8,149	7,801
Gross unrealized gains	564	426
Gross unrealized losses	12	65
Estimated fair value, fixed maturities	8,701	8,162
Exchange | U.S. government & agencies
Available-for-sale securities
Amortized cost, fixed maturities		171
Gross unrealized gains		1
Gross unrealized losses		0
Estimated fair value, fixed maturities		172
Exchange | U.S. treasury
Available-for-sale securities
Amortized cost, fixed maturities	31
Gross unrealized gains	0
Gross unrealized losses	0
Estimated fair value, fixed maturities	31
Exchange | Government sponsored enterprises
Available-for-sale securities
Amortized cost, fixed maturities	3
Gross unrealized gains	1
Gross unrealized losses	0
Estimated fair value, fixed maturities	4
Exchange | States & political subdivisions
Available-for-sale securities
Amortized cost, fixed maturities	1,438	1,430
Gross unrealized gains	83	55
Gross unrealized losses	2	15
Estimated fair value, fixed maturities	1,519	1,470
Exchange | Foreign government securities
Available-for-sale securities
Amortized cost, fixed maturities	15	15
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Estimated fair value, fixed maturities	15	15
Exchange | Corporate debt securities
Available-for-sale securities
Amortized cost, fixed maturities	6,409	5,902
Gross unrealized gains	465	354
Gross unrealized losses	8	45
Estimated fair value, fixed maturities	6,866	6,211
Exchange | Residential mortgage-backed securities
Available-for-sale securities
Amortized cost, fixed maturities	145	157
Gross unrealized gains	3	3
Gross unrealized losses	2	4
Estimated fair value, fixed maturities	146	156
Exchange | Commercial mortgage-backed securities
Available-for-sale securities
Amortized cost, fixed maturities	32	45
Gross unrealized gains	2	2
Gross unrealized losses	0	0
Estimated fair value, fixed maturities	34	47
Exchange | Collateralized debt obligations
Available-for-sale securities
Amortized cost, fixed maturities	7	8
Gross unrealized gains	7	8
Gross unrealized losses	0	0
Estimated fair value, fixed maturities	14	16
Exchange | Other debt securities
Available-for-sale securities
Amortized cost, fixed maturities	69	73
Gross unrealized gains	3	3
Gross unrealized losses	0	1
Estimated fair value, fixed maturities	72	75
Exchange | Nonredeemable preferred stock
Available-for-sale securities
Amortized cost, equity securities	646	577
Gross unrealized gains	73	55
Gross unrealized losses	2	11
Estimated fair value, equity securities	717	621
Exchange | Common stock
Available-for-sale securities
Amortized cost, equity securities	196	201
Gross unrealized gains	2	0
Gross unrealized losses	1	3
Estimated fair value, equity securities	$ 197	$ 198

