##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 2-39458
 ERIE FAMILY LIFE INSURANCE COMPANY 
 Pennsylvania
    
    25-1186315(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 100 Erie Insurance Place, Erie, Pennsylvania
    
    16530(Address of principal executive offices)
    
    (Zip code)
 (814) 870-2000
    
  o þ
  o þ
  þ o
 o
  o o þ
  o þ




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##### Table of Contents



INDEX
 ITEM NUMBER AND CAPTION
 PAGEPart IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    7Item 1B. Unresolved Staff Comments
    
    
    11Item 2. Properties
    
    
    12Item 3. Legal Proceedings
    
    
    12Item 4. Submission of Matters to a Vote of Security Holders
    
    
    13Part IIItem 5. Market for the Registrants Common Equity, Related Shareholder Matters
and Issuer Repurchases of Equity Securities
    
    
    14Item 6. Selected Financial Data
    
    
    15Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    16Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 8. Financial Statements and Supplementary Data
    
    
    35Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
    
    
    67Item 9A. Controls and Procedures
    
    
    67Item 9B. Other Information
    
    
    67Part IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    68Item 11. Executive Compensation
    
    
    73Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    83Item 13. Certain Relationships and Related Transactions
    
    
    84Item 14. Principal Accountant Fees and Services
    
    
    85Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    88Exhibit 31.1
    
    
    96Exhibit 31.2
    
    
    97Exhibit 32.1
    
    
    98
 2




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PART I
 
 ITEM 1. BUSINESS
    Products
   ERIE Target Term
    
    
    90
    %
    
    (first dollar quota share)ERIE Flagship Term Plus
    
    
    75
    %
    
    (first dollar quota share)ERIE Flagship Term and ERIE Flagship Term2
    
    
    50
    %
    
    (first dollar quota share)
    3




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Accounting and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments.
    For the year ended December 31(in thousands)2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Universal Life Deposits
    
    $
    12,229
    
    
    $
    12,374
    
    
    $
    13,326
    
    
    $
    12,176
    
    
    $
    12,238Annuity Deposits
    
    
    84,430
    
    
    
    78,572
    
    
    
    144,202
    
    
    
    175,509
    
    
    
    69,754$
    96,659
    
    
    $
    90,946
    
    
    $
    157,528
    
    
    $
    187,685
    
    
    $
    81,992
 Marketing
  4




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Competition
  Insurance Liabilities
  Government Regulation
    5




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##### Table of Contents



Ratio of Total Adjusted Capital toNAIC Required
    
    Authorized Control Level Risk-BasedRegulatory Event
    
    Capital (Less Than or Equal to)Company action level
    
    2.0 (or 2.5 with negative trends)Regulatory action level
    
    1.5Authorized control level
    
    1.0Mandatory control level
    
    0.7
  Employees
  Website Access to Company Reports
 http://www.erieinsurance.com
  6




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##### Table of Contents



ITEM 1A. RISK FACTORS
  The Company operates in a mature, highly competitive industry where enterprise size is important,
which could limit its ability to grow and maintain profitable operations.
    
    
    to recruit, retain and incent independent agents to market its insurance and
investment products
    
    to develop competitive and profitable products
    
    to maintain low unit costs
    
    to maintain strong ratings from rating agencies
  A downgrade in the Companys financial strength ratings could adversely affect its ability to
compete.
  7




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The Companys profitability may be negatively affected should actual experience differ from
actuarial assumptions and estimates.
   The Companys reinsurers could default on their obligations to the Company. In addition, the
Companys reinsurers could significantly alter terms of our reinsurance arrangements, including
canceling the arrangement.
     Because the Company is subject to market risk, primarily as a result of interest rate and credit
risk inherent in the fixed maturity portfolio, changes in interest rates and declines in credit
quality may have adverse effects on the financial results and condition of the Company
  8




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Interest-rate fluctuations could negatively affect sales and profitability of spread based
products.
   The Company could be forced to sell investments at a loss to cover policyholder withdrawals and
surrenders, primarily from the Companys annuity and universal life products.
  9




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Changes in estimates of profitability on interest-sensitive products may have an adverse effect on
results through increased amortization of DAC.
  The Companys ability to maintain low unit costs is dependent upon the level of new sales and
persistency of existing business.
  If the Erie Insurance Group (Group) is
unable to keep pace with the rapidly developing technological advancements in the insurance
industry or to replace its legacy policy administration systems, the ability of the Group to compete effectively could be impaired.
  Insurance companies are highly regulated and subject to numerous legal restrictions and
regulations.
   Changes to tax law or interpretations of existing tax law could adversely affect the Company and
its ability to compete with non-insurance products or reduce the demand for certain insurance
products.
  10




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##### Table of Contents



Insurance companies are frequently
named as defendants of or are the possible targets of lawsuits,
including class action litigation, which could result in substantial judgments or verdicts.
   The Companys ability to pay
dividends is limited.
  
    
    10% of its statutory surplus as regards policyholders as shown on its last
annual statement on file with the commissioner, or
    
    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.
  The Company is exposed to the risks of natural disasters, malicious and terrorist acts that could
adversely affect the Companys operations.
  
 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  11




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ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
     
 12




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  13




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PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER
REPURCHASES OF EQUITY SECURITIES
   First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2005High
    
    $
    33.00
    
    
    $
    32.00
    
    
    $
    31.74
    
    
    $
    29.00Low
    
    
    31.35
    
    
    
    31.55
    
    
    
    28.75
    
    
    
    27.50Dividends declared
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.44
    
    
    $
    0.002004High
    
    $
    33.50
    
    
    $
    36.00
    
    
    $
    35.00
    
    
    $
    32.00Low
    
    
    29.00
    
    
    
    31.00
    
    
    
    31.35
    
    
    
    31.35Dividends declared
    
    $
    0.22
    
    
    $
    0.22
    
    
    $
    0.44
    
    
    $
    0.00
  14




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 Years ended December 312005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(amounts in thousands, except per share data)Operating dataTotal net policy revenue
    
    $
    59,492
    
    
    $
    56,548
    
    
    $
    55,932
    
    
    $
    51,129
    
    
    $
    46,491Net investment and other income
    
    
    89,067
    
    
    
    83,881
    
    
    
    80,865
    
    
    
    71,940
    
    
    
    63,844Net realized gains (losses) on
investments
    
    
    317
    
    
    
    9,404
    
    
    
    13,176
    
    
    
    ( 9,610
    )
    
    
    ( 19,646
    )Total revenues
    
    
    148,876
    
    
    
    149,833
    
    
    
    149,973
    
    
    
    113,459
    
    
    
    90,689Total benefits and expenses
    
    
    124,561
    
    
    
    104,541
    
    
    
    102,668
    
    
    
    97,238
    
    
    
    85,789Income before income taxes
    
    
    24,315
    
    
    
    45,292
    
    
    
    47,305
    
    
    
    16,221
    
    
    
    4,900Provision for federal income taxes
    
    
    7,776
    
    
    
    15,660
    
    
    
    14,818
    
    
    
    5,636
    
    
    
    1,698Net income
    
    $
    16,539
    
    
    $
    29,632
    
    
    $
    32,487
    
    
    $
    10,585
    
    
    $
    3,202Net income per share
    
    $
    1.75
    
    
    $
    3.14
    
    
    $
    3.44
    
    
    $
    1.12
    
    
    $
    0.34Financial positionTotal assets
    
    $
    1,776,360
    
    
    $
    1,661,440
    
    
    $
    1,629,563
    
    
    $
    1,378,451
    
    
    $
    1,161,846Notes payable to affiliates
    
    
    45,000
    
    
    
    40,000
    
    
    
    40,000
    
    
    
    15,000
    
    
    
    15,000Shareholders equity
    
    
    255,970
    
    
    
    271,528
    
    
    
    255,563
    
    
    
    217,188
    
    
    
    200,822Book value per share
    
    
    27.09
    
    
    
    28.73
    
    
    
    27.04
    
    
    
    22.98
    
    
    
    21.25Dividends declared per share
    
    
    0.88
    
    
    
    0.88
    
    
    
    0.84
    
    
    
    0.84
    
    
    
    0.78Average number of shares outstanding
    
    
    9,450
    
    
    
    9,450
    
    
    
    9,450
    
    
    
    9,450
    
    
    
    9,450
 15




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
 General
  Financial overview
   Changes in
    
    
    Corrections ofEstimates
    
    
    Errors
    
    
    Total(dollars in thousands, except per share data)Valuation system conversion (FAS 60)DAC amortization
    
    ($
    1,050
    )
    
    $
    0
    
    
    ($
    1,050
    )Future life policy benefits
    
    
    (2,523
    )
    
    
    0
    
    
    
    (2,523
    )Valuation system conversion (FAS 97)DAC amortization
    
    
    (948
    )
    
    
    1,978
    
    
    
    1,030Net impact from valuation system
conversions
    
    
    (4,521
    )
    
    
    1,978
    
    
    
    (2,543
    )Reinsurance reserve credits
    
    
    0
    
    
    
    (677
    )
    
    
    (677
    )Limited partnerships
    
    
    0
    
    
    
    206
    
    
    
    206Total (decrease) increase in pre-tax income
    
    ($
    4,521
    )
    
    $
    1,507
    
    
    ($
    3,014
    )Net (loss) income per share
    
    ($
    0.48
    )
    
    $
    0.16
    
    
    ($
    0.32
    )
 16




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Financial stability
  
    
    Developing and distributing products with competitive pricing and features;
    
    Pricing insurance products at a level enabling the Company to earn a margin over the cost of providing benefits;
    
    Controlling expenses of acquiring policyholders and administering insurance products;
    
    Mortality and morbidity experience on individual and group life insurance and annuity products;
    
    Persistency experience to enable the recovery of the costs of acquiring new business over the lives of the contracts;
    
    Returns on investments, including maintaining interest rate spreads over the amounts credited to deposit funds.
  Critical Accounting Estimates
  Investment valuation
   17




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Insurance liabilities
  Accounting and Reporting
by Insurance Enterprises Accounting and Reporting by
Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from
the Sale of Investments
     18




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Deferred policy acquisition costs (DAC) asset
     New Accounting Standards
  19




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##### Table of Contents



Results of Operations
 Revenues
 Analysis of policy revenue
  2005
    
    
    2004
    
    
    2003(dollars in thousands)Direct premiums
    
    $
    83,940
    
    
    $
    79,035
    
    
    $
    72,947Ceded premiums
    
    
    24,448
    
    
    
    22,487
    
    
    
    17,015Net premiums(1)
    
    $
    59,492
    
    
    $
    56,548
    
    
    $
    55,932
   (1)
    
    Net premiums include primarily traditional life, universal life and
group life insurance premiums.   2005
    
    
    2004
    
    
    2003(dollars in thousands)NewDirect premiums
    
    $
    9,031
    
    
    $
    9,986
    
    
    $
    10,729Ceded premiums
    
    
    (4,440
    )
    
    
    (5,731
    )
    
    
    (5,465
    )Net premiums
    
    $
    4,591
    
    
    $
    4,255
    
    
    $
    5,264RenewalDirect premiums
    
    $
    55,511
    
    
    $
    49,433
    
    
    $
    42,499Ceded premiums
    
    
    (18,209
    )
    
    
    (15,078
    )
    
    
    (9,960
    )Net premiums
    
    $
    37,302
    
    
    $
    34,355
    
    
    $
    32,539TotalDirect premiums
    
    $
    64,542
    
    
    $
    59,419
    
    
    $
    53,228Ceded premiums
    
    
    (22,649
    )
    
