FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
(NO FEE REQUIRED)
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
Commission File Number 2-39458
ERIE FAMILY LIFE INSURANCE COMPANY
(Exact name of Company as specified in its charter)
Pennsylvania 25-1186315
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 Erie Insurance Place, Erie, Pennsylvania 16530
(Address of principal executive offices) (Zip code)
Company's telephone number, including area code (814) 870-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.40 par value
(Title of class)
Indicate by check mark whether the Company (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 Company 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate the number of shares outstanding of each of the Company's classes of
common stock, as of the latest practicable date: 9,450,000 shares of Common
Stock outstanding on February 15, 2002.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Company's Annual Report to shareholders for the fiscal year
ended December 31, 2001 (the "Annual Report") are incorporated by reference into
Parts II and IV of this Form 10-K Report.
1
INDEX
ITEM NUMBER AND CAPTION PAGE
Part I
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters 8
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 7a. Quantitative and Qualitative Disclosures About Market Risk 8
Item 8. Financial Statements and Supplementary Data 8
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure 8
Part III
Item 10. Directors and Executive Officers of the Registrant 9
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain Beneficial Owners and
Management 21
Item 13. Certain Relationships and Related Transactions 23
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 24
2
PART I
ITEM 1. BUSINESS
Erie Family Life Insurance Company (hereinafter referred to as the
"Company" or "Erie Family Life") was incorporated in the Commonwealth of
Pennsylvania on May 23, 1967 and commenced business on September 1, 1967.
The Company is primarily engaged in the business of underwriting and
selling nonparticipating individual and group life insurance policies,
including universal life, annuity and disability income products.
The Company is owned 21.6% by the Erie Indemnity Company (EIC), 53.5% by
the Erie Insurance Exchange (Exchange) and the remaining 24.9% by public
shareholders, who are predominantly directors, agents and employees of EIC.
EIC is a Pennsylvania business corporation formed in 1925 to be the
attorney-in-fact for the Exchange, a Pennsylvania-domiciled reciprocal
insurance exchange. EIC's principal business activity consists of the
management of the Exchange. EIC also is engaged in the property/casualty
insurance business through its wholly owned subsidiaries, Erie Insurance
Company, Erie Insurance Company of New York and Erie Insurance Property &
Casualty Company and through its management of Flagship City Insurance
Company, a subsidiary of the Exchange. Together with the Exchange, EIC and
its subsidiaries and affiliates, including Erie Family Life, operate
collectively under the name "Erie Insurance Group."
Products
The Company's portfolio of life insurance includes permanent life,
endowment and term policies, including whole life, mortgage and decreasing
term, group, and universal life insurance. In terms of face value, new life
business issued in 2001, 2000 and 1999 had a ratio of 8:1, 8:1 and 5:1,
respectively, of term insurance to whole life insurance coverage.
Contributing to the increase in this ratio has been the introduction of
three new term life insurance products since late 1999. The ERIE Flagship
TermSM, introduced in late 1999, was designed for sale of face amounts of
$300,000 and above. In the third quarter of 2001, the Company rolled out
its two newest products - ERIE Target TermSM and ERIE Flagship Term2SM. The
ERIE Target Term product has a minimum face amount of $100,000 and offers a
very low initial premium with rates guaranteed for 10 years on all plans.
The ERIE Flagship Term2, now Erie Family Life's most comprehensive term
insurance plan for individuals desiring substantial coverage, offers a
minimum face amount of $100,000 and replaced the ERIE Flagship Term product
for new policy sales after October 1, 2001.
Life insurance premiums and annuity deposits have been the primary sources
of cash inflows for the Company. Net life insurance premiums by class, as a
percentage of total sales, are as follows:
For the year ended December 31,
Class 2001 2000 1999 1998 1997
----- ---- ---- ---- ---- ----
Ordinary Life (including Term,
Whole Life and Universal Life) 94.0% 94.2% 93.7% 93.4% 93.3%
Group and other 6.0 5.8 6.3 6.6 6.7
------ ------ ------ ------ ------
100.0% 100.0% 100.0% 100.0% 100.0%
Certain elements of revenue and expense reflect the requirements of
Financial Accounting Standard (FAS) 97. FAS 97 prescribes a uniform method
by which life insurance companies record certain long-term contracts,
specifically annuities, universal life, and other interest-sensitive
products. This method involves separating the premium income into the
"premium" portion (shown in revenue) which represents insurance protection
purchased, and the "deposit" portion, which represents funds to be held at
interest for future uses. Under this standard, the "deposit" portion of the
premium received is accounted for using methods applicable to comparable
"interest bearing obligations" of other types of financial institutions.
3
The Erie Insurance Group affiliated property and casualty insurance
companies periodically purchase annuities from the Company in connection
with the structured settlement of claims. Structured settlement annuities
sold to affiliated property/casualty companies totaled $12,878,769,
$16,167,642 and $23,312,225 in 2001, 2000, and 1999, respectively. Also
included in the annuity deposits are annuity contracts purchased by the
Erie Insurance Group Retirement Plan for Employees. These annuity contracts
totaled $4,513,441 in 2001, $5,626,892 in 2000 and $5,321,738 in 1999.
Annuity deposits by class are as follows:
For the year ended December 31,
Class 2001 2000 1999 1998 1997
----- ---- ---- ---- ---- ----
Universal Life Deposits $ 12,238,438 $ 11,198,124 $ 11,792,172 $ 10,692,515 $ 10,733,738
Annuity Deposits 69,754,071 51,060,326 67,114,641 56,727,779 58,306,640
--------------- -------------- --------------- -------------- ---------------
$ 81,992,509 $ 62,258,450 $ 78,906,813 $ 67,420,294 $ 69,040,378
Annuity product offerings compete with other available investment products
including, but not limited to, common and preferred stocks, bonds, mutual
funds and other instruments. The Company's ability to attract policyholders
depends in large part on the relative attractiveness of its products
compared to other investment alternatives commercially available. Factors
such as the interest rate environment and the performance of the stock
market influence this ability.
The Company reinsures a portion of its business under a number of different
reinsurance agreements. The primary purpose of this reinsurance is to
enable the Company to write a policy in an amount larger than the Company
is willing to assume for itself. The secondary purposes are to receive
commissions on the reinsurance ceded and in some instances to participate
in the profits of the reinsured business by way of an "experience rating
refund." The Company currently reinsures with other insurance companies the
portion of the insurance coverage above acceptable retentions. The
retention limits on an acceptable risk is generally $300,000 per life for
individual and $200,000 per life for group coverage. For its disability
income product, the Company has a 50% coinsurance agreement with a
nonaffiliated reinsurer. The Company has a 50% coinsurance agreement, with
a maximum retention of $300,000, with nonaffiliated reinsurers for its ERIE
Flagship TermSM and ERIE Flagship Term2SM products. For its Erie Target
TermSM product, the Company has a 90% coinsurance agreement, with a maximum
retention of $300,000, with nonaffiliated reinsurers.
Marketing
The Company markets its products through independent agents in eleven
jurisdictions. The 2001 statutory direct premiums and annuity
considerations for those jurisdictions is made up of: Pennsylvania
(64.76%), Maryland (7.33%), Ohio (6.84%), Virginia (6.50%), North Carolina
(4.35%), West Virginia (3.81%), Indiana (3.13%), Tennessee (1.10%),
Illinois (.55%), and the District of Columbia (.04%). The policies sold are
evaluated by the Company's Underwriting Department which accepts or
declines applicants for insurance. Premium on policies which are accepted
may be standard or rated, depending on the nature of the risk.
Competition
The Company operates in a highly competitive industry which consists of
numerous stock and mutual life insurance companies. A large number of
established insurance companies compete in states in which the Company
transacts business and many of these companies offer more diversified lines
of insurance coverage and have substantially greater financial resources
than does the Company. Competition is based primarily on price, product
features, availability of insurance products and the financial strength of
the Company.
4
Federal legislative initiatives on financial services reform, begun in
1997, culminated in the enactment of Senate Bill 900, the Financial
Services Modernization Act, which significantly changes the way insurance
companies, banks and securities firms are regulated. The elimination of
some regulatory barriers to banks entering the insurance market, privacy
initiatives concerning the consumer data held by financial institutions and
the interjection of federal government agencies into the traditionally
state-regulated insurance industry may materially change the ground rules
under which insurance products are marketed.
Additionally, current and proposed future federal measures may affect the
way the life insurance industry distributes, prices, and services their
products. These proposals may include possible changes to laws governing
the taxation of insurance companies and life insurance products.
Insurance Liabilities
The Company establishes and maintains actuarial reserves to meet its
obligations on life insurance, disability income, and annuity policies.
These reserves are amounts which, with additions from premiums to be
received on outstanding policies and with interest on such reserves
compounded annually at certain assumed rates, are calculated to be
sufficient to meet policy obligations at death, disability or maturity in
accordance with the mortality and morbidity tables employed when the
policies are issued.
Reserves for life insurance and income-paying annuity future policy
benefits have been computed primarily by the net level premium method with
assumptions as to anticipated mortality, withdrawals, lapses and investment
yields. Disability income reserves are calculated as two-year preliminary
term mid-terminal reserves plus unearned premium reserves. Deferred annuity
future policy benefit liabilities have been established at accumulated
values without reduction for surrender charges. Reserves for universal life
and deposit contracts are based on the contract account balance, if future
benefit payments in excess of the account balance are not guaranteed, or
the present value of future benefit payments when such payments are
guaranteed. Variations are inherent in such calculations due to the
estimates and assumptions necessary in the calculations. Interest rate
assumptions for non-interest sensitive life insurance range from 3.5% to 4%
on policies issued in 1980 and prior years and 6% to 7.25% on policies
issued in 1981 and subsequent years. Mortality and withdrawal assumptions
are based on tables typically used in the industry, modified to reflect
actual experience where appropriate.