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Available-for-sale securities, at fair value:
Fixed maturities	$ 9,198	$ 8,688
Equity securities	940	869
Trading securities, at fair value	3,377	3,202
Limited partnerships	1,072	1,086
Other invested assets	21	21
Total investments	14,608	13,866
Cash and cash equivalents (Exchange portion of $237 and $403, respectively)	300	452
Premiums receivable from policyholders	1,287	1,167
Reinsurance recoverable	168	172
Deferred income taxes	1	2
Deferred acquisition costs	579	566
Other assets (Exchange portion of $405 and $337, respectively)	517	451
Total assets	17,460	16,676
Liabilities
Losses and loss expense reserves	3,964	3,747
Life policy and deposit contract reserves	1,789	1,758
Unearned premiums	2,788	2,598
Deferred income taxes	557	450
Total liabilities	9,639	9,126
Indemnity shareholders' equity
Total Indemnity shareholders' equity	755	734
Noncontrolling interest in consolidated entity - Exchange	7,066	6,816
Total equity	7,821	7,550
Total liabilities, shareholders' equity, and noncontrolling interest	17,460	16,676
Indemnity
Available-for-sale securities, at fair value:
Fixed maturities	497	526
Equity securities	26	50
Limited partnerships	141	146
Other invested assets	1	1
Total investments	665	723
Cash and cash equivalents (Exchange portion of $237 and $403, respectively)	63	49
Deferred income taxes	1	2
Other assets (Exchange portion of $405 and $337, respectively)	112	114
Total assets	1,205	1,213
Liabilities
Deferred income taxes	0	0
Other liabilities	451	476
Total liabilities	450	479
Indemnity shareholders' equity
Additional paid-in-capital	16	16
Accumulated other comprehensive loss	(55)	(59)
Retained earnings	1,938	1,902
Total contributed capital and retained earnings	1,901	1,861
Treasury stock, at cost, 22,110,132 and 21,838,075 shares, respectively	(1,146)	(1,127)
Total Indemnity shareholders' equity	755	734
Total equity	755	734
Total liabilities, shareholders' equity, and noncontrolling interest	1,205	1,213
Exchange
Available-for-sale securities, at fair value:
Fixed maturities	8,701	8,162
Equity securities	914	819
Trading securities, at fair value	3,377	3,202
Limited partnerships	931	940
Other invested assets	20	20
Total investments	13,943	13,143
Cash and cash equivalents (Exchange portion of $237 and $403, respectively)	237	403
Premiums receivable from policyholders	1,287	1,167
Reinsurance recoverable	168	172
Deferred income taxes	0	0
Deferred acquisition costs	579	566
Other assets (Exchange portion of $405 and $337, respectively)	405	337
Total assets	16,619	15,788
Liabilities
Losses and loss expense reserves	3,964	3,747
Life policy and deposit contract reserves	1,789	1,758
Unearned premiums	2,788	2,598
Deferred income taxes	557	450
Other liabilities	90	97
Total liabilities	9,553	8,972
Indemnity shareholders' equity
Noncontrolling interest in consolidated entity - Exchange	7,066	6,816
Total equity	7,066	6,816
Total liabilities, shareholders' equity, and noncontrolling interest	16,619	15,788
Class A | Indemnity
Indemnity shareholders' equity
Common stock	2	2
Class B | Indemnity
Indemnity shareholders' equity
Common stock	$ 0	$ 0

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Indemnity Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Indemnity Earnings Per Share

Note 3.  IndemnityEarnings Per Share

Class A and Class B basic earnings per share and Class B diluted earnings per share are calculated under the two-class method. The two-class method allocates earnings to each class of stock based upon its dividend rights.  Class B shares are convertible into Class A shares at a conversion ratio of 2,400 to 1. See Note 11. “Indemnity Capital Stock”.

Class A diluted earnings per share are calculated under the if-converted method, which reflects the conversion of Class B shares to Class A shares. Diluted earnings per share calculations include the effect of any potential common shares. Potential common shares include outstanding vested and not yet vested awards related to our outside directors’ stock compensation plan and any employee stock based awards.

A reconciliation of the numerators and denominators used in the basic and diluted per-share computations is presented as follows for each class of Indemnity common stock:

	Indemnity Shareholder Interest
(dollars in millions, except per share data)	Three months ended June 30,
	2014					2013
	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per- share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	49	46,214,153	$	1.05	$	44	46,693,333	$	0.95
Dilutive effect of stock-based awards	0		96,461	—		0		92,126	—
Assumed conversion of Class B shares	0		6,100,800	—		0		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	49	52,411,414	$	0.94	$	44	52,886,259	$	0.84
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$	0	2,542	$	158	$	0	2,542	$	142

	Indemnity Shareholder Interest
(dollars in millions, except per share data)	Six months ended June 30,
	2014					2013
	Allocated net income (numerator)		Weighted shares (denominator)	Per-share amount		Allocated net income (numerator)		Weighted shares (denominator)	Per- share amount
Class A – Basic EPS:
Income available to Class A stockholders	$	94	46,307,659	$	2.04	$	80	46,733,925	$	1.73
Dilutive effect of stock-based awards	0		96,461	—		0		92,126	—
Assumed conversion of Class B shares	1		6,100,800	—		1		6,100,800	—
Class A – Diluted EPS:
Income available to Class A stockholders on Class A equivalent shares	$	95	52,504,920	$	1.82	$	81	52,926,851	$	1.54
Class B – Basic and diluted EPS:
Income available to Class B stockholders	$	1	2,542	$	307	$	1	2,542	$	259