    
    (20,809
    )
    
    
    (15,425
    )Net premiums
    
    $
    41,893
    
    
    $
    38,610
    
    
    $
    37,803
  20




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Analysis of investment-related income
    21




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Benefits and expenses
 Net death benefits
  Interest expense
  Annuity
    
    Universal lifedeposits
    
    depositsJanuary 1, 2004July 31, 2004
    
    3.00% 4.70%
    
    4.25% 5.00%August 1, 2004August 14, 2005
    
    3.50 4.70
    
    4.25 5.00August 15, 2005November 13, 2005
    
    3.50 6.00
    
    4.25 5.00November 14, 2005December 31, 2005
    
    3.50 6.25
    
    4.25 5.00
 Surrender and other benefits
  DAC amortization
  22




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2005
    
    
    2004
    
    
    2003(dollars in thousands)Traditional life
    
    (FAS 60)
    
    $
    5,799
    
    
    $
    4,601
    
    
    $
    3,823Universal life
    
    (FAS 97)
    
    
    2,416
    
    
    
    (6,627
    )
    
    
    1,772Annuities
    
    (FAS 97)
    
    
    410
    
    
    
    2,839
    
    
    
    1,882$
    8,625
    
    
    $
    813
    
    
    $
    7,477
    Future life policy benefits
  2005
    
    
    2004
    
    
    2003(dollars in thousands)Increase in future life policy benefits
    
    $
    24,016
    
    
    $
    15,927
    
    
    $
    13,846Reinsurance reserve credits
    
    
    (10,945
    )
    
    
    (8,662
    )
    
    
    (6,635
    )Net increase in future life policy benefits
    
    $
    13,071
    
    
    $
    7,265
    
    
    $
    7,211
  23




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Analysis of other expenses
 Commissions
   General expenses
  24




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Federal income taxes
  Financial Condition
 Investments
    Two years endedDecember 31, 2005(Pre-tax annualized returns)
    (1)Erie Family Life Insurance Company indices:Fixed maturities
    
    4.32%Preferred stock
    
    6.37%Other indices:Lehman Brothers U.S. Aggregate
    
    3.38%
   (1)
    
    Includes investment income, realized and unrealized gains and losses. Fixed maturities
   25




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Equity securities
  Reserve liabilities
  Liquidity and Capital Resources
 General considerations and analysis
    26




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##### Table of Contents



2005
    
    
    2004Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of Total(dollars in thousands)Not subject to discretionary
withdrawal provisions
    
    $
    282,570
    
    
    
    27.4
    %
    
    $
    280,243
    
    
    
    28.5
    %Subject to discretionary withdrawal,
with adjustment:With market value adjustment
    
    
    32,626
    
    
    
    3.2
    
    
    
    30,226
    
    
    
    3.1At contract value, less surrender
charge of 5% or more
    
    
    60,970
    
    
    
    6.0
    
    
    
    108,567
    
    
    
    11.0Subtotal
    
    
    376,166
    
    
    
    36.6
    
    
    
    419,036
    
    
    
    42.6Subject to discretionary withdrawal
at contract value with surrender
charges of less than 5%
    
    
    645,276
    
    
    
    63.4
    
    
    
    565,834
    
    
    
    57.4Total annuity reserves and
deposit liabilities
    
    $
    1,021,442
    
    
    
    100.0
    %
    
    $
    984,870
    
    
    
    100.0
    %
  27




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##### Table of Contents



Contractual obligations
  Payments Due By Period(dollars in thousands)Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    ThereafterFixed obligations:Limited partnership commitments
    
    $
    22,510
    
    
    $
    6,093
    
    
    $
    13,987
    
    
    $
    2,430
    
    
    $
    0Principal and interest on
surplus notes
    
    
    91,815
    
    
    
    2,927
    
    
    
    8,781
    
    
    
    8,781
    
    
    
    71,326Fixed contractual obligations
    
    
    114,325
    
    
    
    9,020
    
    
    
    22,768
    
    
    
    11,211
    
    
    
    71,326Gross long-term liabilities (1)
    
    
    4,275,568
    
    
    
    139,880
    
    
    
    309,510
    
    
    
    351,661
    
    
    
    3,474,517Gross contractual obligations (2)
    
    $
    4,389,893
    
    
    $
    148,900
    
    
    $
    332,278
    
    
    $
    362,872
    
    
    $
    3,545,843
   (1)
    
    Contractual obligations on gross long-term liabilities represent estimated benefit payments
from insurance policies and annuity contracts including claims currently payable. Actual
obligations in any single year will vary based on actual mortality, morbidity, lapse, and
withdrawal experience. The sum of these obligations exceeds the liability on the balance sheet
of $1,352,653 due to expected future premiums, deposits and investment income that, along with
invested assets backing the liabilities, will be used to fund these obligations.(2)
    
    Gross contractual obligations net of estimated reinsurance recoverables are as follows: Payments Due By Period(dollars in thousands)Total
    
    

Less than 1 year
    
    

1-3 years
    
    

3-5 years
    
    
    ThereafterGross contractual obligations
    
    $
    4,389,893
    
    
    $
    148,900
    
    
    $
    332,278
    
    
    $
    362,872
    
    
    $
    3,545,843Estimated reinsurance recoverables (a)
    
    
    247,907
    
    
    
    11,636
    
    
    
    19,128
    
    
    
    20,556
    
    
    
    196,587Net contractual obligations
    
    $
    4,141,986
    
    
    $
    137,264
    
    
    $
    313,150
    
    
    $
    342,316
    
    
    $
    3,349,256
   (a)
    
    Includes estimated amounts recoverable from reinsurers on long-term liabilities
that are subject to the credit worthiness of the reinsurer. Off-balance sheet arrangements
  Regulatory considerations
  28




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Significant Transactions with Related Parties
        29




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Factors That May Affect Future Results
 Products with interest rate guarantees
   Initial
    
    
    
    CurrentGuaranteed
    
    Policy
    
    Guaranteed
    
    DepositInterest Rate
    
    Years
    
    Interest Rate
    

Liabilities(in thousands)4.5
    %
    
    1-5
    
    
    4.5
    %
    
    
    $
    237,3304.5
    %
    
    6-10
    
    
    4.0
    %
    
    
    
    108,6424.5
    %
    
    Over 10
    
    
    3.5
    %
    
    
    
    198,0813.0
    %
    
    All Years
    
    
    3.0
    %
    
    
    
    54,3481.5
    %
    
    All Years
    
    
    1.5
    %
    
    
    
    49,806Total
    
    
    
    
    
    
    
    
    $
    648,207
   Market conditions for competing products
  30




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Financial ratings
    Information
technology development
     31




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##### Table of Contents



Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:
 32




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest rate risk
   December 31, 2005(dollars in thousands)Principal
    
    
    Weighted-averagecash flows
    
    
    interest rateFixed maturities:2006
    
    
    22,879
    
    
    5.5%2007
    
    
    43,452
    
    
    5.52008
    
    
    45,596
    
    
    5.32009
    
    
    39,500
    
    
    5.92010
    
    
    46,500
    
    
    6.0Thereafter
    
    
    1,154,787
    
    
    5.9Total
    
    $
    1,352,714Market value
    
    $
    1,378,067
 December 31, 2004(dollars in thousands)Principal
    
    
    Weighted-averagecash flows
    
    
    interest rateFixed maturities:2005
    
    $
    32,200
    
    
    5.8%2006
    
    
    32,917
    
    
    5.02007
    
    
    56,000
    
    
    5.22008
    
    
    46,081
    
    
    5.42009
    
    
    43,900
    
    
    5.8Thereafter
    
    
    1,090,527
    
    
    6.0Total
    
    $
    1,301,625Market value
    
    $
    1,366,898
   33




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Fixed maturity interest rate sensitivity analysis
 As of December 31(dollars in thousands)2005
    
    
    2004Current market value
    
    
    
    
    
    $
    1,378,067
    
    
    $
    1,366,898Change in market value (1)
    
    
    
    
    
    
    (72,081
    )
    
    
    (75,587
    )Pro forma market value
    
    
    
    
    
    $
    1,305,986
    
    
    $
    1,291,311Modified duration (2)
    
    
    
    
    
    
    5.4
    
    
    
    5.7
   (1)
    
    The change in market value is calculated by taking the negative of the product obtained by
multiplying (i) modified duration by (ii) change in interest rates by (iii) market value of
the portfolio.(2)
    
    Modified duration is a measure of a portfolios sensitivity to changes in interest rates. It
is interpreted as the approximate percentage change in the market value of a portfolio for a
100 basis point change in interest rates.  Credit risk
   Equity price risk
  34




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 REPORT OF MANAGEMENT
    /s/
    
    Jeffrey A. LudrofJeffrey A. LudrofPresident and Chief Executive OfficerMarch 6, 2006/s/
    
    Philip A. GarciaPhilip A. GarciaExecutive Vice President and Chief Financial OfficerMarch 6, 2006/s/
    
    Timothy G. NeCastroTimothy G. NeCastroSenior Vice President and ControllerMarch 6, 2006
 35




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##### Table of Contents



36




---



##### Table of Contents



(dollars in thousands, except per share data)
 Years ended December 312005
    
    
    2004
    
    
    2003RevenuesNet policy revenue:Life premiums
    
    $
    55,963
    
    
    $
    53,184
    
    
    $
    52,045Group life and other premiums
    
    
    3,529
    
    
    
    3,364
    
    
    
    3,887Total net policy revenue
    
    
    59,492
    
    
    
    56,548
    
    
    
    55,932Net investment income
    
    
    84,875
    
    
    
    80,624
    
    
    
    78,725Net realized gains on investments
    
    
    317
    
    
    
    9,404
    
    
    
    13,176Equity in earnings of limited partnerships
    
    
    3,540
    
    
    
    2,116
    
    
    
    1,296Other income
    
    
    652
    
    
    
    1,141
    
    
    
    844Total revenues
    
    
    148,876
    
    
    
    149,833
    
    
    
    149,973Benefits and expensesDeath benefits
    
    
    19,333
    
    
    
    17,558
    
    
    
    15,197Interest on annuity deposits
    
    
    44,957
    
    
    
    44,276
    
    
    
    42,178Interest on universal life deposits
    
    
    7,631
    
    
    
    7,355
    
    
    
    6,959Interest on surplus notes and other affiliate interest
    
    
    2,845
    
    
    
    2,855
    
    
    
    1,759Surrender and other benefits
    
    
    1,415
    
    
    
    3,267
    
    
    
    1,263Increase in future life policy benefits
    
    
    13,071
    
    
    
    7,265
    
    
    
    7,211Amortization of deferred policy acquisition costs
    
    
    8,625
    
    
    
    813
    
    
    
    7,477Commissions
    
    
    1,839
    
    
    
    1,221
    
    
    
    2,679General expenses
    
    
    21,050
    
    
    
    16,311
    
    
    
    14,881Taxes, licenses and fees
    
    
    3,795
    
    
    
    3,620
    
    
    
    3,064Total benefits and expenses
    
    
    124,561
    
    
    
    104,541
    
    
    
    102,668Income before income taxes
    
    
    24,315
    
    
    
    45,292
    
    
    
    47,305Provision for income taxes
    
    
    7,776
    
    
    
    15,660
    
    
    