Universal life and annuity deposits are credited with varying interest
rates determined at the discretion of the Company subject to certain
minimums. During 2001, interest rates credited ranged from 6.0% to 6.75% on
universal life deposits and 5.0% to 6.25% on annuity deposits. There were
no material differences between the carrying value and fair value of the
Company's investment-type policies at December 31, 2001.
Insurance Regulation
The Company is subject to supervision and regulation by the insurance
departments of the states in which it does business. Although the extent of
the regulation varies from state to state, generally the supervisory
agencies are vested with broad regulatory powers relating to the granting
and revocation of licenses to transact business, regulation of trade
practices, licensing of agents, approval of policy forms, deposits of
securities as for the benefits of policy owners, and investments and
maintenance of specified reserves and capital, all designed primarily for
the protection of policy owners. In accordance with the rules of the
National Association of Insurance Commissioners (NAIC), the Company is
examined periodically by one or more of the state supervisory agencies. The
last completed examination of the Company was conducted by the Pennsylvania
Insurance Department and covered the five years ended December 31, 1995.
The Company is currently being examined by the Pennsylvania Insurance
Department for the five year period ended December 31, 2000.
5
The Commonwealth of Pennsylvania follows the statutory accounting practices
minimum risk-based capital requirements on domestic insurance companies
that were developed by the NAIC. Companies below specific trigger points or
ratios are classified within certain levels, each of which requires
specified corrective action. The formulas for determining the amount of
risk-based capital specify various weighing factors that are applied to
financial balances or various levels of activity based on the perceived
degree of risk. These formulas determine a ratio of the company's
regulatory total adjusted capital to its authorized control level
risk-based capital, as defined by the NAIC.
The NAIC levels and ratios are as follows:
Ratio of Total Adjusted Capital to
NAIC Required Authorized Control Level Risk-Based
Regulatory Event Capital (Less Than or Equal to)
Company action level 2 (or 2.5 with negative trends)
Regulatory action level 1.5
Authorized control level 1
Mandatory control level .7
Erie Family Life has regulatory total adjusted capital of almost $126
million and a ratio of total adjusted capital to authorized control level
risk-based capital of more than 8:1 at December 31, 2001. The Company's
ratios significantly exceed the minimum NAIC risk-based capital
requirements.
The NAIC adopted the Codification of Statutory Accounting Practices
(Codification), effective January 1, 2001, as the NAIC-supported basis of
accounting. The Codification was approved with a provision allowing for
prescribed or permitted accounting practices to be determined by each
states' insurance commissioner. Accordingly, such discretion will continue
to allow prescribed or permitted accounting practices that may differ from
state to state. The Company follows complete NAIC statutory accounting
practices, with no permitted or prescribed deviations from the Pennsylvania
Insurance Department. The Codification resulted in changes to the Company's
statutory-basis financial statements, the most significant of which were
the recording of statutory deferred taxes and the elimination of the cost
of collection liability. The total net cumulative adjustment increased the
statutory surplus by $3,388,534.
Employees
Services of 128 full-time Employees are provided through EIC. Five of the
employees are officers. Employee expenses along with other operating
expenses are paid by EIC and reimbursed by the Company on a monthly basis.
None of the Employees are covered by collective bargaining agreements and
the Company believes its Employee relations are good.
Other Data
The Company's Lapse Rate for 2001 and 2000 was 5.8% and
8.5%, respectively.
Total Life Insurance In Force for the last five years Net of
Reinsurance was:
2001 - $14,790,984,000
2000 - $13,918,295,000
1999 - $13,031,594,000
1998 - $11,961,512,000
1997 - $10,754,141,000
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act
of 1995: Certain forward-looking statements contained herein involve risks
and uncertainties. Many factors could cause future results to differ
materially from those discussed. Examples of such factors include but are
not limited to: better (or worse) mortality rates, terrorist actions,
changes in insurance regulations or legislation that disadvantage the
Company in the marketplace and recession, economic conditions or stock
market changes affecting pricing or demand for insurance products or
ability to generate investment income and returns. Growth and profitability
have been and will be potentially materially affected by these and other
factors.
6
ITEM 2. PROPERTIES
The Company owns real property for investment purposes as provided in Schedule I
"Summary of Investments other than Investments in Related Parties." This
investment property, located in Allentown, Pennsylvania, is leased to EIC and a
nonaffiliated business. Rental income for 2001 was $353,760. The executive and
administrative offices of the Company are located in the headquarters office of
Erie Insurance Group in Erie, Pennsylvania. The Company pays other members of
the group an amount determined by an agreement for office space and for the use
of facilities, equipment and services.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material pending legal proceedings other than
ordinary routine litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote to shareholders during the fourth
quarter of 2001.
7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The information set forth on page 25 of the Company's 2001 Annual Report is
incorporated herein by reference. The following sets forth the range of high and
low closing prices of the Company's stock by quarter:
2001 2000
Low High Low High
First Quarter 16 17 1/2 17 5/8 20 3/4
Second Quarter 16 3/4 18 3/4 17 3/8 21
Third Quarter 17 4/5 21 18 19 1/2
Fourth Quarter 19 21 3/4 16 19
The amount of dividends the Company can pay to its shareholders without the
prior approval of the Pennsylvania Insurance Commissioner is limited by statute
to the greater of: (a) 10 percent of its statutory surplus as regards
policyholders as shown on its last annual statement on file with the
commissioner, or (b) the net income as reported for the period covered by such
annual statement, but shall not include pro rata distribution of any class of
the insurer's own securities. Accordingly, the maximum dividend payout which may
be made in 2002 without prior Pennsylvania Commissioner approval is $10,609,021.
ITEM 6. SELECTED FINANCIAL DATA
The information contained in "Selected Financial Data" on page 16 of the
Company's 2001 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth on pages 17 through 25 of the Company's 2001 Annual
Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth on pages 22 and 23 of the Company's 2001 Annual Report
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The 2001 Financial Statements and the Company's Independent Auditors' Report on
pages 28 through 45 of the Company's 2001 Annual Report are incorporated herein
by reference, as is the unaudited information set forth in the Notes to the
Financial Statements under the caption "Quarterly Results of Operations
(Unaudited)" on pages 44 through 45.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Erie Insurance Group President and CEO, Stephen A. Milne, retired from the
Company effective January 18, 2002. Jan R. Van Gorder, Senior Executive Vice
President, Secretary and General Counsel, is acting President and CEO until a
new President and CEO is selected. Mr. Milne remains on the Board of Directors
of the Company and the Erie Indemnity Company, the principal management company
of the Erie Insurance Group.
Directors are elected to one year terms at the Company's annual meeting of
Shareholders. Following are the Company's officers and directors:
Present Principal Position with Erie
Name and Age Family Life and Other Material Positions
as of 12/31/01 Held During the Last Five Years
Samuel P. Black, III 1,3,4 Director since 1997. President, Treasurer and Secretary, Samuel
59 P. Black & Associates, Inc.--insurance agency; Director--the
Company, Erie Insurance Company, Flagship City Insurance Company,
Erie Insurance Property & Casualty Company and Erie Indemnity
Company, Attorney-in-Fact for Erie Insurance Exchange.
J. Ralph Borneman, Jr. 3,4 Director since 1992. President and Chief Executive Officer,
63 Body-Borneman Associates, Inc., insurance agency. President,
Body-Borneman, Ltd. and Body-Borneman, Inc., insurance agencies.
Director--the Company, Erie Insurance Company, Erie Indemnity
Company, Attorney-in-Fact for Erie Insurance Exchange, Erie
Insurance Company of New York and National Penn Bancshares.
John J. Brinling, Jr. Executive Vice President of the Company since December 1990.
54 Division Officer 1984 - Present. Director--Erie Insurance
Company of New York.
Patricia Garrison-Corbin 2,4,5C Director since 2000. President, P.G. Corbin & Company 1987 -
54 Present. Director--the Company, Erie Insurance Company and Erie
Indemnity Company, Attorney-in-Fact for Erie Insurance Exchange.
Robert H. Dreyer Senior Vice President of the Company since 1990. Chief Actuary
64 1983 - Present.
Philip A. Garcia Executive Vice President and Chief Financial Officer of the
45 Company, Erie Insurance Company, Erie Indemnity Company,
Attorney-in-Fact for Erie Insurance Exchange, Flagship City
Insurance Company, Erie Insurance Property & Casualty Company and
Erie Insurance Company of New York since October 1997. Senior
Vice President and Controller 1993 - 1997. Director--Flagship
City Insurance Company, Erie Insurance Property & Casualty
Company and Erie Insurance Company of New York.
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Executive Compensation Committee
4 Member of Nominating Committee
5 Member of Investment Committee
C Committee Chairman
9
Present Principal Position with Erie
Name and Age Family Life and Other Material Positions
as of 12/31/01 Held During the Last Five Years
Susan Hirt Hagen 1,* Director since 1980. Managing Partner, Hagen, Herr & Peppin,
66 Group Relations Consultants since 1990; Director--the Company,
Erie Insurance Company and Erie Indemnity Company,
Attorney-in-Fact for Erie Insurance Exchange, since 1980.