XML

Indemnity Supplemental Information (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income attributable to Indemnity shareholder interest
Service agreement revenue	$ 8	$ 8	$ 16	$ 16
Total revenues	1,598	1,426	3,109	2,997
Net investment income	111	104	220	207
Net realized gains on investments	133	61	189	310
Net impairment losses recognized in earnings	0	(1)	0	(1)
Equity in earnings of limited partnerships	27	39	77	75
Income (loss) from operations before income taxes and noncontrolling interest	147	263	303	699
Provision for income taxes	44	86	91	232
Net income attributable to Indemnity	49	44	95	81
Indemnity
Income attributable to Indemnity shareholder interest
Net investment income	4	3	8	7
Net realized gains on investments	0	0	1	0
Equity in earnings of limited partnerships	3	5	9	8
Income (loss) from operations before income taxes and noncontrolling interest	75	67	144	123
Provision for income taxes	26	23	49	42
Net income attributable to Indemnity	49	44	95	81
Indemnity | Management operations
Income attributable to Indemnity shareholder interest
Management fee revenue, net	366	336	685	632
Service agreement revenue	8	8	15	15
Total revenues	374	344	700	647
Cost of management operations	306	285	574	539
Income (loss) from operations before income taxes and noncontrolling interest	68	59	126	108
Indemnity | Investment operations
Income attributable to Indemnity shareholder interest
Net investment income	4	3	8	7
Net realized gains on investments	0	0	1	0
Net impairment losses recognized in earnings	0	0	0	0
Equity in earnings of limited partnerships	3	5	9	8
Income (loss) from operations before income taxes and noncontrolling interest	$ 7	$ 8	$ 18	$ 15

XML

Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of consolidated fair value measurements on a recurring basis by asset class and level of input

The following table represents our consolidated fair value measurements on a recurring basis by asset class and level of input at December 31, 2013:

	Erie Insurance Group
	December 31, 2013
	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	$	243	$	0	$	243	$	0
Corporate debt securities	282		0		281		1
Collateralized debt obligations	1		0		0		1
Total fixed maturities	526		0		524		2
Nonredeemable preferred stock	25		2		23		0
Common stock	25		25		0		0
Total available-for-sale securities	576		27		547		2
Other investments (1)	18		0		0		18
Total – Indemnity	$	594	$	27	$	547	$	20
Exchange
Available-for-sale securities:
U.S. government & agencies	$	172	$	0	$	172	$	0
States & political subdivisions	1,470		0		1,470		0
Foreign government securities	15		0		15		0
Corporate debt securities	6,211		0		6,185		26
Residential mortgage-backed securities	156		0		156		0
Commercial mortgage-backed securities	47		0		47		0
Collateralized debt obligations	16		0		11		5
Other debt securities	75		0		75		0
Total fixed maturities	8,162		0		8,131		31
Nonredeemable preferred stock	621		242		379		0
Common stock	198		198		0		0
Total available-for-sale securities	8,981		440		8,510		31
Trading securities:
Common stock	3,202		3,187		0		15
Total trading securities	3,202		3,187		0		15
Other investments (1)	98		0		0		98
Total – Exchange	$	12,281	$	3,627	$	8,510	$	144
Total – Erie Insurance Group	$	12,875	$	3,654	$	9,057	$	164

(1)Other investments measured at fair value represent four real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. These investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if they represent the NAV at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of December 31, 2013. During the year ended December 31, 2013, Indemnity made no contributions and received distributions totaling $2.4 million, and the Exchange made no contributions and received distributions totaling $21.7 million for these investments. As of December 31, 2013, the amount of unfunded commitments related to the investments was $1.5 million for Indemnity and $4.5 million for the Exchange.