    14,818Net income
    
    $
    16,539
    
    
    $
    29,632
    
    
    $
    32,487Net income per share
    
    $
    1.75
    
    
    $
    3.14
    
    
    $
    3.44
 See accompanying notes to financial statements.
 37




---



##### Table of Contents



(dollars in thousands, except per share data)
 As of December 312005
    
    
    2004AssetsInvestmentsFixed maturities at fair value (amortized cost of $1,349,646
and $1,297,913, respectively)
    
    $
    1,378,067
    
    
    $
    1,366,898Equity securities at fair value (cost of $78,890 and
$59,426, respectively)
    
    
    84,545
    
    
    
    66,375Limited partnerships (cost of $15,341 and
$15,234, respectively)
    
    
    16,671
    
    
    
    15,467Real estate mortgage loans
    
    
    5,930
    
    
    
    6,124Real estate
    
    
    1,219
    
    
    
    1,044Policy loans
    
    
    11,667
    
    
    
    10,671Total investments
    
    
    1,498,099
    
    
    
    1,466,579Cash and cash equivalents
    
    
    18,636
    
    
    
    22,446Premiums receivable from policyholders
    
    
    180
    
    
    
    168Reinsurance recoverable
    
    
    3,770
    
    
    
    2,527Other receivables
    
    
    406
    
    
    
    319Accrued investment income
    
    
    16,715
    
    
    
    16,031Deferred policy acquisition costs
    
    
    133,812
    
    
    
    119,117Reserve credit for reinsurance ceded
    
    
    40,366
    
    
    
    29,420Securities lending collateral
    
    
    59,514
    
    
    
    0Prepaid federal income taxes
    
    
    273
    
    
    
    789Other assets
    
    
    4,589
    
    
    
    4,044Total assets
    
    $
    1,776,360
    
    
    $
    1,661,440
 See accompanying notes to financial statements.
 38




---



##### Table of Contents



(dollars in thousands, except per share data)
 As of December 312005
    
    
    2004Liabilities and shareholders equityLiabilitiesPolicy liabilities and accruals:Future life and accident and health policy benefits
    
    $
    148,034
    
    
    $
    124,016Policy and contract claims
    
    
    5,867
    
    
    
    3,153Annuity deposits
    
    
    1,021,442
    
    
    
    984,870Universal life deposits
    
    
    176,569
    
    
    
    163,489Supplementary contracts not including life contingencies
    
    
    741
    
    
    
    702Other policyholder funds
    
    
    8,420
    
    
    
    6,048Deferred income taxes
    
    
    33,821
    
    
    
    48,066Reinsurance premium due
    
    
    2,357
    
    
    
    2,581Securities lending collateral
    
    
    59,514
    
    
    
    0Accounts payable and accrued expenses
    
    
    12,604
    
    
    
    10,581Notes payable to affiliates
    
    
    45,000
    
    
    
    40,000Due to affiliates
    
    
    3,942
    
    
    
    4,327Dividends payable
    
    
    2,079
    
    
    
    2,079Total liabilities
    
    
    1,520,390
    
    
    
    1,389,912Shareholders equityCommon stock, $.40 par value per share;
authorized 15,000,000 shares; 9,450,000 shares
issued and outstanding
    
    
    3,780
    
    
    
    3,780Additional paid-in capital
    
    
    630
    
    
    
    630Accumulated other comprehensive income
    
    
    15,471
    
    
    
    39,252Retained earnings
    
    
    236,089
    
    
    
    227,866Total shareholders equity
    
    
    255,970
    
    
    
    271,528Total liabilities and shareholders equity
    
    $
    1,776,360
    
    
    $
    1,661,440
 See accompanying notes to financial statements.
 39




---



##### Table of Contents



(dollars in thousands)
 Years ended December 312005
    
    
    2004
    
    
    2003Cash flows from operating activitiesPremiums collected
    
    $
    61,504
    
    
    $
    52,721
    
    
    $
    51,942Net investment income received
    
    
    85,487
    
    
    
    83,792
    
    
    
    78,295Limited partnership distributions
    
    
    9,235
    
    
    
    5,036
    
    
    
    7,965Miscellaneous income
    
    
    652
    
    
    
    1,141
    
    
    
    844Benefits to policyholders
    
    
    (72,100
    )
    
    
    (72,991
    )
    
    
    (65,485
    )Commissions paid to agents
    
    
    (6,733
    )
    
    
    (6,013
    )
    
    
    (14,300
    )Salaries and wages paid
    
    
    (16,260
    )
    
    
    (12,663
    )
    
    
    (11,408
    )General operating expenses paid
    
    
    (13,232
    )
    
    
    (12,223
    )
    
    
    (11,358
    )Taxes, licenses and fees paid
    
    
    (3,860
    )
    
    
    (3,455
    )
    
    
    (2,934
    )Interest paid
    
    
    (2,848
    )
    
    
    (2,850
    )
    
    
    (1,757
    )Income taxes paid
    
    
    (8,700
    )
    
    
    (10,332
    )
    
    
    (12,426
    )Net cash provided by operating activities
    
    
    33,145
    
    
    
    22,163
    
    
    
    19,378Cash flows from investing activitiesPurchase of investments:Fixed maturities
    
    
    (327,087
    )
    
    
    (297,259
    )
    
    
    (554,355
    )Equity securities
    
    
    (19,464
    )
    
    
    (9,444
    )
    
    
    (13,675
    )Limited partnerships
    
    
    (8,628
    )
    
    
    (5,913
    )
    
    
    (2,560
    )Sales/maturities of investments:Sales of fixed maturities
    
    
    209,131
    
    
    
    179,894
    
    
    
    228,277Calls/maturities of fixed maturities
    
    
    65,389
    
    
    
    43,624
    
    
    
    111,713Equity securities
    
    
    0
    
    
    
    6,650
    
    
    
    20,841Return on limited partnerships
    
    
    1,498
    
    
    
    0
    
    
    
    0Purchase of computer software
    
    
    (114
    )
    
    
    (188
    )
    
    
    0Real estate additions
    
    
    (255
    )
    
    
    0
    
    
    
    0Net mortgage loans
    
    
    194
    
    
    
    181
    
    
    
    871Net policy loans
    
    
    (996
    )
    
    
    (720
    )
    
    
    (435
    )Net cash used in investing activities
    
    
    (80,332
    )
    
    
    (83,175
    )
    
    
    (209,323
    )Cash flows from financing activitiesAnnuity and supplementary contract deposits and interest
    
    
    129,512
    
    
    
    123,019
    
    
    
    186,379Annuity and supplementary contract surrenders and
withdrawals
    
    
    (95,900
    )
    
    
    (70,579
    )
    
    
    (57,547
    )Universal life deposits and interest
    
    
    19,860
    
    
    
    19,729
    
    
    
    20,285Universal life surrenders
    
    
    (6,779
    )
    
    
    (6,661
    )
    
    
    (5,415
    )Increase (decrease) in collateral from securities lending
    
    
    59,514
    
    
    
    (65,495
    )
    
    
    23,826(Investment) redemption of securities lending collateral
    
    
    (59,514
    )
    
    
    65,495
    
    
    
    (23,826
    )Proceeds from issuance of surplus note to affiliate
    
    
    20,000
    
    
    
    0
    
    
    
    25,000Principal payments on surplus note from affiliate
    
    
    (15,000
    )
    
    
    0
    
    
    
    0Dividends paid to shareholders
    
    
    (8,316
    )
    
    
    (8,222
    )
    
    
    (7,938
    )Net cash provided by financing activities
    
    
    43,377
    
    
    
    57,286
    
    
    
    160,764Net decrease in cash and cash equivalents
    
    
    (3,810
    )
    
    
    (3,726
    )
    
    
    (29,181
    )Cash and cash equivalents at beginning of year
    
    
    22,446
    
    
    
    26,172
    
    
    
    55,353Cash and cash equivalents at end of year
    
    $
    18,636
    
    
    $
    22,446
    
    
    $
    26,172
 See accompanying notes to financial statements.
 40




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##### Table of Contents



(dollars in thousands, except per share data)
 AccumulatedTotal
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    AdditionalShareholders'
    
    
    Comprehensive
    
    
    Retained
    
    
    Comprehensive
    
    
    Common
    
    
    Paid-inEquity
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    CapitalBalance, January 1, 2003
    
    $
    217,188
    
    
    
    
    
    
    $
    182,001
    
    
    $
    30,777
    
    
    $
    3,780
    
    
    $
    630Comprehensive income:Net income
    
    
    32,487
    
    
    $
    32,487
    
    
    
    32,487Unrealized appreciation
of investments, net of tax
and adjustments to
deferred acquisition costs
    
    
    13,826
    
    
    
    13,826
    
    
    
    
    
    
    
    13,826Comprehensive income
    
    
    
    
    
    $
    46,313Dividends declared, $0.84 per
share
    
    
    (7,938
    )
    
    
    
    
    
    
    (7,938
    )Balance, December 31, 2003
    
    
    255,563
    
    
    
    
    
    
    
    206,550
    
    
    
    44,603
    
    
    
    3,780
    
    
    
    630Comprehensive income:Net income
    
    
    29,632
    
    
    $
    29,632
    
    
    
    29,632Unrealized depreciation
of investments, net of tax
and adjustments to
deferred acquisition costs
    
    
    (5,351
    )
    
    
    (5,351
    )
    
    
    
    
    
    
    (5,351
    )Comprehensive income
    
    
    
    
    
    $
    24,281Dividends declared, $0.88 per
share
    
    
    (8,316
    )
    
    
    
    
    
    
    (8,316
    )Balance, December 31, 2004
    
    
    271,528
    
    
    
    
    
    
    
    227,866
    
    
    
    39,252
    
    
    
    3,780
    
    
    
    630Comprehensive income:Net income
    
    
    16,539
    
    
    $
    16,539
    
    
    
    16,539Unrealized depreciation
of investments, net of tax
and adjustments to
deferred acquisition costs
and life contingent
payout annuities
    
    
    (23,781
    )
    
    
    (23,781
    )
    
    
    
    
    
    
    (23,781
    )Comprehensive loss
    
    
    
    
    
    ($
    7,242
    )Dividends declared, $0.88 per
share
    
    
    (8,316
    )
    
    
    
    
    
    
    (8,316
    )Balance, December 31, 2005
    
    $
    255,970
    
    
    
    
    
    
    $
    236,089
    
    
    $
    15,471
    
    
    $
    3,780
    
    
    $
    630
 See accompanying notes to financial statements.
 41




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##### Table of Contents



NOTE 1. NATURE OF BUSINESS
   NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
   42




---



##### Table of Contents




    
    An internal replacement that is determined to result in a replacement that is
substantially unchanged from the replaced contract should be accounted for as a
continuation of the replaced contract. Unamortized DAC associated with the replaced
contract should continue to be deferred and amortized in connection with the replacement
contract. Other balances associated with the replaced contract should be accounted for in a
similar manner, that is, as if the replacement contract is a continuation of the replaced
contract.
    