F. William Hirt 1C,* Director since 1967. Chairman of the Board of the Company, Erie
76 Insurance Company, Erie Indemnity Company, Attorney-in-Fact for
Erie Insurance Exchange, Erie Insurance Property & Casualty
Company and Flagship City Insurance Company since September 1993;
Chairman of the Board of Erie Insurance Company of New York since
April 1994. Chairman of the Executive Committee of the Company
and the Erie Indemnity Company, Attorney-in-Fact for Erie
Insurance Exchange since November 1990; Interim President and
Chief Executive Officer of the Company, Erie Indemnity Company,
Attorney-in-Fact for Erie Insurance Exchange, Erie Insurance
Company, Erie Insurance Property & Casualty Company, Flagship
City Insurance Company and Erie Insurance Company of New York
from January 1, 1996 to February 12, 1996; Chairman of the Board,
Chief Executive Officer and Chairman of the Executive Committee
of the Company, Erie Indemnity Company, Attorney-in-Fact for Erie
Insurance Exchange and Erie Insurance Company for more than five
years prior thereto; Director--the Company, Erie Insurance
Company, Flagship City Insurance Company, Erie Indemnity Company,
Attorney-in-Fact for Erie Insurance Exchange, Erie Insurance
Property & Casualty Company and Erie Insurance Company of New
York.
Samuel P. Katz 2,3 Director since 2000. Chief Executive Officer, Greater
52 Philadelphia First, July 2000 - Present; Managing Partner,
Wynnefield Capital Advisors, Inc., 1997 - Present; President,
Entersport Capital Advisors Inc., 1997 - Present; Partner,
Stafford Capital Partners, L.P. 1994 - 1997; Director--the
Company, Erie Insurance Company and Erie Indemnity Company,
Attorney-in-Fact for Erie Insurance Exchange.
Claude C. Lilly, III 2 Director since 2000. Professor and Dean, Belk College of Business
55 Administration, University of North Carolina, Charlotte 1997 -
Present; Professor, Florida State University, 1978 - 1997.
Director--the Company, Erie Insurance Company and Erie Indemnity
Company, Attorney-in-Fact for Erie Insurance Exchange.
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Executive Compensation Committee
* F. William Hirt is the brother of Susan Hirt Hagen.
C Committee Chairman
10
Present Principal Position with Erie
Name and Age Family Life and Other Material Positions
as of 12/31/01 Held During the Last Five Years
Stephen A. Milne 1,5 Director since 1996. Retired; President and Chief Executive
53 Officer of the Company, Erie Insurance Company, Erie Indemnity
Company, Attorney-in-Fact for Erie Insurance Exchange, Flagship
City Insurance Company, Erie Insurance Property & Casualty
Company and Erie Insurance Company of New York 1996 - January 18,
2002; Executive Vice President of the Erie Insurance Company,
Erie Indemnity Company, Attorney-in-Fact for Erie Insurance
Exchange, Flagship City Insurance Company, Erie Insurance
Property & Casualty Company and Erie Insurance Company of New
York 1994 - 1996. Director--the Company, Erie Insurance Company,
Erie Indemnity Company, Attorney-in-Fact for Erie Insurance
Exchange and Erie Insurance Company of New York, Flagship City
Insurance Company and Erie Insurance Property & Casualty Company.
Henry N. Nassau 1,5 Director since 2000. General Counsel, Internet Capital Group 1999
47 - Present; Partner, Dechert, Price & Rhoads 1987 - 1999;
Director--the Company, Erie Insurance Company and Erie Indemnity
Company, Attorney-in-Fact for Erie Insurance Exchange.
Timothy G. NeCastro Senior Vice President and Controller of the Company, Erie
41 Insurance Company, Erie Indemnity Company, Attorney-in-Fact for
Erie Insurance Exchange, Flagship City Insurance Company, Erie
Insurance Property & Casualty Company and Erie Insurance Company
of New York since 1997. Department Manager - Internal Audit 1996
- 1997.
John M. Petersen 1,4C Director since 1980. Retired; President and Chief Executive
73 Officer of the Company, Erie Indemnity Company, Attorney-in-Fact
for Erie Insurance Exchange, Erie Insurance Company, Flagship
City Insurance Company and Erie Insurance Property & Casualty
Company 1993 - 1995 and Erie Insurance Company of New York 1994 -
1995; President, Treasurer and Chief Financial Officer of the
Erie Indemnity Company, Attorney-in-Fact for the Erie Insurance
Exchange, Erie Insurance Company and Erie Family Life Insurance
Company 1990 - 1993, and of Flagship City Insurance Company and
Erie Insurance Property & Casualty Company since 1992 and 1993,
respectively, to September 1993; President, Treasurer and Chief
Financial Officer of the Company and Executive Vice President,
Treasurer and Chief Financial Officer of the Erie Indemnity
Company, Attorney-in-Fact for the Erie Insurance Exchange and
Erie Insurance Company for more than five years prior thereto;
Director--the Company, Erie Insurance Company, Flagship City
Insurance Company, Erie Indemnity Company, Attorney-in-Fact for
Erie Insurance Exchange, Erie Insurance Property & Casualty
Company, Erie Insurance Company of New York, and Spectrum
Control.
1 Member of Executive Committee
4 Member of Nominating Committee
5 Member of Investment Committee
C Committee Chairman
11
Present Principal Position with Erie
Name and Age Family Life and Other Material Positions
as of 12/31/01 Held During the Last Five Years
Jan R. Van Gorder 1 Director since 1990. Acting President and Chief Executive Officer
54 of the Company, Erie Indemnity Company, Attorney-in-fact for Erie
Insurance Exchange, Erie Insurance Company, Flagship City
Insurance Company, Erie Insurance Property and Casualty Company
and Erie Insurance Company of New York since January 19, 2002.
Senior Executive Vice President, Secretary and General Counsel of
the Company, Erie Indemnity Company, Attorney-in-Fact for Erie
Insurance Exchange, and Erie Insurance Company since 1990 and of
Flagship City Insurance Company and Erie Insurance Property &
Casualty Company since 1992 and 1993, respectively and of Erie
Insurance Company of New York since 1994. Senior Vice President,
Secretary and General Counsel of the Company, Erie Insurance
Company and Erie Indemnity Company, Attorney-in-Fact for Erie
Insurance Exchange for more than five years prior thereto;
Director--the Company, Erie Insurance Company, Flagship City
Insurance Company, Erie Insurance Property & Casualty Company,
Erie Insurance Company of New York and Erie Indemnity Company,
Attorney-in-Fact for Erie Insurance Exchange.
Douglas F. Ziegler Senior Vice President, Treasurer and Chief Investment Officer of
51 the Company since 1993. Senior Vice President, Treasurer and
Chief Investment Officer of the Erie Insurance Company, Erie
Indemnity Company, Attorney-in-Fact for Erie Insurance Exchange,
Flagship City Insurance Company and Erie Insurance Property &
Casualty Company and Erie Insurance Company of New York.
Director--Erie Insurance Company of New York.
Robert C. Wilburn 2C,3C,4,5 Director since 1999. President and Chief Executive Officer, the
58 Gettysburg National Battlefield Museum Foundation since 2001;
Distinguished Service Professor, Carnegie Mellon University since
1999; Retired President and Chief Executive Officer, Colonial
Williamsburg Foundation 1992 - 1999; Director - the Company, Erie
Insurance Company and Erie Indemnity Company, Attorney-in-Fact
for Erie Insurance Exchange.
1 Member of Executive Committee
2 Member of Audit Committee
3 Member of Executive Compensation Committee
4 Member of Nominating Committee
5 Member of Investment Committee
C Committee Chairman
12
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The Company is a member of an insurance holding company system pursuant to
Pennsylvania law under which insurance companies are required to have
nominating, audit and executive compensation committees composed solely of
directors who are not officers, employees or controlling shareholders of the
Company or any entity controlling the Company. Insurance companies can satisfy
this requirement if the insurance company is controlled by an insurer or a
publicly held corporation that has committees that comply with this requirement.
EIC, holder of 21.6% of the Company's stock directly and 53.5% of the Company's
stock as attorney-in-fact for the Exchange, has committees which meet these
requirements.
The following table sets forth the compensation during each of the three fiscal
years ended December 31, 2001, 2000, and 1999, awarded to, earned by or paid to
the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company during 2001 for services rendered
in all capacities to the Company, Erie Indemnity Company (EIC), the Exchange and
their subsidiaries and affiliates. The executive and senior officers of the
Company also participate in certain pension and deferred compensation plans of
EIC. All amounts presented in the Executive Compensation section, herein, are
total payments received and earned for all entities of the Erie Insurance Group,
a portion of which is borne by Erie Family Life based on allocation of the
respective work efforts of the executive officer. All amounts exhibited are
before individual income taxes.