The following table represents our consolidated fair value measurements on a recurring basis by asset class and level of input at June 30, 2014:

	Erie Insurance Group
	June 30, 2014
	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	$	241	$	0	$	241	$	0
Corporate debt securities	256		0		255		1
Collateralized debt obligations	0		0		0		0
Total fixed maturities	497		0		496		1
Nonredeemable preferred stock	14		2		12		0
Common stock	12		12		0		0
Total available-for-sale securities	523		14		508		1
Other investments (1)	18		0		0		18
Total – Indemnity	$	541	$	14	$	508	$	19
Exchange
Available-for-sale securities:
U.S. treasury	$	31	$	0	$	31	$	0
Government sponsored enterprises	4		0		4		0
States & political subdivisions	1,519		0		1,519		0
Foreign government securities	15		0		15		0
Corporate debt securities	6,866		0		6,841		25
Residential mortgage-backed securities	146		0		146		0
Commercial mortgage-backed securities	34		0		34		0
Collateralized debt obligations	14		0		14		0
Other debt securities	72		0		72		0
Total fixed maturities	8,701		0		8,676		25
Nonredeemable preferred stock	717		303		413		1
Common stock	197		197		0		0
Total available-for-sale securities	9,615		500		9,089		26
Trading securities:
Common stock	3,377		3,362		0		15
Total trading securities	3,377		3,362		0		15
Other investments (1)	102		0		0		102
Total – Exchange	$	13,094	$	3,862	$	9,089	$	143
Total – Erie Insurance Group	$	13,635	$	3,876	$	9,597	$	162

(1)Other investments measured at fair value represent four real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. These investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if they represent the NAV at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of June 30, 2014. During the six months ended June 30, 2014, Indemnity made no contributions and received distributions totaling $1.8 million, and the Exchange made no contributions and received distributions totaling $6.9 million for these investments. As of June 30, 2014, the amount of unfunded commitments related to the investments was $1.5 million for Indemnity and $4.5 million for the Exchange.

Schedule of roll forward of consolidated Level 3 fair value measurements on a recurring basis

Level 3 Assets – Quarterly Change:

	Erie Insurance Group
(in millions)	Beginning balance at March 31, 2014		Included in earnings (1)		Included in other comprehensive income		Purchases		Sales			Transfers in and (out) of Level 3 (2)		Ending balance at June 30, 2014
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0	$	0	$	0		$	0	$	1
Collateralized debt obligations	0		0		0		0		0			0		0
Total fixed maturities	1		0		0		0		0			0		1
Total available-for-sale securities	1		0		0		0		0			0		1
Other investments	18		1		0		0		(1		)	0		18
Total Level 3 assets – Indemnity	$	19	$	1	$	0	$	0	$	(1	)	$	0	$	19
Exchange
Available-for-sale securities:
Corporate debt securities	$	26	$	0	$	0	$	0	$	(1	)	$	0	$	25
Collateralized debt obligations	0		0		0		0		0			0		0
Total fixed maturities	26		0		0		0		(1		)	0		25
Nonredeemable preferred stock	1		0		0		0		0			0		1
Total available-for-sale securities	27		0		0		0		(1		)	0		26
Trading securities:
Common stock	15		0		0		0		0			0		15
Total trading securities	15		0		0		0		0			0		15
Other investments	98		6		0		0		(2		)	0		102
Total Level 3 assets – Exchange	$	140	$	6	$	0	$	0	$	(3	)	$	0	$	143
Total Level 3 assets – Erie Insurance Group	$	159	$	7	$	0	$	0	$	(4	)	$	0	$	162

(1) These amounts are reported in the Consolidated Statement of Operations. There is $7 million included in equity in earnings of limited partnerships for the three months ended June 30, 2014 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.

Level 3 Assets – Quarterly Change:

	Erie Insurance Group
(in millions)	Beginning balance at March 31, 2013		Included in earnings (1)		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2013
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	2		0		0			0		(1		)	0			1
Total fixed maturities	3		0		0			0		(1		)	0			2
Total available-for-sale securities	3		0		0			0		(1		)	0			2
Other investments	20		0		0			0		0			0			20
Total Level 3 assets – Indemnity	$	23	$	0	$	0		$	0	$	(1	)	$	0		$	22
Exchange
Available-for-sale securities:
Corporate debt securities	58		0		(1		)	1		(2		)	(23		)	33
Commercial mortgage-backed securities	5		0		0			0		(1		)	0			4
Collateralized debt obligations	14		1		(1		)	0		(2		)	0			12
Total fixed maturities	77		1		(2		)	1		(5		)	(23		)	49
Nonredeemable preferred stock	12		2		(1		)	0		(6		)	0			7
Total available-for-sale securities	89		3		(3		)	1		(11		)	(23		)	56
Trading securities:
Common stock	7		0		0			0		0			0			7
Total trading securities	7		0		0			0		0			0			7
Other investments	112		2		0			0		(1		)	0			113
Total Level 3 assets – Exchange	$	208	$	5	$	(3	)	$	1	$	(12	)	$	(23	)	$	176
Total Level 3 assets – Erie Insurance Group	$	231	$	5	$	(3	)	$	1	$	(13	)	$	(23	)	$	198