    An internal replacement that is determined to result in a replacement that is
substantially changed from the replaced contract should be accounted for as an
extinguishment of the replaced contract. Unamortized DAC from the replaced contract in an
internal replacement transaction that results in a substantially changed contract should
not be deferred and amortized in connection with the replacement contract. Other balances
associated with the replaced contract should be accounted for in a similar manner; that is,
accounted for based on an extinguishment of the replaced contract and issuance of a new
contract.
  NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
 Basis of presentation
  Reclassifications
  Use of estimates
  43




---



##### Table of Contents



Investments and cash equivalents
       
    
    the extent and duration to which fair value is less than cost,
    
    historical operating performance and financial condition of the issuer,
    
    near term prospects of the issuer and its industry, based on analysts recommendations,
    
    specific events that occurred affecting the issuer, including a ratings downgrade, and
    
    the Companys ability and intent to hold the investment for a period of time
sufficient to allow for a recovery in value.
  Securities lending program
   44




---



##### Table of Contents



Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities
 Deferred policy acquisition costs (DAC) asset
  Accounting and Reporting by Insurance Enterprises
 Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments
   Insurance liabilities
  45




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Annuity
    
    
    3.50%6.25
    %
    
    
    3.00%4.70
    %
    
    
    3.00%4.80
    %Universal Life
    
    
    4.25%5.00
    %
    
    
    4.25%5.00
    %
    
    
    4.25%6.00
    %
 Recognition of premium revenues and losses
  Reinsurance
 Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts
  46




---



##### Table of Contents



Income taxes
  Earnings per share
  NOTE 4. INVESTMENTS
  Gross
    
    
    Gross(in thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedDecember 31, 2005
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueFixed maturitiesBonds:U.S. treasuries and government agencies
    
    $
    37,091
    
    
    $
    365
    
    
    $
    261
    
    
    $
    37,195Public utilities
    
    
    183,441
    
    
    
    7,080
    
    
    
    1,589
    
    
    
    188,932U.S. banks, trusts and insurance companies
    
    
    232,128
    
    
    
    6,852
    
    
    
    1,745
    
    
    
    237,235U.S. industrial and miscellaneous
    
    
    560,596
    
    
    
    17,914
    
    
    
    5,991
    
    
    
    572,519Mortgage-backed securities
    
    
    155,603
    
    
    
    2,126
    
    
    
    1,973
    
    
    
    155,756Asset-backed securities
    
    
    15,862
    
    
    
    114
    
    
    
    175
    
    
    
    15,801Foreign
    
    
    162,774
    
    
    
    7,129
    
    
    
    1,427
    
    
    
    168,476Total bonds
    
    
    1,347,495
    
    
    
    41,580
    
    
    
    13,161
    
    
    
    1,375,914Redeemable preferred stock
    
    
    2,151
    
    
    
    2
    
    
    
    0
    
    
    
    2,153Total fixed maturities
    
    $
    1,349,646
    
    
    $
    41,582
    
    
    $
    13,161
    
    
    $
    1,378,067Equity securitiesNonredeemable preferred stock:U.S. banks, trusts and insurance companies
    
    
    33,909
    
    
    
    1,889
    
    
    
    105
    
    
    
    35,693U.S. industrial and miscellaneous
    
    
    20,801
    
    
    
    1,555
    
    
    
    64
    
    
    
    22,292Foreign
    
    
    24,180
    
    
    
    2,421
    
    
    
    41
    
    
    
    26,560Total equity securities
    
    $
    78,890
    
    
    $
    5,865
    
    
    $
    210
    
    
    $
    84,545
 47




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##### Table of Contents



Gross
    
    
    Gross(in thousands)
    
    Amortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedDecember 31, 2004
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueFixed maturitiesBonds:U.S. treasuries and government agencies
    
    $
    60,126
    
    
    $
    1,048
    
    
    $
    98
    
    
    $
    61,076Public utilities
    
    
    160,516
    
    
    
    11,313
    
    
    
    219
    
    
    
    171,610U.S. banks, trusts and insurance companies
    
    
    193,461
    
    
    
    9,148
    
    
    
    709
    
    
    
    201,900U.S. industrial and miscellaneous
    
    
    566,633
    
    
    
    34,721
    
    
    
    976
    
    
    
    600,378Mortgage-backed securities
    
    
    157,289
    
    
    
    3,713
    
    
    
    609
    
    
    
    160,393Asset-backed securities
    
    
    10,946
    
    
    
    348
    
    
    
    77
    
    
    
    11,217Foreign
    
    
    141,926
    
    
    
    12,080
    
    
    
    686
    
    
    
    153,320Total bonds
    
    
    1,290,897
    
    
    
    72,371
    
    
    
    3,374
    
    
    
    1,359,894Redeemable preferred stock
    
    
    7,016
    
    
    
    94
    
    
    
    106
    
    
    
    7,004Total fixed maturities
    
    $
    1,297,913
    
    
    $
    72,465
    
    
    $
    3,480
    
    
    $
    1,366,898Equity securitiesNonredeemable preferred stock:U.S. banks, trusts and insurance companies
    
    
    19,909
    
    
    
    2,078
    
    
    
    2
    
    
    
    21,985U.S. industrial and miscellaneous
    
    
    18,801
    
    
    
    1,873
    
    
    
    0
    
    
    
    20,674Foreign
    
    
    20,716
    
    
    
    3,000
    
    
    
    0
    
    
    
    23,716Total equity securities
    
    $
    59,426
    
    
    $
    6,951
    
    
    $
    2
    
    
    $
    66,375
  Amortized
    
    
    Estimated(in thousands)
    
    Cost
    
    
    Fair ValueDue in one year or less
    
    $
    24,863
    
    
    $
    24,958Due after one year through five years
    
    
    171,675
    
    
    
    172,533Due after five years through 10 years
    
    
    709,021
    
    
    
    722,461Due after 10 years through 20 years
    
    
    219,135
    
    
    
    224,332Due after 20 years
    
    
    224,952
    
    
    
    233,783Total fixed maturities
    
    $
    1,349,646
    
    
    $
    1,378,067
  48




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##### Table of Contents



December 31, 2005
    
    Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Number ofValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    HoldingsFixed maturitiesBonds:U.S. treasuries and
government agencies
    
    $
    12,815
    
    
    $
    119
    
    
    $
    6,858
    
    
    $
    142
    
    
    $
    19,673
    
    
    $
    261
    
    
    
    8Public utilities
    
    
    53,021
    
    
    
    1,161
    
    
    
    9,312
    
    
    
    428
    
    
    
    62,333
    
    
    
    1,589
    
    
    
    26U.S. industrial,
miscellaneous, banks,
trusts and insurance
companies
    
    
    247,064
    
    
    
    5,393
    
    
    
    56,885
    
    
    
    2,343
    
    
    
    303,949
    
    
    
    7,736
    
    
    
    123Mortgage-backed securities
    
    
    70,867
    
    
    
    1,220
    
    
    
    28,347
    
    
    
    753
    
    
    
    99,214
    
    
    
    1,973
    
    
    
    30Asset-backed securities
    
    
    1,946
    
    
    
    53
    
    
    
    2,871
    
    
    
    122
    
    
    
    4,817
    
    
    
    175
    
    
    
    2Foreign
    
    
    48,973
    
    
    
    834
    
    
    
    11,269
    
    
    
    593
    
    
    
    60,242
    
    
    
    1,427
    
    
    
    24Total fixed maturities
    
    
    434,686
    
    
    
    8,780
    
    
    
    115,542
    
    
    
    4,381
    
    
    
    550,228
    
    
    
    13,161
    
    
    
    213Equity securitiesNonredeemable preferred
stock
    
    
    5,798
    
    
    
    210
    
    
    
    0
    
    
    
    0
    
    
    
    5,798
    
    
    
    210
    
    
    
    3Total fixed maturity and
equity securities
    
    $
    440,484
    
    
    $
    8,990
    
    
    $
    115,542
    
    
    $
    4,381
    
    
    $
    556,026
    
    
    $
    13,371
    
    
    
    216
  December 31, 2004
    
    Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Number ofValue
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    HoldingsFixed maturitiesBonds:U.S. treasuries and
government agencies
    
    $
    22,926
    
    
    $
    98
    
    
    $
    0
    
    
    $
    0
    
    
    $
    22,926
    
    
    $
    98
    
    
    
    6Public utilities
    
    
    11,862
    
    
    
    116
    
    
    
    4,705
    
    
    
    103
    
    
    
    16,567
    
    
    
    219
    
    
    
    7U.S. industrial,
miscellaneous, banks,
trusts and insurance
companies
    
    
    101,150
    
    
    
    1,162
    
    
    
    16,266
    
    
    
    524
    
    
    
    117,416
    
    
    
    1,685
    
    
    
    48Mortgage-backed securities
    
    
    44,471
    
    
    
    609
    
    
    
    0
    
    
    
    0
    
    
    
    44,471
    
    
    
    609
    
    
    
    13Asset-backed securities
    
    
    2,914
    
    
    
    77
    
    
    
    0
    
    
    
    0
    
    
    
    2,914
    
    
    
    77
    
    
    
    1Foreign
    
    
    25,924
    
    
    
    307
    
    
    
    9,482
    
    
    
    378
    
    
    
    35,406
    
    
    
    686
    
    
    
    14Total bonds
    
    
    209,247
    
    
    
    2,369
    
    
    
    30,453
    
    
    
    1,005
    
    
    
    239,700
    
    
    
    3,374
    
    
    
    89Redeemable preferred
stock
    
    
    4,760
    
    
    
    106
    
    
    
    0
    
    
    
    0
    
    
    
    4,760
    
    
    
    106
    
    
    
    1Total fixed maturities
    
    
    214,007
    
    
    
    2,475
    
    
    
    30,453
    
    
    
    1,005
    
    
    
    244,460
    
    
    
    3,480
    
    
    
    90Equity securitiesNonredeemable preferred
stock
    
    
    2,998
    
    
    
    2
    
    
    
    0
    
    
    
    0
    
    
    
    2,998
    
    
    
    2
    
    
    
    1Total fixed maturity and
equity securities
    
    $
    217,005
    
    
    $
    2,477
    
    
    $
    30,453
    
    
    $
    1,005
    
    
    $
    247,458
    
    
    $
    3,482
    
    
    
    91
 49




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(in thousands)
    
    2005
    
    
    2004
    
    
    2003Fixed maturities
    
    ($
    40,563
    )
    
    ($
    7,735
    )
    
    $
    3,663Equity securities
    
    
    (1,294
    )
    
    
    609
    
    
    
    23,490Limited partnerships
    
    
    (233
    )
    
    
    194
    
    
    
    338Deferred policy acquisition costs
    
    
    8,503
    
    
    
    (1,300
    )
    
    
    (6,219
    )Life contingent payout annuities
    
    
    (3,000
    )
    
    
    0
    
    
    
    0Deferred federal income tax
    
    
    12,806
    
    
    
    2,881
    
    
    
    (7,446
    )(Decrease) increase in net unrealized gains
    
    ($
    23,781
    )
    
    ($
    5,351
    )
    
    $
    13,826
 50




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(in thousands)
    
    2005
    
    
    2004
    
    
    2003Fixed maturities
    
    $
    78,480
    
    
    $
    75,078
    
    
    $
    72,139Equity securities
    
    
    4,922
    
    
    
    4,539
    
    
    
    5,323Cash equivalents and other
    
    
    2,219
    
    
    
    1,847
    
    
    
    2,051Total investment income
    
    
    85,621
    
    
    
    81,464
    
    
    
    79,513Less: Investment expense
    
    
    746
    
    
    
    840
    
    
    
    788Net investment income
    
    $
    84,875
    
    
    $
    80,624
    
    
    $
    78,725
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Fixed maturitiesGross realized gains
    