Annual Long-Term
Compensation
Name and Other Annual Restricted LTIP All Other
Principal Position Year Salary Bonus Compensation Stock Awards Payments Compensation
- ------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Stephen A. Milne (6) 2001 $ 741,103 $ 592,204 $ 14,247 $ 411,881 $ 308,160 $ 79,555
President and Chief 2000 677,606 627,417 5,913 162,971 73,476 74,145
Executive Officer 1999 633,600 495,201 2,595 0 0 64,649
Jan R. Van Gorder (6) 2001 $ 384,211 $ 250,193 $ 6,020 $ 122,591 $ 122,692 $ 32,564
Senior Executive 2000 359,167 268,681 4,120 97,002 43,726 28,046
Vice President, 1999 335,482 150,653 2,614 0 0 26,492
Secretary & General
Counsel
Jeffrey A. Ludrof 2001 $ 309,463 $ 202,971 $ 2,534 $ 65,125 $ 63,042 $ 19,023
Executive Vice 2000 273,985 203,145 1,362 48,173 21,715 18,265
President 1999 216,432 95,769 76 0 0 13,063
Philip A. Garcia 2001 $ 280,457 $ 184,102 $ 3,397 $ 76,441 $ 66,777 $ 18,148
Executive Vice 2000 262,177 198,593 1,813 45,222 20,398 14,809
President & Chief 1999 244,720 119,302 763 0 0 13,475
Financial Officer
John J. Brinling Jr. 2001 $ 260,408 $ 147,452 $ 2,688 $ 81,830 $ 82,350 $ 30,040
Executive Vice 2000 248,530 160,129 2,246 64,807 30,780 29,375
President of EFL 1999 238,168 101,575 2,454 0 0 24,875
(1) The amounts indicated in the "Bonus" column above represent amounts earned
by the named executives during 2001, 2000 and 1999, under EIC's Annual
Incentive Plan. The purpose of the Annual Incentive Plan is to promote the
best interests of the Exchange while enhancing shareholder value of EIC by
basing a portion of selected employees' compensation on the performance of
such employee and EIC. Performance measures are established by the
Executive Compensation Committee based on the attainment of individual
performance goals and EIC's financial goals compared to a selected peer
group. The amounts indicated include reimbursement for minor perquisites in
the amounts of $13,403, $11,339, $8,693, $9,749 and $8,594 for Messrs.
Milne, Van Gorder, Ludrof, Garcia, and Brinling, respectively.
13
(2) Amounts indicated in the "Other Annual Compensation" column include the
taxable value of group term life insurance policies in excess of $50,000
and the associated tax reimbursement for the named executive officers.
Amounts also include dividends paid on behalf of EIC's Long-Term Incentive
Plan.
(3) The "Restricted Stock Awards" column represents Long-Term Incentive Plan
benefits expressed in dollar amounts using the closing price of EIC's stock
as of the end of the respective year ($29.81 at December 31, 2000 and
$38.49 at December 31, 2001) that remain restricted at the end of the year.
For Messrs. Milne, Van Gorder, Ludrof, Garcia, and Brinling, respectively,
the number of shares awarded were: 10,701, 3,185, 1,692, 1,986 and 2,126
for 2001. See "Long-Term Incentive Plan" for a detailed description of the
Plan. Long-Term Incentive Plan dividends earned in the current year are
reported in "Other Annual Compensation" when paid or in "All Other
Compensation" when deferred.
(4) The "LTIP Payments" column represents Long-Term Incentive Plan benefits
that became unrestricted at the end of the year. The shares for 2000 were
distributed in January 2001 and the shares for 2001 were distributed in
January 2002. All of such shares were valued using the actual share price
at the time of distribution. The number of shares distributed after
withholding for income taxes for Messrs. Milne, Van Gorder, Ludrof, Garcia
and Brinling, respectively, were: 4,539, 2,180, 928, 1,186 and 685 for
2001. Messr. Brinling deferred the distribution of 543 shares valued using
the share price at December 31, 2000 and 1,075 shares valued using the
share price as of December 31, 2001.
(5) Amounts shown in the "All Other Compensation" column include matching
contributions made by EIC pursuant to EIC's Employee Savings Plan, premiums
paid by EIC on behalf of the named individuals on the split dollar life
insurance policies, expenses for spousal travel, and deferred dividends and
related earnings. For the year 2001, contributions made to the Employee
Savings Plan amounted to $29,644, $15,368, $12,378, $11,218 and $10,416, on
behalf of Messrs. Milne, Van Gorder, Ludrof, Garcia and Brinling,
respectively. For the year 2000, contributions made to the Employee Savings
Plan amounted to $20,143, $10,736, $8,214, $7,831 and $7,456 on behalf of
Messrs. Milne, Van Gorder, Ludrof, Garcia and Brinling, respectively. For
the year 1999, contributions made to the Employee Savings Plan amounted to
$14,308, $9,084, $6,365, $6,461 and $7,145 on behalf of Messrs. Milne, Van
Gorder, Ludrof, Garcia and Brinling, respectively. Premiums paid during
2001 for split dollar life insurance policies for Messrs. Milne, Van
Gorder, Ludrof, Garcia, and Brinling, respectively, were: $49,911, $17,196,
$6,645, $6,930 and $17,538. Premiums paid during 2000 for split dollar life
insurance policies for Messrs. Milne, Van Gorder, Ludrof, Garcia and
Brinling, respectively, were as follows: $50,132, $17,310, $6,674, $6,978
and $17,634. Premiums paid during 1999 for split dollar life insurance
policies for Messrs. Milne, Van Gorder, Ludrof, Garcia and Brinling,
respectively, were as follows: $50,341, $17,408, $6,698, $7,014 and
$17,730. The Company is entitled to recover the premiums from any proceeds
paid on such split dollar life insurance policies and has retained a
collateral interest in each policy to the extent of the premiums paid with
respect to such policies. Messr. Brinling also had deferred dividends of
$1,967 and interest on deferred dividends of $119.
(6) Mr. Milne served as President and Chief Executive Officer from February
1996 until his retirement in January 2002. Mr. Van Gorder became Acting
President and Chief Executive Officer upon Mr. Milne's retirement.
14
Agreements with Executive Officers
The Company has employment agreements with the following executive officers of
the Company: Jan R. Van Gorder, Senior Executive Vice President, Secretary and
General Counsel of the Company and currently Acting President and Chief
Executive Officer; Philip A. Garcia, Executive Vice President and Chief
Financial Officer of the Company; Jeffrey A. Ludrof, Executive Vice President of
the Company and John J. Brinling, Jr., Executive Vice President of Erie Family
Life. At a meeting of the Board of Directors held on December 11, 2001, the
Board of Directors extended the term of each executive officer's employment
agreement for one year and approved benefits to be paid to Mr. Milne upon his
retirement. The employment agreements have the following principal terms:
(a) A two-year term expiring December 15, 2003, unless the agreement is
theretofore terminated in accordance with its terms, with or without cause,
or due to the disability or death of the officer or notice of nonrenewal is
given by EIC or the executive 30 days before any anniversary date;
(b) A minimum annual base salary at least equal to the executive's annual base
salary at the time the agreement was executed, subject to periodic review
to reflect the executive's performance and responsibilities, competitive
compensation levels and the impact of inflation;
(c) The eligibility of the executive under the Company's incentive compensation
programs and employee benefit plans;
(d) The establishment of the terms and conditions upon which the executive's
employment may be terminated by EIC and the compensation of the executive
in such circumstances. The agreements provide generally, among other
things, that if the employment of an executive is terminated without Cause
(as defined in the agreement) by EIC or by the executive for Good Reason
(as defined in the agreement) then the executive shall be entitled to
receive: (i) an amount equal to the sum of three times the executive's
highest annual base salary during the preceding three years plus an amount
equal to three times the total of the executive's highest award during the
preceding three years under EIC's Annual Incentive Plan; (ii) any award or
other compensation to which the executive is entitled under EIC's Long-Term
Incentive Plan; (iii) continuing participation in any employee benefit
plans for a period of three years following termination to the extent the
executive and his dependents were eligible to participate in such programs
immediately prior to the executive's termination and (iv) immediate vesting
and nonforfeitability of accrued benefits under EIC's Supplemental
Retirement Plan for Certain Members of the Erie Insurance Group Retirement
Plan for Employees ("Supplemental Employee Retirement Plan");
(e) Provisions relating to confidentiality and nondisclosure following an
executive's termination; and
(f) An agreement by the executive not to compete with the Company for a period
of one year following his or her termination, unless such termination was
without Cause.
Severance Recognition Award for Retired President and Chief Executive Officer
At a meeting held on December 11, 2001, the Board of Directors approved benefits
to be paid to Mr. Milne upon his retirement as President and Chief Executive
Officer of the Company on January 18, 2002. These benefits are summarized as
follows:
(a) Cash. A cash payment equal to five times the sum of (i) Mr. Milne's 2002
base salary plus (ii) the amount payable to him under the Annual Incentive
Plan for 2001.
(b) Insurance. Continuation of health, dental and vision insurance coverage for
Mr. Milne and his spouse until they reach age 65. Continuation of current
life insurance coverages for the remainder of Mr. Milne's life.
15
(c) Supplemental Employee Retirement Plan. Mr. Milne shall be credited with 30
years of service in the Supplemental Employee Retirement Plan (SERP)
benefit formula and will be eligible to receive the equivalent payment of
his SERP/pension benefit beginning immediately. The SERP payment will be a
100% joint and survivor benefit for Mr. Milne and his spouse.
(d) Long-Term Incentive Plan. Under the Long-Term Incentive Plan (LTIP), all
open performance periods applicable to Mr. Milne shall be deemed to end on
December 31, 2002. The value of Phantom Share Units under the LTIP will be
calculated based on the shortened performance periods and paid to Mr. Milne
in unrestricted stock. All vesting periods under the LTIP shall be deemed
to end and shares of unrestricted stock shall be paid to Mr. Milne.