(1) These amounts are reported in the Consolidated Statement of Operations. There is $3 million included in net realized investment gains (losses) and $2 million included in equity in earnings of limited partnerships for the three months ended June 30, 2013 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.

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group
(in millions)	Beginning balance at December 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, 2013
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0		$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	3		0			0			0		(2		)	0			1
Total fixed maturities	4		0			0			0		(2		)	0			2
Total available-for-sale securities	4		0			0			0		(2		)	0			2
Other investments	19		1			0			0		0			0			20
Total Level 3 assets – Indemnity	$	23	$	1		$	0		$	0	$	(2	)	$	0		$	22
Exchange
Available-for-sale securities:
Corporate debt securities	$	43	$	0		$	(1	)	$	1	$	(2	)	$	(8	)	$	33
Commercial mortgage-backed securities	0		0			(1		)	0		(1		)	6			4
Collateralized debt obligations	16		1			0			0		(7		)	2			12
Total fixed maturities	59		1			(2		)	1		(10		)	0			49
Nonredeemable preferred stock	0		0			3			4		0			0			7
Total available-for-sale securities	59		1			1			5		(10		)	0			56
Trading securities:
Common stock	15		(3		)	0			0		(5		)	0			7
Total trading securities	15		(3		)	0			0		(5		)	0			7
Other investments	109		7			0			0		(3		)	0			113
Total Level 3 assets – Exchange	$	183	$	5		$	1		$	5	$	(18	)	$	0		$	176
Total Level 3 assets – Erie Insurance Group	$	206	$	6		$	1		$	5	$	(20	)	$	0		$	198

(1) These amounts are reported in the Consolidated Statement of Operations. There is $(2) million of losses included in net realized investment (losses) and $8 million included in equity in earnings of limited partnerships for the six months ended June 30, 2013 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.

Level 3 Assets – Year-to-Date Change:

	Erie Insurance Group
(in millions)	Beginning balance at December 31, 2013		Included in earnings (1)		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3 (2)			Ending balance at June 30, 2014
Indemnity
Available-for-sale securities:
Corporate debt securities	$	1	$	0	$	0		$	0	$	0		$	0		$	1
Collateralized debt obligations	1		0		0			0		(1		)	0			0
Total fixed maturities	2		0		0			0		(1		)	0			1
Total available-for-sale securities	2		0		0			0		(1		)	0			1
Other investments	18		2		0			0		(2		)	0			18
Total Level 3 assets – Indemnity	$	20	$	2	$	0		$	0	$	(3	)	$	0		$	19
Exchange
Available-for-sale securities:
Corporate debt securities	$	26	$	0	$	0		$	0	$	(1	)	$	0		$	25
Collateralized debt obligations	5		1		(1		)	0		(3		)	(2		)	0
Total fixed maturities	31		1		(1		)	0		(4		)	(2		)	25
Nonredeemable preferred stock	0		0		0			1		0			0			1
Total available-for-sale securities	31		1		(1		)	1		(4		)	(2		)	26
Trading securities:
Common stock	15		0		0			0		0			0			15
Total trading securities	15		0		0			0		0			0			15
Other investments	98		11		0			0		(7		)	0			102
Total Level 3 assets – Exchange	$	144	$	12	$	(1	)	$	1	$	(11	)	$	(2	)	$	143
Total Level 3 assets – Erie Insurance Group	$	164	$	14	$	(1	)	$	1	$	(14	)	$	(2	)	$	162

(1) These amounts are reported in the Consolidated Statement of Operations. There is $1 million included in net realized investment gains (losses) and $13 million included in equity in earnings of limited partnerships for the six months ended June 30, 2014 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