    $
    5,651
    
    
    $
    10,200
    
    
    $
    19,411Gross realized losses
    
    
    (5,341
    )
    
    
    (855
    )
    
    
    (6,081
    )Net realized gains
    
    
    310
    
    
    
    9,345
    
    
    
    13,330Equity securitiesGross realized gains
    
    
    11
    
    
    
    176
    
    
    
    379Gross realized losses
    
    
    (4
    )
    
    
    (117
    )
    
    
    (533
    )Net realized gains (losses)
    
    
    7
    
    
    
    59
    
    
    
    (154
    )Net realized gains on investments
    
    $
    317
    
    
    $
    9,404
    
    
    $
    13,176
  51




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(in thousands)
    
    2005
    
    
    2004
    
    
    2003Real estate
    
    $
    1,828
    
    
    $
    2,012
    
    
    $
    2,790Mezzanine debt
    
    
    382
    
    
    
    104
    
    
    
    (1,494
    )Valuation adjustments
    
    
    1,330
    
    
    
    0
    
    
    
    0Equity in earnings of limited partnerships
    
    $
    3,540
    
    
    $
    2,116
    
    
    $
    1,296
      NOTE 5. DEFERRED POLICY ACQUISITION COSTS
  (in thousands)
    
    2005
    
    
    2004Balance at beginning of year
    
    $
    119,117
    
    
    $
    98,207Additions:Commissions
    
    
    5,898
    
    
    
    5,935General expenses
    
    
    8,808
    
    
    
    9,308Taxes, licenses and fees
    
    
    74
    
    
    
    7214,780
    
    
    
    15,315Amortization
    
    
    (8,625
    )
    
    
    (813
    )Valuation system reclassification to
premium receivables
    
    
    37
    
    
    
    7,708Effect of unrealized investment losses (gains)
    
    
    8,503
    
    
    
    (1,300
    )Balance at end of year
    
    $
    133,812
    
    
    $
    119,117
 52




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Accounting and Reporting by Insurance Enterprises for
Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments
 NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
  Cash and cash equivalents:
 Fixed maturities and equity securities:
 Limited partnerships:
 Policy loans and real estate mortgage loans:
 Trading assets and trading liabilities:
 53




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Annuity deposits:
 Annuity payouts:
 Universal life deposits:
 NOTE 7. COMPREHENSIVE INCOME
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Unrealized holding (losses) gains arising
during period, net of offsets to
shadow deferred acquisition costs and life
contingent payout annuities
    
    ($
    36,269
    )
    
    $
    1,172
    
    
    $
    34,448Less: gains included in net income
    
    
    (317
    )
    
    
    (9,404
    )
    
    
    (13,176
    )Net unrealized holding (losses) gains
arising during period, net of offsets to
shadow deferred acquisition costs and life
contingent payout annuities
    
    
    (36,586
    )
    
    
    (8,232
    )
    
    
    21,272Income tax benefit (liability) related to
unrealized (losses) gains
    
    
    12,805
    
    
    
    2,881
    
    
    
    (7,446
    )Change in other comprehensive income, net of tax
    
    ($
    23,781
    )
    
    ($
    5,351
    )
    
    $
    13,826
  54




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NOTE 8. LIABILITY FOR UNPAID POLICY AND CONTRACT CLAIMS
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Balance at January 1
    
    $
    3,153
    
    
    $
    3,653
    
    
    $
    2,362Less reinsurance recoverables
    
    
    (1,497
    )
    
    
    (2,106
    )
    
    
    (915
    )Net balance at January 1
    
    
    1,656
    
    
    
    1,547
    
    
    
    1,447Total death claims incurred
    
    
    19,333
    
    
    
    17,558
    
    
    
    15,197Total death claims paid, net of reinsurance recoveries
    
    
    (18,027
    )
    
    
    (17,449
    )
    
    
    (15,097
    )Net balance at December 31
    
    
    2,962
    
    
    
    1,656
    
    
    
    1,547Plus reinsurance recoverables
    
    
    2,905
    
    
    
    1,497
    
    
    
    2,106Balance at December 31
    
    $
    5,867
    
    
    $
    3,153
    
    
    $
    3,653
 55




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NOTE 9. ANNUITY AND UNIVERSAL LIFE DEPOSITS
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Universal life
    
    $
    12,229
    
    
    $
    12,374
    
    
    $
    13,326Annuity
    
    
    84,430
    
    
    
    78,572
    
    
    
    144,202Total
    
    $
    96,659
    
    
    $
    90,946
    
    
    $
    157,528
  NOTE 10. FEDERAL INCOME TAXES
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Federal income taxes:Currently due
    
    $
    9,216
    
    
    $
    11,526
    
    
    $
    13,118Deferred
    
    
    (1,440
    )
    
    
    4,134
    
    
    
    1,700Total
    
    $
    7,776
    
    
    $
    15,660
    
    
    $
    14,818
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Federal income taxes at statutory rates
    
    $
    8,510
    
    
    $
    15,852
    
    
    $
    16,557Dividends received deduction and tax-exempt interest
    
    
    (28
    )
    
    
    (1
    )
    
    
    (3
    )Other (1)
    
    
    (706
    )
    
    
    (191
    )
    
    
    (1,736
    )Provision for federal income taxes
    
    $
    7,776
    
    
    $
    15,660
    
    
    $
    14,818
   (1)
    
    In 2005, the Company adjusted its income tax liability to reflect the difference in the
December 31, 2004 income tax expense provision and the actual federal income tax return
filed in September 2005. This adjustment decreased the tax expense for the period by $0.7
million.In 2003, the Company recorded an adjustment to deferred income taxes. Deferred tax liabilities
established in previous years to reflect potential income tax exposures were determined to be
unnecessary and the amounts provided were reversed during the year. The one-time non-cash reduction
in deferred taxes of $1.3 million, increased earnings by $0.14 per share. 56




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(in thousands)
    
    2005
    
    
    2004Deferred tax assets:Liability for future life and annuity policy benefits
    
    ($
    15,537
    )
    
    ($
    9,464
    )Write-down of investments
    
    
    (339
    )
    
    
    (509
    )Deferred compensation
    
    
    (1,794
    )
    
    
    (1,462
    )IRS audit adjustments of prior years
    
    
    (1,252
    )
    
    
    (1,252
    )Total deferred tax assets
    
    
    (18,922
    )
    
    
    (12,687
    )Deferred tax liabilities:Deferred policy acquisition costs
    
    
    42,634
    
    
    
    38,284Unrealized gains on investments
    
    
    8,331
    
    
    
    21,136Other
    
    
    1,778
    
    
    
    1,333Total deferred tax liabilities
    
    
    52,743
    
    
    
    60,753Net deferred income tax liability
    
    $
    33,821
    
    
    $
    48,066
 NOTE 11. RELATED PARTY TRANSACTIONS
 Expense allocations
    Notes payable to affiliates
  57




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Real estate
   Year endingDecember 31
    
    (in thousands)2006
    
    $
    3372007
    
    
    3412008
    
    
    114Total
    
    $
    792
 Software and equipment
  Annuities sold to affiliates
     58




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NOTE 12. REINSURANCE
     59




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(in thousands)
    
    2005
    
    
    2004
    
    
    2003Direct life insurance in force
    
    $
    32,508,227
    
    
    $
    30,086,967
    
    
    $
    27,077,945Amounts ceded to other companies
    
    
    (14,460,521
    )
    
    
    (12,478,433
    )
    
    
    (9,788,882
    )Net in force
    
    $
    18,047,706
    
    
    $
    17,608,534
    
    
    $
    17,289,063
   (in thousands)
    
    2005
    
    
    2004
    
    
    2003Direct policy revenue
    
    $
    83,940
    
    
    $
    79,035
    
    
    $
    72,947Policy revenue ceded
    
    
    (24,448
    )
    
    
    (22,487
    )
    
    
    (17,015
    )Net policy revenue
    
    $
    59,492
    
    
    $
    56,548
    
    
    $
    55,932Death benefits
    
    $
    28,771
    
    
    $
    23,731
    
    
    $
    19,933Reinsurance recoveries
    
    
    (9,438
    )
    
    
    (6,173
    )
    
    
    (4,736
    )Net death benefits
    
    $
    19,333
    
    
    $
    17,558
    
    
    $
    15,197Increase in future life policy benefits
    
    $
    24,016
    
    
    $
    15,927
    
    
    $
    13,846Reinsurance reserve credits
    
    
    (10,945
    )
    
    
    (8,662
    )
    
    
    (6,635
    )Net increase in future life policy benefits
    
    $
    13,071
    
    
    $
    7,265
    
    
    $
    7,211Commissions
    
    $
    10,487
    
    
    $
    10,035
    
    
    $
    10,316Reinsurance commission allowance
    
    
    (8,648
    )
    
    
    (8,814
    )
    
    
    (7,637
    )Net commissions
    
    $
    1,839
    
    
    $
    1,221
    
    
    $
    2,679
 60




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NOTE 13. SUPPLEMENTARY DATA ON CASH FLOWS
  (in thousands)
    
    2005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet income
    
    $
    16,539
    
    
    $
    29,632
    
    
    $
    32,487Adjustments to reconcile net income to net cash
provided by operating activities:Amortization of deferred policy acquisition costs
    
    
    8,625
    
    
    
    813
    
    
    
    7,477Other amortization
    
    
    876
    
    
    
    984
    
    
    
    790Deferred federal income tax expense
    
    
    (1,440
    )
    
    
    4,134
    
    
    
    1,700Realized gains on investments
    
    
    (317
    )
    
    
    (9,404
    )
    
    
    (13,176
    )Equity in earnings of limited partnerships
    
    
    (3,540
    )
    
    
    (2,116
    )
    
    
    (1,296
    )Limited partnership distributions
    
    
    9,235
    
    
    
    5,036
    
    
    
    7,965Increase in premiums receivable
    
    
    (12
    )
    
    
    (532
    )
    
    
    (1,120
    )(Increase) decrease in other receivables
    
    
    (124
    )
    
    
    (182
    )
    
    
    1,351Increase in accrued investment income
    
    
    (683
    )
    
    
    (943
    )
    
    
    (1,735
    )Policy acquisition costs deferred
    
    
    (14,780
    )
    
    
    (15,315
    )
    
    
    (19,006
    )(Increase) decrease in other assets
    
    
    (77
    )
    
    
    2,538
    
    
    
    69Decrease in prepaid federal income taxes
    
    
    516
    
    
    
    1,194
    
    
    
    692Increase in reinsurance recoverables and reserve
credits
    
    
    (12,189
    )
    
    
    (8,229
    )
    
    
    (8,041
    )Increase in future policy benefits and claims
    
    
    26,731
    
    
    
    15,427
    
    
    
    15,296Increase (decrease) in other policyholder funds
    
    
    2,371
    
    
    
    (3,807
    )
    
    
    (4,479
    )(Decrease) increase in reinsurance premium due
    
    
    (224
    )
    
    
    706
    
    
    
    283Increase in accounts payable and due to affiliates
    
    
    1,638
    
    
    
    2,227
    
    
    
    121Net cash provided by operating activities
    
    $
    33,145
    
    
    $
    22,163
    
    
    $
    19,378
 NOTE 14. COMMITMENTS AND CONTINGENCIES
 Commitments
  Contingencies
  61




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NOTE 15. SEGMENT INFORMATION
     Traditional
    
    
    Universal
    
    
    Fixed
    
    
    Group Life
    
    
    Corporate(in thousands)
    