The retirement benefits for Mr. Milne charged to the Company in 2001 totaled
$748,581.
Stock Options and Stock Appreciation Rights
The Company does not have a stock option plan, nor has it ever granted any stock
option or stock appreciation right to any of the persons named in the Summary
Compensation Table.
Long-Term Incentive Plan
The Company participates in a Long-Term Incentive Plan sponsored by EIC. This
plan is designed to enhance the growth and profitability of EIC by providing the
incentive of long-term rewards to key employees who are capable of having a
significant impact on the performance of EIC; to attract and retain employees of
outstanding competence and ability and to further align the interests of such
employees with those of the shareholders of EIC. The Plan was approved by
shareholders in 1997 as a performance-based plan under the Internal Revenue Code
of 1986, as amended (the Code). Each of the named executives has been granted
awards of phantom share units under EIC's Long-Term Incentive Plan based upon a
target award calculated as a percentage of the executive's base salary. The
total value of any phantom share units will be determined at the end of the
performance period based upon the growth in EIC's retained earnings. Each
executive will then be entitled to receive restricted shares of Class A Common
Stock of EIC equal to the dollar value of the phantom share units at the end of
the performance period. The vesting period for the restricted shares of Class A
Common Stock issued to each executive is three years after the end of the
performance period. If an executive ceases to be an employee prior to the end of
the performance period, the executive forfeits all phantom share units awarded.
If an executive ceases to be an employee prior to the end of the vesting period,
the executive forfeits all unvested restricted shares previously granted. The
following table sets forth target awards granted to EIC's five highest paid
executive officers (i) for the three-year performance period 2001 through 2003,
(ii) for the three-year performance period of 2000 through 2002 and (iii) for
the three-year performance period of 1999 through 2001. The amount of expenses
allocated to the Company for the long-term incentive plan amounted to $250,036,
$182,327 and $118,700 for 2001, 2000 and 1999, respectively.
16
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------
Name Number of Shares, Performance Estimated Future Payouts
Units or Other or Other Period Under Non-Stock
Rights (#) Until Maturation Price-Based Plans
or Payout
- -------------------------------------------------------------------------------------------------------------
Phantom Share Units Threshold Target Maximum
- -------------------------------------------------------------------------------------------------------------
Milne, S. 78,531 1999-2001 -0- $420,000 (1)
96,634 2000-2002 -0- $513,600 (1)
88,569 2001-2003 -0- $549,552 (1)
Van Gorder, J. 33,014 1999-2001 -0- $176,568 (1)
35,215 2000-2002 -0- $187,162 (1)
32,276 2001-2003 -0- $200,263 (1)
Garcia, P. 23,653 1999-2001 -0- $126,500 (1)
25,705 2000-2002 -0- $136,620 (1)
23,560 2001-2003 -0- $146,183 (1)
Brinling, J. 23,371 1999-2001 -0- $124,992 (1)
24,928 2000-2002 -0- $132,492 (1)
22,207 2001-2003 -0- $137,792 (1)
Ludrof, J. 23,278 1999-2001 -0- $124,498 (1)
25,705 2000-2002 -0- $136,620 (1)
24,881 2001-2003 -0- $154,381 (1)
(1) There is no maximum payout limitation for a specific performance
period. However, the maximum value of phantom share units that may be
earned by any named executive in any year shall not exceed $500,000.
17
Pension Plan
The following table sets forth the estimated total annual benefits payable upon
retirement at age 65 under the Erie Insurance Group Retirement Plan for
Employees and the Supplemental Employee Retirement Plan (collectively, the
"Retirement Plans").
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30
- --------------------------------------------------------------------------------
$ 150,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000
200,000 60,000 80,000 100,000 120,000
250,000 75,000 100,000 125,000 150,000
300,000 90,000 120,000 150,000 180,000
350,000 105,000 140,000 175,000 210,000
400,000 120,000 160,000 200,000 240,000
450,000 135,000 180,000 225,000 270,000
500,000 150,000 200,000 250,000 300,000
550,000 165,000 220,000 275,000 330,000
600,000 180,000 240,000 300,000 360,000
650,000 195,000 260,000 325,000 390,000
700,000 210,000 280,000 350,000 420,000
750,000 225,000 300,000 375,000 450,000
800,000 240,000 320,000 400,000 480,000
The compensation covered by the Retirement Plans is the base salary reported in
the Summary Compensation Table.
Under the Retirement Plans, credited years of service is capped at 30 years.
Credited years of service for each of the individuals named in the Summary
Compensation Table is as follows: Stephen A. Milne - 25 years, Jan R. Van Gorder
- - 21 years, John J. Brinling, Jr. - 30 years, Philip A. Garcia - 21 years and
Jeffrey A. Ludrof - 21 years.
The benefits under the Retirement Plans are computed on the basis of
straight-life annuity amounts and a life annuity with a ten-year certain
benefit. The benefits listed in the Pension Plan Table are not subject to
deduction for Social Security or other offset amounts. The information in the
foregoing table does not reflect certain limitations imposed by the Code.
Beginning in 1994, the Code prohibits the inclusion of earnings in excess of
$200,000 per year (adjusted periodically for cost of living increases) in the
average earnings used to calculate benefits. The Code also limits the maximum
annual pension (currently $160,000, but adjusted periodically for cost of living
increases) that can be paid to each eligible employee. A Supplemental Employee
Retirement Plan for senior management is in effect which provides benefits in
excess of the earnings limitations imposed by the Code similar to those provided
to all other full time employees as if the Code limitations were not in effect.
Those benefits are incorporated into the Pension Plan Table.
Director Compensation
The annual retainer for the directors of all members of the Group, including the
Company, is $25,000, plus $1,500 for each meeting attended and $1,500 for each
committee meeting attended plus an additional $2,000 per year for each committee
chairperson. The directors are also reimbursed for their expenses incurred in
attending meetings. Officers of the Company who serve as directors are not
compensated for attendance at meetings of the Board of Directors and its
committees. EIC also has a deferred compensation plan for certain directors of
the Company. The Company receives an allocated portion of its share of these
charges. The total amount allocated to the Company in 2001 for directors fees
and other charges was $109,787. Director Petersen also is compensated pursuant
to a consulting arrangement as disclosed in Item 13.
18
Compensation Committee Interlocks and Insider Participation
The Executive Compensation Committee (the "Compensation Committee") of the
Company presently consists of Robert C. Wilburn, Chairman, Samuel P. Black, III,
J. Ralph Borneman, Jr., and Samuel P. Katz. No member of the Compensation
Committee is a former or current officer or employee of the Company or any of
its affiliates (1). Furthermore, no executive officer of the Company serves as a
member of a compensation committee of another entity, one of whose executive
officers serves on the Compensation Committee, or as a director of the Company,
nor does any executive officer of the Company serve as a director of another
entity, one of whose executive officers serves on the Compensation Committee.
Mr. Borneman is the President and a principal shareholder of Body-Borneman
Associates, Inc., Body-Borneman, Inc. and Body-Borneman, Ltd., all of which are
independent insurance agencies representing a number of insurers, including the
Company and its insurance affiliates. Mr. Black is the President, Treasurer and
Secretary and a principal shareholder of Samuel P. Black & Associates, Inc.,
which is an independent insurance agency representing a number of insurers,
including the Company and its insurance affiliates.
1. J. Ralph Borneman, Jr. is an officer and a principal shareholder of the
insurance agencies named herein which receive commissions in the ordinary
course of business from the Company. Mr. Borneman does not qualify as an
outside director for purposes of approving performance-based incentive
plans as qualified under section 162(m) of the Code. Mr. Borneman has
excused himself from voting on such plans as a member of the Compensation
Committee.
Samuel P. Black, III is an officer of the insurance agencies named herein
which receive commissions in the ordinary course of business from the
Company. Mr. Black does not qualify as an outside director for purposes of
approving performance-based incentive plans as qualified under section
162(m) of the Code. Mr. Black has excused himself from voting on such plans
as a member of the Compensation Committee.
Report of the Executive Compensation Committee of the Company
The Compensation Committee is charged with the duty of recommending to the Board
of Directors the compensation of the three highest paid officers of the Company
and such other officers as are determined by the Board of Directors;
recommending to the Board of Directors all forms of bonus compensation,
including incentive programs, that would be appropriate for the Company and to
undertake such other responsibilities as may be delegated to the Compensation
Committee by the Board of Directors. The Board of Directors has authorized the
Compensation Committee to consider the compensation of the four highest paid
officers, including the Chief Executive Officer. The purpose of the Compensation
Committee is to determine the level and composition of compensation that is
sufficient to attract and retain top quality executives for the Company.
The objectives of the Company's executive compensation practices are to: (1)
attract, reward and retain key executive talent and (2) to motivate executive
officers to perform to the best of their abilities and to achieve short-term and
long-term corporate objectives that will contribute to the overall goal of
enhancing shareholder value and policyholder security. To that end, compensation
comparisons are made to benchmark positions at other insurers in terms of
compensation levels and composition of the total compensation mix.
Under Section 162(m) of the Code, the Company is not allowed a federal income
tax deduction for compensation, under certain circumstances, paid to certain
executive officers to the extent that such compensation exceeds $1 million per
officer in any fiscal year. In 1999, 2000 and 2001 no officer of the Company has
received compensation in excess of $1 million in any fiscal year to date with
the exception of Stephen A. Milne, former President and Chief Executive Officer
of the Company. The Compensation Committee may consider adopting policies with
respect to this limitation on deductibility when appropriate.