Quantitative and Qualitative Disclosures about Unobservable Inputs

	Erie Insurance Group
	June 30, 2014
(dollars in millions)	Fair value		No. of holdings	Valuation techniques	Unobservable input	Range	Weighted average
Indemnity
Corporate debt securities (1)	$	1	1	Market approach	Non-binding broker quote	114
Collateralized debt obligations (2)	0		1	Income approach	Projected maturity date	Dec 2014
					Repayment at maturity	1%
					Discount rate	15%
Other investments (4)	18		2
Total Level 3 assets – Indemnity	$	19	4
Exchange
Corporate debt securities (1)(3)	$	25	7	Market approach	Non-binding broker quote	109-117	111
					Comparable transaction EBITDA multiples	8.0 - 12.1x	8.0x
					Comparable security yield	6%
Collateralized debt obligations (2)	0		2	Income approach	Projected maturity date	Dec 2014 - Oct 2035
					Repayment at maturity	1 - 100%	64%
					Discount rate	15 - 18%	17%
Nonredeemable preferred stock (5)	1		1	Market approach	Comparable company price-to-sales ratio	12.0 - 22.0x	19.0x
Common stock (3)	15		4	Market approach	Comparable transaction EBITDA multiples	8.0 - 12.1x	8.0x
					Discount for lack of marketability	5 - 30%	10%
Other investments (4)	102		4
Total Level 3 assets – Exchange	$	143	18
Total Level 3 assets – Erie Insurance Group	$	162	22

(1) Corporate debt securities – The unobservable input used in the fair value measurement of certain corporate debt securities is the likelihood of repayment by the underlying entity when there is no market for trading these securities.  When available, we obtain non-binding broker quotes to value such securities. When a non-binding broker quote was the only input available, it was considered unobservable.

(2) Collateralized-debt-obligation securities – The unobservable inputs used in the fair value measurement of certain collateralized-debt-obligation securities are the repayment at maturity of underlying collateral available to pay note holders, the projected maturity of the underlying security, and a discount rate appropriate for the security.  Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.  Generally, a change in the assumption used for the performance of the underlying collateral is accompanied by an opposite change in the maturity and a directionally opposite change in the discount rate used to value the security. 

(3) Common stock investments and Corporate debt securities – The unobservable inputs used in the fair value measurement of direct private equity common stock investments and certain corporate debt securities are comparable private transaction earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples, the average EBITDA multiple for comparable publicly traded companies and the amount of discount applied to the price due to the illiquidity of the securities being valued.  Significant changes in any of those inputs in isolation could result in a significantly higher or lower fair value measurement.

(4) Other investments – Other investments represent certain limited partnerships that are recorded at fair value and are based upon net asset value (NAV) provided by the general partner where the unobservable inputs are not reasonably available to us.

(5) Nonredeemable preferred stock - The unobservable input used in the fair value measurement of a private nonredeemable preferred stock security is the price to sales ratio for comparable publicly traded companies. 

Securities valued using unobservable inputs shown above totaled $162 million at June 30, 2014. In total, Level 3 assets represent less than 1.2% of the total assets measured at fair value on a recurring basis for the Erie Insurance Group.

Schedule of consolidated fair value measurements on a recurring basis by pricing source

The following table presents our consolidated fair value measurements on a recurring basis by pricing source at June 30, 2014:

	Erie Insurance Group
(in millions)	June 30, 2014
	Total		Level 1		Level 2		Level 3
Indemnity
Fixed maturities:
Priced via pricing services	$	496	$	0	$	496	$	0
Priced via market comparables/broker quotes (1)	1		0		0		1
Priced via internal modeling	0		0		0		0
Total fixed maturities	497		0		496		1
Nonredeemable preferred stock:
Priced via pricing services	12		2		10		0
Priced via market comparables/broker quotes (1)	2		0		2		0
Total nonredeemable preferred stock	14		2		12		0
Common stock:
Priced via pricing services	12		12		0		0
Total common stock	12		12		0		0
Other investments:
Priced via unobservable inputs (2)	18		0		0		18
Total other investments	18		0		0		18
Total – Indemnity	$	541	$	14	$	508	$	19
Exchange
Fixed maturities:
Priced via pricing services	$	8,646	$	0	$	8,646	$	0
Priced via market comparables/broker quotes (1)	48		0		30		18
Priced via internal modeling	7		0		0		7
Total fixed maturities	8,701		0		8,676		25
Nonredeemable preferred stock:
Priced via pricing services	679		303		376		0
Priced via market comparables/broker quotes (1)	37		0		37		0
Priced via internal modeling	1		0		0		1
Total nonredeemable preferred stock	717		303		413		1
Common stock:
Priced via pricing services	3,559		3,559		0		0
Priced via internal modeling	15		0		0		15
Total common stock	3,574		3,559		0		15
Other investments:
Priced via unobservable inputs (2)	102		0		0		102
Total other investments	102		0		0		102
Total – Exchange	$	13,094	$	3,862	$	9,089	$	143
Total – Erie Insurance Group	$	13,635	$	3,876	$	9,597	$	162