    Life
    
    
    Life
    
    
    Annuities
    
    
    & Other
    
    
    Account
    
    
    Total2005Total policy revenue, net of
reinsurance
    
    $
    42,095
    
    
    $
    13,868
    
    
    $
    1
    
    
    $
    3,528
    
    
    $
    0
    
    
    $
    59,492Total net investment and
other income
    
    
    7,419
    
    
    
    9,720
    
    
    
    58,750
    
    
    
    251
    
    
    
    12,927
    
    
    
    89,067Net realized capital gains
    
    
    27
    
    
    
    34
    
    
    
    214
    
    
    
    1
    
    
    
    41
    
    
    
    317Total revenues
    
    
    49,541
    
    
    
    23,622
    
    
    
    58,965
    
    
    
    3,780
    
    
    
    12,968
    
    
    
    148,876Less: Total benefits and
expenses
    
    
    46,601
    
    
    
    20,050
    
    
    
    53,917
    
    
    
    3,681
    
    
    
    312
    
    
    
    124,561Income before income
taxes
    
    $
    2,940
    
    
    $
    3,572
    
    
    $
    5,048
    
    
    $
    99
    
    
    $
    12,656
    
    
    $
    24,315
 62




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Traditional
    
    
    Universal
    
    
    Fixed
    
    
    Group Life
    
    
    Corporate(in thousands)
    
    Life
    
    
    Life
    
    
    Annuities
    
    
    & Other
    
    
    Account
    
    
    Total2004Total policy revenue, net of
reinsurance
    
    $
    39,003
    
    
    $
    14,181
    
    
    $
    2
    
    
    $
    3,362
    
    
    $
    0
    
    
    $
    56,548Total net investment and
other income
    
    
    6,922
    
    
    
    9,432
    
    
    
    56,460
    
    
    
    205
    
    
    
    10,862
    
    
    
    83,881Net realized capital gains
    
    
    810
    
    
    
    995
    
    
    
    6,583
    
    
    
    25
    
    
    
    991
    
    
    
    9,404Total revenues
    
    
    46,735
    
    
    
    24,608
    
    
    
    63,045
    
    
    
    3,592
    
    
    
    11,853
    
    
    
    149,833Less: Total benefits and
expenses
    
    
    37,767
    
    
    
    8,630
    
    
    
    52,595
    
    
    
    5,239
    
    
    
    310
    
    
    
    104,541Income before income taxes
    
    $
    8,968
    
    
    $
    15,978
    
    
    $
    10,450
    
    
    ($
    1,647
    )
    
    $
    11,543
    
    
    $
    45,2922003Total policy revenue, net of
reinsurance
    
    $
    38,695
    
    
    $
    13,350
    
    
    $
    5
    
    
    $
    3,882
    
    
    $
    0
    
    
    $
    55,932Total net investment and
other income
    
    
    7,014
    
    
    
    9,084
    
    
    
    55,568
    
    
    
    171
    
    
    
    9,028
    
    
    
    80,865Net realized capital gains
    
    
    1,191
    
    
    
    1,421
    
    
    
    9,417
    
    
    
    29
    
    
    
    1,118
    
    
    
    13,176Total revenues
    
    
    46,900
    
    
    
    23,855
    
    
    
    64,990
    
    
    
    4,082
    
    
    
    10,146
    
    
    
    149,973Less: Total benefits and
expenses
    
    
    34,488
    
    
    
    16,090
    
    
    
    48,670
    
    
    
    3,247
    
    
    
    173
    
    
    
    102,668Income before income
taxes
    
    $
    12,412
    
    
    $
    7,765
    
    
    $
    16,320
    
    
    $
    835
    
    
    $
    9,973
    
    
    $
    47,305
 NOTE 16. STATUTORY INFORMATION
  63




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(in thousands)
    
    2005
    
    
    2004
    
    
    2003Statutory net income
    
    $
    15,705
    
    
    $
    20,524
    
    
    $
    15,404Reconciling items:Policy liabilities and accruals
    
    
    (2,107
    )
    
    
    1,435
    
    
    
    1,224Cumulative effect of change in
accounting principle
    
    
    (2,000
    )
    
    
    0
    
    
    
    0Deferred policy acquisition costs,
net of amortization
    
    
    6,155
    
    
    
    14,502
    
    
    
    11,529Investment valuation differences
    
    
    (1,457
    )
    
    
    1,494
    
    
    
    6,747GAAP deferred taxes
    
    
    1,440
    
    
    
    (4,134
    )
    
    
    (1,700
    )Deferred and uncollected premiums
    
    
    (1,719
    )
    
    
    (4,793
    )
    
    
    (1,764
    )Limited partnership income
    
    
    700
    
    
    
    856
    
    
    
    1,295Other
    
    
    (178
    )
    
    
    (252
    )
    
    
    (248
    )GAAP net income
    
    $
    16,539
    
    
    $
    29,632
    
    
    $
    32,487
  (in thousands)
    
    2005
    
    
    2004Statutory shareholders equity
    
    $
    147,533
    
    
    $
    136,021Reconciling items:Asset valuation and interest maintenance reserves
    
    
    33,182
    
    
    
    34,277Investment valuation differences
    
    
    34,076
    
    
    
    75,932Deferred policy acquisition costs
    
    
    133,812
    
    
    
    119,117Surplus notes
    
    
    (45,000
    )
    
    
    (40,000
    )Policy liabilities and accruals
    
    
    15,175
    
    
    
    20,283Difference between statutory and GAAP deferred taxes
    
    
    (37,093
    )
    
    
    (50,276
    )Deferred and uncollected premiums
    
    
    (26,955
    )
    
    
    (25,198
    )Capitalized computer software, net of amortization
    
    
    1,169
    
    
    
    1,372Other
    
    
    71
    
    
    
    0GAAP shareholders equity
    
    $
    255,970
    
    
    $
    271,528
  64




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##### Table of Contents



NOTE 17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth(in thousands, except per share data)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2005Total net policy revenue
    
    $
    14,408
    
    
    $
    15,554
    
    
    $
    14,902
    
    
    $
    14,628Net investment income
    
    
    20,306
    
    
    
    21,443
    
    
    
    20,949
    
    
    
    22,177Net realized (losses) gains on investments
    
    
    (1,353
    )
    
    
    1,514
    
    
    
    267
    
    
    
    (112
    )Equity in earnings (losses) of limited partnerships
    
    
    604
    
    
    
    3,085
    
    
    
    (201
    )
    
    
    53Other income
    
    
    177
    
    
    
    191
    
    
    
    126
    
    
    
    158Total revenues
    
    
    34,142
    
    
    
    41,787
    
    
    
    36,043
    
    
    
    36,904Total benefits and expenses
    
    
    28,682
    
    
    
    31,741
    
    
    
    32,427
    
    
    
    31,711Income before income taxes
    
    
    5,460
    
    
    
    10,046
    
    
    
    3,616
    
    
    
    5,193Provision for federal income taxes
    
    
    1,911
    
    
    
    3,516
    
    
    
    709
    
    
    
    1,640Net income
    
    $
    3,549
    
    
    $
    6,530
    
    
    $
    2,907
    
    
    $
    3,553Net income per share
    
    $
    0.38
    
    
    $
    0.69
    
    
    $
    0.31
    
    
    $
    0.37Comprehensive (loss) income
    
    (
    $10,486
    )
    
    $
    20,648
    
    
    (
    $13,234
    )
    
    (
    $4,170
    )
 65




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##### Table of Contents



First
    
    
    Second
    
    
    Third
    
    
    Fourth(in thousands, except per share data)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2004Total net policy revenue
    
    $
    13,979
    
    
    $
    14,625
    
    
    $
    14,277
    
    
    $
    13,667Net investment income
    
    
    19,472
    
    
    
    20,464
    
    
    
    19,705
    
    
    
    20,983Net realized gains (losses) on investments
    
    
    2,848
    
    
    
    5,556
    
    
    
    1,103
    
    
    
    (104
    )Equity in earnings of limited partnerships
    
    
    155
    
    
    
    712
    
    
    
    203
    
    
    
    1,047Other income
    
    
    318
    
    
    
    238
    
    
    
    203
    
    
    
    382Total revenues
    
    
    36,772
    
    
    
    41,595
    
    
    
    35,491
    
    
    
    35,975Total benefits and expenses
    
    
    26,316
    
    
    
    21,728
    
    
    
    27,874
    
    
    
    28,624Income before income taxes
    
    
    10,456
    
    
    
    19,867
    
    
    
    7,617
    
    
    
    7,351Provision for federal income taxes
    
    
    3,940
    
    
    
    6,620
    
    
    
    2,618
    
    
    
    2,481Net income
    
    $
    6,516
    
    
    $
    13,247
    
    
    $
    4,999
    
    
    $
    4,870Net income per share
    
    $
    0.69
    
    
    $
    1.40
    
    
    $
    0.53
    
    
    $
    0.52Comprehensive income (loss)
    
    $
    21,482
    
    
    (
    $27,619
    )
    
    $
    25,454
    
    
    $
    4,964
 2005:
    
    In the first quarter of 2005, the Company recorded a charge to expenses of $0.7 million
related to a correction of an error in the determination of reinsurance reserve credits. The
prior calculation method overstated the amount of such credits for certain policy types due to
an error in determining the inventory of policies qualifying for such credits.In the second quarter of 2005, the Company made a correction to record unrealized gains and
losses on limited partnerships in the equity in earnings of limited partnerships previously
recorded in shareholders equity in the Statements of Operations. This correction increased
pretax income by $1.2 million, or $0.13 per share. Included in the pretax adjustment was $1.0
million related to 2005 and $0.2 million related to 2004 and prior years.During the third and fourth quarter of 2005, the Company updated the valuation software it
uses to estimate insurance liability and DAC balances for its traditional life insurance,
universal life and deferred annuity products. This new valuation system uses more refined
methods and calculations to estimate these amounts. Differences in liability and DAC
estimates between the new and old valuation systems, determined to be changes in accounting
estimates, resulted in a $4.5 million pretax charge to the
Company, or $0.31 per
share after taxes. Differences determined to be a correction of errors resulted in a $2.0
million increase to pretax income, or $0.14 per share after taxes. The adjustments are
reflected above as a $3.5 million increase in the third quarter 2005 benefits and expenses
and a $1.0 million decrease in the fourth quarter 2005 benefits and expenses.2004:
    
    During the second quarter, the Company unlocked certain assumptions related to the
determination of DAC for its universal life and fixed annuities. As a result of unlocking
these assumptions, amortization of DAC was decreased by $6.5 million in the second quarter.
See Note 12 for a discussion on the charge against income during the fourth quarter of 2004
relating to the PEGLI pool.
 66




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   
 ITEM 9B. OTHER INFORMATION
  67




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PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 http://www.erieinsurance.com
  Director ofAge as of
    
    Principal Occupation for Past Five Years and
    
    the CompanyName
    
    12/31/05
    
    Positions with Erie Insurance Group
    
    since:Kaj
Ahlmann(1)(3)(4)(7)(8C)
    
    
    55
    
    
    Advisory Board Member, Sapiens International, 2004 to present; Chairman,
Danish Re Group, a property and casualty
reinsurer, 2002 to 2004; Chairman and
Chief Executive Officer, Inreon,
internet reinsurance venture, 2001 to
2003; Chairman of the Board, Hampton
Re, a life reassurance company, 2001 to
2003; Vice Chairman, E.W. Blanch Holdings,
Inc., 1999 to 2001; Director, the
Company, EIC and
Erie Insurance Co.
    