19
The Compensation Committee reviewed the salary ranges and base salaries of the
four highest paid executives, including the Chief Executive Officer, in 2001.
The Compensation Committee has position descriptions for the four highest paid
executives of the Company, including the Chief Executive Officer, which define
the responsibilities and duties of each position. The position descriptions also
delineate the functional areas of accountability and the qualifications and
skills required to perform such responsibilities and duties. The Compensation
Committee then reviews the salary ranges for the Chief Executive Officer and the
other three highest paid executives, comparing the ranges to third party data
compiled for similar positions with other property and casualty and life
insurers. In reviewing the salary ranges for the four highest paid executives,
including the Chief Executive Officer, the Compensation Committee references
Sibson's Management Compensation Survey published annually by Sibson & Company,
Inc., which summarizes compensation data for more than 100 insurance companies.
The data is reported by position, company asset size and premium volume. The
unique aspects of each position, its duties and responsibilities, the effect on
the performance of the Company, the number of employees supervised directly and
other criteria are also considered in setting the base salaries. The
Compensation Committee also consulted data obtained from Towers Perrin, a
nationally recognized consulting firm with specific expertise in the insurance
industry, to make recommendations regarding executive compensation.
The level of compensation for each executive reflects his or her skills,
experience and job performance. Normally, base salary will not be less than the
minimum for the salary range established for each position. Executives with a
broader range of skills, experience and consistently high performance with the
Company may receive compensation above the midpoint for the established salary
range.
Compensation for the Chief Executive Officer consists primarily of salary,
annual incentive and long-term incentive payments and minor perquisites which
amount to less than 10% of the Chief Executive Officer's salary and bonus. The
Board of Directors approved adoption of an annual incentive plan and long-term
incentive plan for senior executives of EIC as recommended by the Executive
Committee at its meeting of March 11, 1997 (the "Annual Incentive Plan" and the
"Long-Term Incentive Plan," respectively).
The purpose of the Annual Incentive Plan is to promote the best interests of the
Exchange while enhancing shareholder value of EIC and to promote the attainment
of significant business objectives for EIC and its affiliates by basing a
portion of the executives' compensation on the attainment of both premium growth
and underwriting profitability goals. The annual incentive awards will be paid
in cash only. Annual Incentive Plan target award levels, expressed as a
percentage of base salary, are established annually by the Compensation
Committee. Payments under the Annual Incentive Plan are based on a combination
of individual executive performance and the performance of EIC and its
affiliates.
The Long-Term Incentive Plan, which was approved by shareholders on April 29,
1997, for purposes of qualifying the plan as a performance-based plan under
Section 162(m) of the Code, is designed to maximize returns to shareholders by
linking executive compensation to the overall profitability of EIC and its
affiliates. Target award amounts, expressed as a percentage of base salary, are
determined by comparisons to peer companies and approved by the Compensation
Committee.
Performance factors applicable to the Company and its affiliates, such as
property and casualty insurance loss ratios, investment portfolio returns,
overall profitability, as well as other factors are considered in evaluating the
Chief Executive Officer's performance. Such performance factors were considered
in approving Mr. Milne's 2001 compensation. Compensation of the next three most
highly compensated individuals is determined by the Compensation Committee and
is based upon the factors and processes enumerated, i.e., a determination of a
salary range based upon market data and evaluation of the executive with respect
to the executive's job description and his or her position within the salary
range.
Compensation of the next highest paid executives (other than the Chief Executive
Officer and the next three highest paid executives) is based upon the Company's
established standard compensation policies and is not determined by the
Compensation Committee.
The Company's Executive Compensation Committee:
Robert C. Wilburn, Chairman
Samuel P. Black, III
J. Ralph Borneman, Jr.
Samuel P. Katz
20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of 1/31/02
(a) Shares beneficially owned directly or indirectly by all affiliates:
Name & Address Shares
of Beneficial Beneficially Percent of
Owner Owned Class
------------------ --------------- -----------
Erie Indemnity Company 2,043,900 (1) 21.6%(1)
100 Erie Insurance Place Direct
Erie, PA 16530
Erie Insurance Exchange 5,055,562 (1) 53.5%(1)
100 Erie Insurance Place Direct
Erie, PA 16530
(b) Shares beneficially owned directly or indirectly by all Directors and
Officers:
Name & Address Shares
of Beneficial Beneficially Percent of
Owner Owned Class
---------------- -------------- ----------
Samuel P. Black, III 132,397 1.40%
1091 Dutch Road
Fairview, PA 16415
J. Ralph Borneman 1,536 .02%
160 N. Funk Road
Boyertown, PA 19512
Susan Hirt Hagen 154,782 (3) 1.64%
5727 Grubb Rd.
Erie, PA 16506
F. William Hirt 167,034 1.77%
3270 Kingston Court
Erie, PA 16506
Stephen A. Milne 200 --
100 Culbertson Drive
Lake City, PA 16423
John M. Petersen 92,141 (4) .98%
124 Voyageur Dr.
Erie, PA 16505
Jan R. Van Gorder 75 --
6796 Manchester Beach Road
Fairview, PA 16415
21
(b) Shares beneficially owned directly or indirectly by all Directors and
Officers:
Name & Address Shares
of Beneficial Beneficially Percent of
Owner Owned Class
---------------- -------------- ----------
Robert C. Wilburn 500 --
P.O. Box 376
Blairsville, PA 15717
John J. Brinling, Jr. 1,260 .01%
5691 Culpepper Drive
Erie, PA 16506
Robert H. Dreyer 600 .01%
465 Hawthorne Trace
Fairview, PA 16415
Philip A. Garcia 1,275 .01%
786 Stockbridge Drive
Erie, PA 16505
Douglas F. Ziegler 570 --
378 Ridgeview Drive
Erie, PA 16505
Officers and directors
as a group (12 persons) 552,370(2) 5.85%(2)
(1) The Exchange is a reciprocal insurance exchange controlled by its
subscribers, each of whom has designated Erie Indemnity Company (EIC)
as such subscriber's attorney-in-fact for certain purposes, including
EIC's holding of Common Stock of the Company. There are two H.O. Hirt
Trusts, one for the benefit of F. William Hirt and one for the benefit
of Susan Hirt Hagen. Each of the H.O. Hirt Trusts is the record owner
of 1,170 shares of Class B Common Stock, or 38.11% of the outstanding
shares of EIC's Class B Common Stock. The trustees of the H.O. Hirt
Trusts are F. William Hirt, Susan Hirt Hagen and Banker's Trust
Company of New York. Mr. Hirt and Mrs. Hagen, who are brother and
sister, are each the beneficial owner of 1,170 shares of Class B
Common Stock held by the H.O. Hirt Trusts. An additional 13.4% of the
EIC voting stock is beneficially owned by Samuel P. Black, III.
(2) Includes direct and indirect beneficial ownership and shares owned by
and with spouses.
(3) Includes 300 shares held by Thomas B. Hagen, Mrs. Hagen's husband.
Mrs. Hagen disclaims beneficial ownership of these shares held by Mr.
Hagen.
(4) Includes 30,000 shares held by Gertrude E. Petersen, Mr. Petersen's
wife. Mr. Petersen disclaims beneficial ownership of these shares held
by Mrs. Petersen.
(c) There are no contractual arrangements known to the Company which may result
in a change in control of the Company.
22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors Borneman and Black are officers and principal shareholders of
insurance agencies which receive insurance commissions in the ordinary
course of business from Erie Family Life and its affiliates in accordance
with the companies' standard commission schedules and agents' contracts.
Such payments made in 2001 to the agencies for commissions written on
insurance policies from the property and casualty affiliated insurers and
Erie Family Life Insurance Company amounted to $3,761,503 and $517,923 for
the Borneman and the Black insurance agencies, respectively. Of these
amounts, the Company paid commissions of $162,456 and $7,501 to the
Borneman and the Black insurance agencies, respectively.
Director Borneman, in his capacity as an insurance agent, placed a worker's
compensation insurance policy covering employees of the Company with
Fireman's Fund Insurance Company. Although director Borneman has received
no compensation to date in connection with the placement of that policy, in
the future he may be entitled to receive a commission from Fireman's Fund
in accordance with Fireman's Fund's standard commission schedules and
agents' contracts for placing that insurance policy.
John M. Petersen, a director and former President and Chief Executive
Officer, and previous Chief Investment Officer of the Erie Insurance Group
of Companies, who retired as an employee of the Company on December 31,
1995, entered into a consulting arrangement with the Company effective
January 2, 1996. Under the terms of the arrangement, the Company engaged
Mr. Petersen as a consultant to furnish the Company, the Exchange, and EIC
and its pension trust, with investment services with respect to their
investments in common stocks. As compensation for services rendered by Mr.
Petersen, a fee of .15 of 1 percent, on an annualized basis, of the total
fair market value of the common stocks under management, is paid to Mr.
Petersen. The Company also pays for all necessary and reasonable expenses
related to Mr. Petersen's consulting services performed under this
arrangement. The compensation paid to Mr. Petersen under this arrangement
in 2001 by the Company, the Exchange, EIC, and the pension trust was
$93,632, $4,584,610, $117,956 and $135,724, respectively.
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following financial statements of the Company and the report
of independent certified public accountants are incorporated herein by
reference to pages 28 through 45 in the Company's annual report to
shareholders for the year ended December 31, 2001.