(1) When a non-binding broker quote was the only price available, the security was classified as Level 3.

(2) Other investments measured at fair value represent real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner.

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Fair Value (Details 2) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Level 3
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	$ 159	$ 231	$ 164	$ 206
Included in earnings	7	5	14	6
Included in other comprehensive income	0	(3)	(1)	1
Purchases	0	1	1	5
Sales	(4)	(13)	(14)	(20)
Transfers in and (out) of Level 3	0	(23)	(2)	0
Ending balance	162	198	162	198
Level 3 | Net realized investment gains losses
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Included in earnings		3	1	(2)
Level 3 | Equity in earnings of limited partnerships
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Included in earnings	7	2	13	8
Indemnity
Fair value transfers due to changes in available market observable inputs
Transfers from level 1 to level 2	0	0	0	0
Transfers from level 2 to level 1	0	0	0	1
Transfers from level 2 to level 3	0	0	0	0
Transfers from level 3 to level 2	0	0	0	0
Indemnity | Nonredeemable preferred stock
Fair value transfers due to changes in available market observable inputs
No. of securities transferred between Level 2 and Level 1				1
Indemnity | Level 3
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	19	23	20	23
Included in earnings	1	0	2	1
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	(1)	(1)	(3)	(2)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	19	22	19	22
Indemnity | Level 3 | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	1	3	2	4
Included in earnings	0	0	0	0
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	0	(1)	(1)	(2)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	1	2	1	2
Indemnity | Level 3 | Fixed maturities | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	1	3	2	4
Included in earnings	0	0	0	0
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	0	(1)	(1)	(2)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	1	2	1	2
Indemnity | Level 3 | Corporate debt securities | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	1	1	1	1
Included in earnings	0	0	0	0
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	1	1	1	1
Indemnity | Level 3 | Collateralized debt obligations | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	0	2	1	3
Included in earnings	0	0	0	0
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	0	(1)	(1)	(2)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	0	1	0	1
Indemnity | Level 3 | Real estate | Limited partnerships
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	18	20	18	19
Included in earnings	1	0	2	1
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	(1)	0	(2)	0
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	18	20	18	20
Exchange
Fair value transfers due to changes in available market observable inputs
Transfers from level 1 to level 2	11	0	14	5
Transfers from level 2 to level 1	0	0	0	44
Transfers from level 2 to level 3	0	0	0	18
Transfers from level 3 to level 2	0	23	2	18
Exchange | Fixed maturities
Fair value transfers due to changes in available market observable inputs
No. of securities transferred between Level 2 and Level 3				5
No. of securities transferred between Level 3 and Level 2		3	1	2
Exchange | Nonredeemable preferred stock
Fair value transfers due to changes in available market observable inputs
No. of securities transferred between Level 1 and Level 2	1		2	1
No. of securities transferred between Level 2 and Level 1				5
Exchange | Level 3
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	140	208	144	183
Included in earnings	6	5	12	5
Included in other comprehensive income	0	(3)	(1)	1
Purchases	0	1	1	5
Sales	(3)	(12)	(11)	(18)
Transfers in and (out) of Level 3	0	(23)	(2)	0
Ending balance	143	176	143	176
Exchange | Level 3 | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	27	89	31	59
Included in earnings	0	3	1	1
Included in other comprehensive income	0	(3)	(1)	1
Purchases	0	1	1	5
Sales	(1)	(11)	(4)	(10)
Transfers in and (out) of Level 3	0	(23)	(2)	0
Ending balance	26	56	26	56
Exchange | Level 3 | Trading securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	15	7	15	15
Included in earnings	0	0	0	(3)
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	(5)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	15	7	15	7
Exchange | Level 3 | Fixed maturities | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	26	77	31	59
Included in earnings	0	1	1	1
Included in other comprehensive income	0	(2)	(1)	(2)
Purchases	0	1	0	1
Sales	(1)	(5)	(4)	(10)
Transfers in and (out) of Level 3	0	(23)	(2)	0
Ending balance	25	49	25	49
Exchange | Level 3 | Corporate debt securities | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	26	58	26	43
Included in earnings	0	0	0	0
Included in other comprehensive income	0	(1)	0	(1)
Purchases	0	1	0	1
Sales	(1)	(2)	(1)	(2)
Transfers in and (out) of Level 3	0	(23)	0	(8)
Ending balance	25	33	25	33
Exchange | Level 3 | Commercial mortgage-backed securities | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance		5		0
Included in earnings		0		0
Included in other comprehensive income		0		(1)
Purchases		0		0
Sales		(1)		(1)
Transfers in and (out) of Level 3		0		6
Ending balance		4		4
Exchange | Level 3 | Collateralized debt obligations | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	0	14	5	16
Included in earnings	0	1	1	1
Included in other comprehensive income	0	(1)	(1)	0
Purchases	0	0	0	0
Sales	0	(2)	(3)	(7)
Transfers in and (out) of Level 3	0	0	(2)	2
Ending balance	0	12	0	12
Exchange | Level 3 | Nonredeemable preferred stock | Available-for-sale securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	1	12	0	0
Included in earnings	0	2	0	0
Included in other comprehensive income	0	(1)	0	3
Purchases	0	0	1	4
Sales	0	(6)	0	0
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	1	7	1	7
Exchange | Level 3 | Common stock | Trading securities
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	15	7	15	15
Included in earnings	0	0	0	(3)
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	(5)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	15	7	15	7
Exchange | Level 3 | Real estate | Limited partnerships
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Beginning balance	98	112	98	109
Included in earnings	6	2	11	7
Included in other comprehensive income	0	0	0	0
Purchases	0	0	0	0
Sales	(2)	(1)	(7)	(3)
Transfers in and (out) of Level 3	0	0	0	0
Ending balance	102	113	102	113
Fair value measurements on a recurring basis
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Ending balance	162		162
Fair value measurements on a recurring basis | Indemnity
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Ending balance	19		19
Fair value measurements on a recurring basis | Indemnity | Real estate
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Ending balance	18		18
Fair value measurements on a recurring basis | Exchange
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Ending balance	143		143
Fair value measurements on a recurring basis | Exchange | Real estate
Roll forward of consolidated level 3 fair value measurements on a recurring basis
Ending balance	$ 102		$ 102