    
    2003John
T. Baily(1)(2C)(6)(8)
    
    
    61
    
    
    Retired since December 31,
2002; President, Swiss Re Capital Partners,
1999 to 2002; Partner, PricewaterhouseCoopers LLP, 1976 to 1999; Director, the
Company, EIC, Erie Insurance Co.,
Endurance Specialty Holdings, Ltd.,
NYMAGIC, Inc. and RLI Corp.
    
    
    2003J.
Ralph Borneman, Jr. CIC(5)(7)(8)
    
    
    67
    
    
    President, Chief Executive Officer and Chairman of the Board,
Body-Borneman Associates, Inc.,
insurance agency; President,
Body-Borneman, Ltd. and Body-Borneman,
Inc., insurance agencies, since
1967; Director, the Company, EIC, Erie
Insurance Co., Erie Insurance Company
of New York and National Penn Bancshares.
    
    
    1992
 68




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##### Table of Contents



Director ofAge as of
    
    Principal Occupation for Past Five Years and
    
    the CompanyName
    
    12/31/05
    
    Positions with Erie Insurance Group
    
    since:Wilson
C. Cooney(1)(3)(4)(7)
    
    
    71
    
    
    Chairman, ForcesGroup, Ltd.,
insurance and financial services group, 2000 to
present; Chairman, Cooney Group, LLC,
leadership and business consulting, 1999 to
present; Deputy Chief Executive Officer, United Services
Automobile Association, 1998 to
1999; PresidentProperty/ Casualty
Group, United Services Automobile
Association, 1995 to 1998; Lead Director, the
Company, EIC and Erie Insurance Co.;
and Director, Safelite Group.
    
    
    2003Patricia
Garrison-Corbin(1)(4C)(6)
    
    
    58
    
    
    President, P.G. Corbin &
Company, Inc., financial advisory services
and municipal finance, 1986 to
present; President and Chief Executive
Officer, P.G. Corbin Asset
Management, Inc., fixed income
investment management, 1987 to
present; Chairman, Delancey Capital
Group, LP, equity investment
management, 1996 to present; Chairman,
P.G. Corbin Group, Inc., investment
and financial advisory services,
1996 to present; Director, the
Company, EIC, Erie Insurance Co. and
FairPoint Communications, Inc.
    
    
    2000John
R. Graham(1)(2)(4)(6C)
    
    
    60
    
    
    Executive-in-Residence and
Professor of Finance, College of Business
Administration, Kansas State
University, 2000 to present; Chairman
of the Board of Directors,
President and Chief Executive Officer,
Graham Capital Management, Inc.,
1997 to present; Owner, Graham
Ventures, business consulting and
education services, 1970 to present;
Chief Executive Officer, Kansas
Farm Bureau (KFB) Services, Inc., KFB
Life Insurance Company, Farm
Bureau Mutual Insurance Company,
KFB Insurance Company and FB
Services Insurance Agency, Inc., 1979
to 1999; Chairman of the Board and
Chief Executive Officer, FB Capital
Management of Kansas, a registered
investment advisor, 1994 to 1999;
Director, the Company, EIC, Erie
Insurance Co, the Tortoise Family of Registered Investment Companies
(Tortoise Energy
Infrastructure Corporation, Tortoise Energy Capital Corporation,
Tortoise North America Energy Corporation and Tortoise Capital
Resources Corporation).
    
    
    2003Jonathan
Hirt Hagen(8)
    
    
    43
    
    
    Vice Chairman, Custom Group Industries, machining,
manufacturing and fabrication
companies, 1999 to present; private
investor, 1990 to present.
    
    
    2005
 69




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##### Table of Contents



Director ofAge as of
    
    Principal Occupation for Past Five Years and
    
    the CompanyName
    
    12/31/05
    
    Positions with Erie Insurance Group
    
    since:Susan
Hirt Hagen
(1)(5C)
    
    
    70
    
    
    Co-Trustee of the H.O. Hirt Trusts since 1967; private investor, 1989 to
present; Director, the Company, EIC
and Erie Insurance Co.
    
    
    1980C.
Scott Hartz
(1)(2)(6)(7C)
    
    
    59
    
    
    Senior Managing Director, SCIUS Capital Group, LLC, 2002 to present;
Chief Executive Officer, Hartz
Group, IT and technology
consulting, 2002 to present; Chief
Executive Officer, PwC Consulting,
1995 to 2002; Director, the
Company, EIC, Erie Insurance Co.,
Siebel Systems and Alien Technologies, Inc.
    
    
    2003F.
William Hirt, CPCU
(1C)(5)
    
    
    80
    
    
    Chairman of the Board of the Company, EIC, Erie Insurance Co., Erie
Insurance Property & Casualty Co., and
Flagship City Insurance Co. 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 EIC since November
1990; Interim President and Chief
Executive Officer of the Company,
EIC, Erie Insurance Co., Erie Insurance
Property & Casualty Co., Flagship City
Insurance Co. 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, EIC and Erie Insurance
Co. for more than five years prior
thereto; Co-Trustee of the H.O. Hirt
Trusts; Director, the Company, EIC,
Erie Insurance Co., Erie Insurance
Property & Casualty Co., Flagship City
Insurance Co. and Erie Insurance
Company of New York.
    
    
    1965Claude
C. Lilly, III,
Ph.D., CPCU, CLU
(2)(6)(8)
    
    
    59
    
    
    Dean, Belk College of Business
Administration, University of North Carolina Charlotte, July 1998 to
present; James H. Harris Chair of
Risk Management and Insurance, Belk
College of Business Administration,
University of North Carolina Charlotte,
August 1997 to present; Director,
the Company, EIC, Erie Insurance Co.,
and FairPoint Communications, Inc and TIAA Trust Bank.
    
    
    2000
 70




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##### Table of Contents



Director ofAge as of
    
    Principal Occupation for Past Five Years and
    
    the CompanyName
    
    12/31/05
    
    Positions with Erie Insurance Group
    
    since:Jeffrey
A. Ludrof
(1)(5)(7)(8)
    
    
    46
    
    
    President and Chief Executive
Officer of the Company, EIC, Erie Insurance
Co., Erie Insurance Property & Casualty
Co., Flagship City Insurance Company
and Erie Insurance Company of New York
since 2002; Executive Vice
PresidentInsurance Operations of the
EIC, Erie Insurance Co., Erie Insurance
Property & Casualty Co., Flagship City
Insurance Co. and Erie Insurance
Company of New York from 1999 to 2002;
Senior Vice President of the
EIC, Erie Insurance Co., Erie Insurance
Property & Casualty Co., Flagship City
Insurance Co. and Erie Insurance
Company of New York from 1994 to 1999;
an officer in various capacities
from 1989 to 1994; Director of the
Company, EIC, Erie Insurance Co., Erie
Insurance Property & Casualty Co.,
Flagship City Insurance Co. and
Erie Insurance Company of New York.
    
    
    2002Robert
C. Wilburn
(1)(2)(3C)
    
    
    62
    
    
    President and Chief Executive
Officer, Gettysburg National Battlefield Museum
Foundation since 2000; Distinguished
Service Professor, Carnegie Mellon
University 1999 to 2000; Director, the
Company, EIC, Erie Insurance Co. and
Harsco, Inc.
    
    
    1999
   (1)
    
    Member of the Executive Committee.(2)
    
    Member of the Audit Committee.(3)
    
    Member of the Executive Compensation and Development Committee (the
Compensation Committee).(4)
    
    Member of the Nominating Committee.(5)
    
    Member of the Charitable Giving Committee.(6)
    
    Member of the Investment Committee.(7)
    
    Member of the Technology Committee.(8)
    
    Member of the Strategy Committee.C
    
    Designates Committee Chairperson. 71




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##### Table of Contents



Age as of
    
    Principal Occupation for Past Five Years and PositionsName
    
    12/31/05
    
    with Erie Insurance GroupExecutive Vice PresidentsJan R. Van Gorder, Esq.
    
    
    58
    
    
    Senior Executive Vice President, Secretary and
General Counsel of the Company, Erie Indemnity
Company, 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 Indemnity Company and Erie Insurance
Company for more than five years prior thereto;
DirectorFlagship City Insurance Company, Erie
Insurance Property & Casualty Company and Erie
Insurance Company of New York.John J. Brinling, Jr.
    
    
    58
    
    
    Executive Vice President of the Company since
December 1990. Division Officer 1984-present.
DirectorErie Insurance Company of New York.Philip A. Garcia
    
    
    49
    
    
    Executive Vice President and Chief Financial
Officer since 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.Michael J. Krahe
    
    
    52
    
    
    Executive Vice PresidentHuman Development and
Leadership since January 2004; Senior Vice
President 1999-December 2003; Vice President
1994-1999. DirectorFlagship City Insurance Company,
Erie Insurance Property & Casualty Company and Erie
Insurance Company of New York.Senior Vice PresidentsDouglas F. Ziegler
    
    
    55
    
    
    Senior Vice President, Treasurer and Chief
Investment Officer of the Company since 1993.
DirectorFlagship City Insurance Company, Erie
Insurance Property & Casualty Company and Erie
Insurance Company of New York.Timothy G. NeCastro
    
    
    45
    
    
    Senior Vice President and Controller of the
Company, Erie Insurance Company, Erie Indemnity
Company, Flagship City Insurance Company, Erie
Insurance Property & Casualty Company and Erie
Insurance Company of New York since 1997.
 72




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Summary Compensation Table
   Annual Compensation
    
    
    Long-Term CompensationName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Annual
    
    
    Restricted
    
    
    LTIP
    
    
    All OtherPosition
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Compensation
    
    
    Stock Awards
    
    
    Payments
    
    
    Compensation(1)
    
    
    (2)
    
    
    (3)
    
    
    (4)
    
    
    (5)Jeffrey A. Ludrof
    
    
    2005
    
    
    $
    707,051
    
    
    $
    964,040
    
    
    $
    97,248
    
    
    $
    337,660
    
    
    $
    319,501
    (6)
    
    $
    28,282President and Chief
    
    
    2004
    
    
    
    653,746
    
    
    
    896,869
    
    
    
    7,939
    
    
    
    142,307
    
    
    
    209,182
    
    
    
    26,150Executive Officer
    
    
    2003
    
    
    
    644,992
    
    
    
    323,086
    
    
    
    6,356
    
    
    
    125,953
    
    
    
    147,406
    
    
    
    30,661Jan R. Van Gorder
    
    
    2005
    
    
    $
    448,466
    
    
    $
    410,714
    
    
    $
    16,478
    
    
    $
    175,720
    
    
    $
    289,267
    (6)
    
    $
    17,939Senior Executive Vice
    
    
    2004
    
    
    
    437,758
    
    
    
    484,907
    
    
    
    13,417
    
    
    
    184,573
    
    
    
    284,414
    
    
    
    17,510President, Secretary and
    
    
    2003
    
    
    
    433,270
    
    
    
    156,757
    
    
    
    12,243
    
    
    
    172,571
    
    
    
    222,580
    
    
    
    17,331General CounselPhilip A. Garcia
    
    
    2005
    
    
    $
    354,388
    
    
    $
    310,233
    
    
    $
    11,093
    
    
    $
    139,012
    
    
    $
    216,472
    (6)
    
    $
    14,175Executive Vice
    
    
    2004
    
    
    
    337,859
    
    
    
    358,526
    
    
    
    8,410
    
    
    
    134,737
    
    
    
    206,420
    
    
    
    13,514President
    
    
    2003
    
    
    
    332,307
    
    
    
    118,709
    
    
    
    7,272
    
    
    
    125,953
    
    
    
    154,381
    
    
    
    13,292and Chief FinancialOfficerJohn J. Brinling, Jr.
    