Independent Auditors' Report
Statements of Financial Position - December 31, 2001 and 2000
Statements of Operations for the years ended December 31, 2001,
2000 and 1999
Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
Statements of Shareholders' Equity for the years ended December
31, 2001, 2000 and 1999
Notes to Financial Statements
(2) The following financial statement schedules are included in this
report on FORM 10-K:
Page
Independent Auditors' Report on Schedules 28
Schedule I - Summary of Investments other than
Investments in Related Parties 29
Schedule III - Supplementary Insurance Information 30
Schedule IV - Reinsurance 32
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore, have been omitted.
(3) Exhibits:
Exhibit
Number Description of Exhibit
3.1* Amended and Restated By-laws of Registrant
10.1** 1997 Annual Incentive Plan of Erie Indemnity Company
10.2** Erie Indemnity Company Long-Term Incentive Plan
10.3** Employment Agreement effective December 16, 1997 by
and between Erie Indemnity Company and Stephen A. Milne
10.4** Employment Agreement effective December 16, 1997 by
and between Erie Indemnity Company and Jan R. Van Gorder
10.5** Employment Agreement effective December 16, 1997 by
and between Erie Indemnity Company and Philip A. Garcia
24
10.6** Employment Agreement effective December 16, 1997 by and
between Erie Indemnity Company and John J. Brinling, Jr.
10.7*** Employment Agreement effective June 30, 1999 by and
between Erie Indemnity Company and Jeffrey A. Ludrof
10.8*** Employment Agreement effective December 15, 1999 by and
between Erie Indemnity Company and Douglas F. Ziegler
10.9*** Addendum to Employment Agreement effective December 15,
1999 by and between Erie Indemnity Company and Stephen A.
Milne
10.10*** Addendum to Employment Agreement effective December 15,
1999 by and between Erie Indemnity Company and Jan R. Van
Gorder
10.11*** Addendum to Employment Agreement effective December 15,
1999 by and between Erie Indemnity Company and Philip A.
Garcia
10.12*** Addendum to Employment Agreement effective December 15,
1999 by and between Erie Indemnity Company and John J.
Brinling, Jr.
10.13*** Addendum to Employment Agreement effective December 15,
1999 by and between Erie Indemnity Company and Jeffrey A.
Ludrof
10.14**** Addendum to Employment Agreement effective December 15,
2000 by and between Erie Indemnity Company and Stephen A.
Milne
10.15**** Addendum to Employment Agreement effective December 15,
2000 by and between Erie Indemnity Company and Jan R. Van
Gorder
10.16**** Addendum to Employment Agreement effective December 15,
2000 by and between Erie Indemnity Company and Philip A.
Garcia
10.17**** Addendum to Employment Agreement effective December 15,
2000 by and between Erie Indemnity Company and John J.
Brinling, Jr.
10.18**** Addendum to Employment Agreement effective December 15,
2000 by and between Erie Indemnity Company and Jeffrey A.
Ludrof
10.19**** Addendum to Employment Agreement effective December 15,
2000 by and between Erie Indemnity Company and Douglas F.
Ziegler
10.20 Addendum to Employment Agreement effective December 12,
2001 by and between Erie Indemnity Company and Stephen A.
Milne
10.21 Addendum to Employment Agreement effective December 12,
2001 by and between Erie Indemnity Company and Jan R. Van
Gorder
10.22 Addendum to Employment Agreement effective December 12,
2001 by and between Erie Indemnity Company and Philip A.
Garcia
10.23 Addendum to Employment Agreement effective December 12,
2001 by and between Erie Indemnity Company and John J.
Brinling, Jr.
25
10.24 Addendum to Employment Agreement effective December 12,
2001 by and between Erie Indemnity Company and Jeffrey A.
Ludrof
10.25 Addendum to Employment Agreement effective December 12,
2001 by and between Erie Indemnity Company and Douglas F.
Ziegler
10.26 Summary of termination benefits provided Stephen A. Milne
upon voluntary termination from active employment on
January 18, 2002
13 2001 Annual Report to Shareholders. Reference is made to
the Annual Report furnished to the Commission, herewith.
99.1**** Audit Committee Charter
- ------------------
* Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 1998 that was filed with the Commission on March 9, 1999.
** Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 1997 that was filed with the Commission on March 11,
1998.
*** Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 1999 that was filed with the Commission on March 28,
2000.
**** Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 2000 that was filed with the Commission on March 19,
2001.
All exhibits for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore,
have been omitted.
(c) Reports on Form 8-K.
On December 12, 2001 the Company filed a report on Form 8-K, reporting
under Item 5, that the Company would recognize charges for realized
capital losses related to the sale of certain impaired securities, as
well as, realized charges for other-than-temporary impairments of
equity and debt securities held in the Company's available-for-sale
investment portfolios.
26
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 5, 2002 ERIE FAMILY LIFE INSURANCE COMPANY
(Registrant)
Principal Officers
/s/ Jan R. Van Gorder
Jan R. Van Gorder, Acting President and CEO, Executive Vice President,
Secretary & General Counsel
/s/ Philip A. Garcia
Philip A. Garcia, Executive Vice President & CFO
/s/ Timothy G. NeCastro
Timothy G. NeCastro, Senior Vice President & Controller
Board of Directors
/s/ Samuel P. Black, III /s/ Claude C. Lilly, III
Samuel P. Black, III Claude C. Lilly, III
/s/ J. Ralph Borneman, Jr. /s/ Stephen A. Milne
J. Ralph Borneman, Jr. Stephen A. Milne
/s/ Patricia Garrison-Corbin /s/ Henry N. Nassau
Patricia Garrison-Corbin Henry N. Nassau
/s/ Susan Hirt Hagen /s/ John M. Petersen
Susan Hirt Hagen John M. Petersen
/s/ F. William Hirt /s/ Jan R. Van Gorder
F. William Hirt Jan R. Van Gorder
/s/ Samuel P. Katz /s/ Robert C. Wilburn
Samuel P. Katz Robert C. Wilburn
27
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Shareholders
Erie Family Life Insurance Company
We have audited the Statements of Financial Position of Erie Family Life
Insurance Company (Company) as of December 31, 2001 and 2000 and the related
Statements of Operations, Shareholders' Equity and Cash Flows for each of the
three years in the period ended December 31, 2001, as contained in the 2001
annual report, incorporated by reference in the annual report on Form 10-K for
the year ended December 31, 2001. In connection with our audits of the financial
statements, we also have audited the financial statement schedules, as listed in
the accompanying index. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Erie Family Life Insurance
Company as of December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2001
in conformity with accounting principles generally accepted in the United States
of America. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/S/ Malin, Bergquist & Company, LLP
Malin, Bergquist & Company, LLP
Erie, Pennsylvania
February 7, 2002
28
SCHEDULE I - SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2001
Cost or Amount at which
Amortized Market Shown in the
Type of Investment Cost Value Balance Sheet
- ----------------------------------------------------------------------------------------------------
Fixed Maturities Available-for-sale
U. S. Treasuries $ 6,386,928 $ 6,403,505 $ 6,403,505
U. S. Government Agency 19,851,579 20,118,288 20,118,288
Special Revenue 8,028,160 8,380,356 8,380,356
Public Utilities 71,906,370 72,783,644 72,783,644
U. S. Banks, Trusts, and Insurance Companies 136,259,287 139,101,759 139,101,759
U. S. Industrial and Miscellaneous 419,325,193 425,179,178 425,179,178
Foreign Governments - Agency 2,995,557 3,118,200 3,118,200
Foreign Banks, Trusts, and Insurance Companies 8,955,173 9,595,590 9,595,590
Foreign Industrial and Miscellaneous 44,791,874 45,589,139 45,589,139
- ----------------------------------------------------------------------------------------------------
Total Fixed Maturities available-for-sale $ 718,500,121 $ 730,269,659 $ 730,269,659
- ----------------------------------------------------------------------------------------------------
Equity Securities
Common Stock:
U. S. Banks, Trusts and Insurance Companies $ 5,331,763 $ 6,123,650 $ 6,123,650
U. S. Industrial and Miscellaneous 30,604,952 46,189,144 46,189,144
Public Utilities 416,500 360,000 360,000
Non-Redeemable Preferred Stocks:
U. S. Industrial and Miscellaneous 8,603,423 9,315,450 9,315,450
Foreign Banks, Trusts and Insurance Companies 37,568,606 37,228,024 37,228,024
Foreign Industrial and Miscellaneous 4,232,560 4,458,800 4,458,800
- ----------------------------------------------------------------------------------------------------
Total Equity Securities $ 86,757,804 $ 103,675,068 $ 103,675,068
- ----------------------------------------------------------------------------------------------------
Real Estate
Investment Property $ 1,292,872 $ 1,292,872 $ 1,292,872
Policy Loans 8,878,949 8,878,949 8,878,949
Mortgage Loans 7,357,362 7,357,362 7,357,362
Limited Partnerships 18,690,970 18,248,709 18,248,709
- ----------------------------------------------------------------------------------------------------
Total Investments $ 841,478,078 $ 869,722,619 $ 869,722,619
- ----------------------------------------------------------------------------------------------------
29
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
At December 31,
------------------------------------------------------------
Deferred Future
Policy Policy Other