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Indemnity Shareholders' Equity and Noncontrolling Interest

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Indemnity Shareholders' Equity and Noncontrolling Interest

Note 13.  Indemnity Shareholders’ Equity and Noncontrolling Interest

A reconciliation of the beginning and ending balances of Indemnity's shareholders’ equity and the noncontrolling interest is presented as follows for the year ended December 31, 2013 and for the six months ended June 30, 2014:

	Erie Insurance Group
(in millions, except per share data)	Indemnity shareholder interest			Exchange noncontrolling interest			Erie Insurance Group
Balance at December 31, 2012	$	642		$	6,149		$	6,791
Net income	163			885			1,048
Change in other comprehensive income (loss), net of tax	74			(218		)	(144		)
Net purchase of treasury stock	(32		)	—			(32		)
Dividends declared:
Class A $2.4125 per share	(112		)	—			(112		)
Class B $361.875 per share	(1		)	—			(1		)
Balance at December 31, 2013	$	734		$	6,816		$	7,550
Net income	95			117			212
Change in other comprehensive income, net of tax	4			133			137
Net purchase of treasury stock	(19		)	—			(19		)
Dividends declared:
Class A $1.27 per share	(59		)	—			(59		)
Class B $190.50 per share	0			—			0
Balance at June 30, 2014	$	755		$	7,066		$	7,821