Acquisition Benefits & Unearned Policy
Segment Costs Deposits Premium Claims
- --------------------------------------------------------------------------------------------
2001
Ordinary Life Insurance $ 82,422,633 $ 205,266,500 $ 211,571 $ 1,728,863
Accident & Health 0 38,875 0 0
Group Life & Other 0 2,532,238 0 221,000
Annuities 9,592,286 636,849,508 0 0
Corporate 0 0 0 0
- --------------------------------------------------------------------------------------------
Total $ 92,014,919 $ 844,687,121 $ 211,571 $ 1,949,863
- --------------------------------------------------------------------------------------------
2000
Ordinary Life Insurance $ 76,186,624 $ 182,496,788 $ 133,629 $ 2,282,586
Group Life & Other 0 2,125,073 0 191,000
Annuities 8,536,549 584,174,301 0 0
Corporate 0 0 0 0
- --------------------------------------------------------------------------------------------
Total $ 84,723,173 $ 768,796,162 $ 133,629 $ 2,473,586
- --------------------------------------------------------------------------------------------
1999
Ordinary Life Insurance $ 68,227,117 $ 163,615,744 $ 152,484 $ 1,095,052
Group Life & Other 0 1,934,223 0 209,500
Annuities 9,361,203 569,218,451 0 0
Corporate 0 0 0 0
- --------------------------------------------------------------------------------------------
Total $ 77,588,320 $ 734,768,418 $ 152,484 $ 1,304,552
- --------------------------------------------------------------------------------------------
30
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION (CONTINUED)
For the Years Ended December 31,
-----------------------------------------------------------------------------------
Amortization
Net Life & of Deferred Other
Policy Investment Annuity Acquisition Operating
Segment Revenues (a) Income Benefits Costs Expenses
- ----------------------------------------------------------------------------------------------------------------
2001
Ordinary Life Insurance $ 43,693,034 $ 13,500,140 $ 25,044,662 $ 4,617,637 $ 14,142,436
Accident & Health 35,208 1,378 20,944 0 ( 13,130)
Group Life & Other 2,759,826 160,961 3,245,753 0 260,457
Annuities 2,712 42,318,132 35,209,692 1,200,425 1,597,481
Corporate 0 5,200,665 0 0 0
- ----------------------------------------------------------------------------------------------------------------
Total $ 46,490,780 $ 61,181,276 $ 63,521,051 $ 5,818,062 $ 15,987,244
- ----------------------------------------------------------------------------------------------------------------
2000
Ordinary Life Insurance $ 41,974,521 $ 11,635,149 $ 23,356,604 $ 3,391,694 $ 11,684,234
Group Life & Other 2,560,180 134,268 958,087 0 255,700
Annuities 2,023 38,255,613 33,659,401 1,752,845 1,490,971
Corporate 0 9,451,007 0 0 0
- ----------------------------------------------------------------------------------------------------------------
Total $ 44,536,724 $ 59,476,037 $ 57,974,092 $ 5,144,539 $ 13,430,905
- ----------------------------------------------------------------------------------------------------------------
1999
Ordinary Life Insurance $ 39,051,763 $ 10,237,994 $ 19,154,171 $ 3,321,111 $ 8,478,603
Group Life & Other 2,629,179 118,090 1,907,370 0 652,474
Annuities 4,693 36,111,734 31,178,605 1,491,468 1,813,700
Corporate 0 8,812,224 0 0 0
- ----------------------------------------------------------------------------------------------------------------
Total $ 41,685,635 $ 55,280,042 $ 52,240,146 $ 4,812,579 $ 10,944,777
- ----------------------------------------------------------------------------------------------------------------
(a) Net of reinsurance ceded
31
SCHEDULE IV - REINSURANCE
Percentage
Ceded to Assumed of Amount
Gross Other From Other Net Assumed
Amount Companies Companies (1) Amount to Net
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 2001
Life Insurance in force $ 18,903,134,000 $ 4,112,150,000 $ 0 $ 14,790,984,000 0.00%
Premiums for the year
Life Insurance 51,644,125 7,951,091 0 43,693,034 0.00%
Annuities 2,712 0 0 2,712 0.00%
Accident and Health 142,327 107,119 0 35,208 0.00%
Group Life & Other 2,759,826 0 0 2,759,826 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
Total Premiums $ 54,548,990 $ 8,058,210 $ 0 $ 46,490,780 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 2000
Life Insurance in force $ 16,509,613,000 $ 2,591,318,000 $ 0 $ 13,918,295,000 0.00%
Premiums for the year
Life Insurance 46,683,551 4,710,619 0 41,972,932 0.00%
Annuities 2,023 0 0 2,023 0.00%
Accident and Health 2,335 1,735 0 600 0.00%
Group Life & Other 2,561,169 0 0 2,561,169 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
Total Premiums $ 49,249,078 $ 4,712,354 $ 0 $ 44,536,724 0.00%
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 1999
Life Insurance in force $ 14,424,095,000 $ 1,425,913,000 $ 33,412,000 $ 13,031,594,000 0.26%
Premiums for the year
Life Insurance 42,972,242 3,920,479 0 39,051,763 0.00%
Annuities 4,693 0 0 4,693 0.00%
Accident and Health 0 0 0 0 0.00%
Group Life & Other 2,512,912 0 116,267 2,629,179 4.42%
- ----------------------------------------------------------------------------------------------------------------------------
Total Premiums $ 45,489,847 $ 3,920,479 $ 116,267 $ 41,685,635 0.28%
- ----------------------------------------------------------------------------------------------------------------------------
(1) - The assumed business in prior years related solely to life insurance assumed from the Pennsylvania Employees'
Group Life Insurance (PEGLI) pool. During 2000, the state recaptured this assumed business, thus, the Company
no longer participates in the pool insuring the PEGLI.
32
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
3.1* Amended and Restated By-laws of Registrant
10.1** 1997 Annual Incentive Plan of Erie Indemnity Company
10.2** Erie Indemnity Company Long-Term Incentive Plan
10.3** Employment Agreement effective December 16, 1997 by and
between Erie Indemnity Company and Stephen A. Milne
10.4** Employment Agreement effective December 16, 1997 by and
between Erie Indemnity Company and Jan R. Van Gorder
10.5** Employment Agreement effective December 16, 1997 by and
between Erie Indemnity Company and Philip A. Garcia
10.6** Employment Agreement effective December 16, 1997 by and
between Erie Indemnity Company and John J. Brinling, Jr.
10.7*** Employment Agreement effective June 30, 1999 by and
between Erie Indemnity Company and Jeffrey A. Ludrof
10.8*** Employment Agreement effective December 15, 1999 by and
between Erie Indemnity Company and Douglas F. Ziegler
10.9*** Addendum to Employment Agreement effective December 15, 1999
by and between Erie Indemnity Company and Stephen A. Milne
10.10*** Addendum to Employment Agreement effective December 15, 1999
by and between Erie Indemnity Company and Jan R. Van Gorder
10.11*** Addendum to Employment Agreement effective December 15, 1999
by and between Erie Indemnity Company and Philip A. Garcia
10.12*** Addendum to Employment Agreement effective December 15, 1999
by and between Erie Indemnity Company and John J. Brinling, Jr.
10.13*** Addendum to Employment Agreement effective December 15, 1999
by and between Erie Indemnity Company and Jeffrey A. Ludrof
10.14**** Addendum to Employment Agreement effective December 15, 2000
by and between Erie Indemnity Company and Stephen A. Milne
10.15**** Addendum to Employment Agreement effective December 15, 2000
by and between Erie Indemnity Company and Jan R. Van Gorder
10.16**** Addendum to Employment Agreement effective December 15, 2000
by and between Erie Indemnity Company and Philip A. Garcia
33
Sequentially
Exhibit Numbered
Number Description of Exhibit Page
10.17**** Addendum to Employment Agreement effective December 15, 2000
by and between Erie Indemnity Company and John J. Brinling, Jr.
10.18**** Addendum to Employment Agreement effective December 15, 2000
by and between Erie Indemnity Company and Jeffrey A. Ludrof
10.19**** Addendum to Employment Agreement effective December 15, 2000
by and between Erie Indemnity Company and Douglas F. Ziegler
10.20 Addendum to Employment Agreement effective December 12, 2001 35
by and between Erie Indemnity Company and Stephen A. Milne
10.21 Addendum to Employment Agreement effective December 12, 2001 36
by and between Erie Indemnity Company and Jan R. Van Gorder
10.22 Addendum to Employment Agreement effective December 12, 2001 37
by and between Erie Indemnity Company and Philip A. Garcia
10.23 Addendum to Employment Agreement effective December 12, 2001 38
by and between Erie Indemnity Company and John J. Brinling, Jr.
10.24 Addendum to Employment Agreement effective December 12, 2001 39
by and between Erie Indemnity Company and Jeffrey A. Ludrof
10.25 Addendum to Employment Agreement effective December 12, 2001 40
by and between Erie Indemnity Company and Douglas F. Ziegler
10.26 Summary of termination benefits provided Stephen A. Milne upon 41
voluntary termination from active employment on January 18, 2002
13 2001 Annual Report to Shareholders. Reference is made to the 42
Annual Report furnished to the Commission, herewith.
99.1**** Audit Committee Charter
* Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 1998 that was filed with the Commission on March 9, 1999.
** Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 1997 that was filed with the Commission on March 11,
1998.
*** Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 1999 that was filed with the Commission on March 28,
2000.
**** Such exhibit is incorporated by reference to the like titled exhibit
in the Registrant's Form 10-K Annual Report for the year ended
December 31, 2000 that was filed with the Commission on March 19,
2001.
34