    
    2005
    
    
    $
    296,628
    
    
    $
    301,448
    
    
    $
    14,765
    
    
    $
    118,689
    
    
    $
    200,053
    (6)
    
    $
    17,630Executive Vice
    
    
    2004
    
    
    
    287,259
    
    
    
    339,669
    
    
    
    10,032
    
    
    
    127,009
    
    
    
    199,491
    
    
    
    15,291President, EFL
    
    
    2003
    
    
    
    284,787
    
    
    
    101,107
    
    
    
    8,704
    
    
    
    122,182
    
    
    
    154,993
    
    
    
    18,941Douglas F. Ziegler
    
    
    2005
    
    
    $
    292,163
    
    
    $
    222,978
    
    
    $
    8,673
    
    
    $
    94,004
    
    
    $
    127,896
    (6)
    
    $
    11,686Senior Vice President
    
    
    2004
    
    
    
    278,250
    
    
    
    248,397
    
    
    
    5,282
    
    
    
    74,229
    
    
    
    112,380
    
    
    
    11,130Treasurer and Chief
    
    
    2003
    
    
    
    265,000
    
    
    
    126,982
    
    
    
    4,991
    
    
    
    69,376
    
    
    
    98,873
    
    
    
    10,600Investment Officer
   (1)
    
    The amounts indicated in the Bonus column represent amounts earned by the named executives under EICs current
Annual Incentive Plan (the Incentive Plan). The purpose of the 73




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##### Table of Contents



Incentive Plan is to promote the best interests
of the Exchange while enhancing EICs shareholder value by basing a portion of selected
employees compensation on
the performance of such employee and the Company. Performance measures are established by the Compensation
Committee based on the attainment of certain predetermined EIC performance goals. Included in the Bonus
column are premiums paid under Insurance Bonus Agreements, which
replaced EICs split dollar insurance program, for Messrs. Ludrof, Van
Gorder, Garcia, Brinling and Ziegler that totaled $40,915, $42,201, $16,437, $46,908 and $0 in 2005,
respectively, $44,017, $42,201, $22,581, $46,907 and $0 in 2004, respectively, and $31,494, $3,535, $0, $4,196 and
$0 in 2003, respectively. The amounts indicated also include reimbursement for perquisites in the amounts of
$18,258, $7,799, $7,292, $15,540 and $0 in 2005, respectively;
$7,921, $7,428, $0, $6,948 and $0 in 2004, respectively; $0, $7,217, $5,861,
$11,778 and $0 in 2003, respectively. For Mr. Ludrof, the 2005
amount includes $41,923 representing the value of 789 shares of
EICs Stock distributed to him on January 12, 2006.(2)
    
    Amounts indicated in the Other Annual Compensation column include the taxable value of group life insurance
policies in excess of $50,000 and the associated tax reimbursement for the named executive officers. Amounts also
include dividends paid on shares under the Long-Term Incentive Plan adopted by EIC in 1997 (the Initial LTIP).
For Mr. Ludrof, the 2005 amount includes $68,940 for the actual cost of his personal use of EICs aircraft plus
$8,054 for tax reimbursement of the related IRS imputed income and an incentive of $25.(3)
    
    The Restricted Stock Awards column represents Initial LTIP benefits expressed in dollar
amounts using the closing price of EICs Class A Common Stock as of the end of the respective year
($53.20 at December 31, 2005, $52.57 at December 31, 2004 and $42.38 at December 31, 2003) that
remain restricted at the end of the year. Amounts shown in the Restricted Stock Awards column are
paid in three annual installments beginning with the year in which the award is made. The last
award under the Initial LTIP was made in 2003. The number of shares awarded to Messrs. Ludrof, Van
Gorder, Garcia, Brinling and Ziegler, respectively, that remain restricted at the end of the year
were: 6,347, 3,303, 2,613, 2,231 and 1,767 for 2005; 2,707, 3,511, 2,563, 2,416 and 1,412 for 2004
and 2,972, 4,072, 2,972, 2,883 and 1,637 for 2003. See Long-Term Incentive Plans for a detailed
description of EICs Initial LTIP and the Long-Term Incentive Plan EIC adopted in 2004 (the New
LTIP). No performance periods have yet ended for the New LTIP, so no amounts related to the New
LTIP are reflected in the Restricted Stock Awards column. Initial LTIP 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
benefits under the Initial LTIP that became unrestricted at the end
of such year.
The shares for 2003 were distributed in January 2004, the shares for 2004 were distributed in January 2005 and
the shares for 2005 were distributed in January 2006. 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. Ludrof, Van Gorder, Garcia, Brinling and Ziegler were
3,492, 3,134, 2,318, 2,283 and 1,329, respectively for 2005;
2,479, 3,122, 2,235, 2,310 and 1,166, respectively for 2004; and
3,508, 3,402, 2,176, 2,485 and 1,393, respectively for 2003. Mr. Brinling deferred the distribution of 531 shares in 2003 (valued using the share price as of
December 31, 2003).(5)
    
    Amounts shown in the All Other Compensation column include matching contributions made by EIC pursuant to EICs
Employee Savings Plan, expenses for spousal travel and deferred dividends and related earnings. For 2005,
matching contributions made by EIC to the Employee Savings Plan amounted to $28,282, $17,939, $14,175, $11,865 and
$11,686 on behalf of Messrs. Ludrof, Van Gorder, Garcia, Brinling and Ziegler, respectively. For 2004, matching
contributions made by EIC to the Employee Savings Plan amounted to $26,150, $17,510, $13,514, $11,490 and $11,130
on behalf of Messrs. Ludrof, Van Gorder, Garcia, Brinling and Ziegler, respectively. For 2003, matching
contributions made by EIC to the Employee Savings Plan amounted to $25,800, $17,331, $13,292, $11,391 and $10,600
on behalf of Messrs. Ludrof, 74




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Van Gorder, Garcia, Brinling and Ziegler, respectively. Expenses for spousal travel were
$4,861 and $4,461 for Messrs. Ludrof and Brinling, respectively, in 2003. Mr. Brinling also deferred dividends of
$4,193, $2,774 and $2,451 and interest on deferred dividends of $1,572, $1,027 and $638 in 2005, 2004 and 2003,
respectively. Agreements with Executive Officers
  (a)
    
    The term of the contract for Mr. Ludrof will remain at 4 years, expiring on
December 11, 2009. For all other of the above officers, the term of the contract was
increased from 2 years to 3 years and will expire on December 11, 2008, unless the
agreement is therefore terminated in accordance with its terms, with or without Cause
(as defined in the agreement), 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 EIC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 by EIC or by the executive for
Good Reason (as defined in the agreement) then the executive shall be entitled to
receive: (i) for the CEO 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
the sum of the higher of the CEOs target amount, or actual bonus paid under any EIC
annual incentive plan for the three (3) calendar years preceding the date of the
termination of the CEOs employment, divided by three; for the named executive vice
presidents, an amount equal to the sum of 2.75 times the executives highest annual
base salary during the preceding three years, plus an amount equal to the sum of the
higher of the executives target amount, or actual bonus paid under any EIC annual
incentive plan for the three (3) calendar years preceding the date of the termination
of the executives employment, divided by three; and for the senior vice president, 2.5
times the officers highest annual base salary during the preceding three years, plus
an amount
 75




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##### Table of Contents



equal to the sum of the higher of the officers target amount, or actual bonus paid
under any EIC annual incentive plan for the three (3) calendar years preceding the
date of the termination of the senior vice presidents employment, divided by three;
(ii) any award or other compensation to which the executive is entitled under any EIC
LTIP; (iii) continuing participation in any employee benefit plans for a period of
three years following a termination to the extent the executive and his or her
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 (the SERP), including an unreduced
benefit for early retirement before age 65, and a gross-up for income taxes on the
annuity and/or lump sum payment of the retirement benefit. Under the prior
agreements, all of the named executive officers received three times their highest
based salary, and three times the highest bonus amount paid in the three prior years
to termination. Based on the research and recommendation of the consultant to the
committee, the severance benefit multiple was reduced from 3 times to 2.75 times for
the Executive Vice Presidents and 2.5 times for the Senior Vice President, consistent
with the consultants market research. Additionally, the bonus component of the
severance benefit was reduced from the highest award in the prior three years to the
average of the bonus amount in the prior three years. Deferral options available
under the previous agreements were eliminated to conform to the requirements of the
American Jobs Creation Act;(e)
    
    A cash payment (a Gross-Up Payment) equal to the then current rate of tax
under Section 4999 of the Internal Revenue Code of 1986, as amended (the Code)
multiplied by the total of the amounts paid or payable, including the Gross-Up Payment,
which are deemed to be a part of an excess parachute payment as that term is defined
in Sections 4999 and 280G of the Code;(f)
    
    Provisions relating to confidentiality and nondisclosure following an
executives termination; and(g)
    
    An agreement by the executive not to compete with EIC for a period of one year
following his or her termination, unless such termination was effected by EIC without
Cause.
  Stock Options and Stock Appreciation Rights
  Long-Term
Incentive Plans
 76




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77




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LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
 Number of Shares, Units
    
    
    Performance
    
    
    Estimated Future Payouts Underor Other Rights(#)
    
    
    or Other
    
    
    Non-Stock Price-Based PlansRestricted
    
    
    Period UntilPhantom
    
    
    Performance
    
    
    MaturationName
    
    Share Units (1)
    
    
    Shares (2)
    
    
    or Payout
    
    
    Threshold
    
    
    Target($)
    
    
    MaximumJeffrey A. Ludrof
    
    
    60,698
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    605,320
    
    
    
    (3
    )N/A
    
    
    
    15,926
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    653,746
    
    
    
    (4
    )N/A
    
    
    
    13,830
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    719,120
    
    
    
    (4
    )Jan R. Van Gorder
    
    
    24,847
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    247,787
    
    
    
    (3
    )N/A
    
    
    
    6,932
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    284,543
    
    
    
    (4
    )N/A
    
    
    
    5,637
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    293,079
    
    
    
    (4
    )Philip A. Garcia
    
    
    20,019
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    199,644
    
    
    
    (3
    )N/A
    
    
    
    5,350
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    219,608
    
    
    
    (4
    )N/A
    
    
    
    4,821
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    250,691
    
    
    
    (4
    )John J. Brinling, Jr.
    
    
    16,460
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    164,148
    
    
    
    (3
    )N/A
    
    
    
    4,199
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    172,355
    
    
    
    (4
    )N/A
    
    
    
    3,448
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    179,250
    
    
    
    (4
    )Douglas F.
Ziegler
    
    
    13,380
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    132,500
    
    
    
    (3
    )N/A
    
    
    
    4,406
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    180,863
    
    
    
    (4
    )N/A
    
    
    
    3,653
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    189,905
    
    
    
    (4
    )Executive Officer
    
    
    146,467
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    1,460,664
    
    
    
    (3
    )Group
    
    
    N/A
    
    
    
    40,043
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    1,643,666
    
    
    
    (4
    )N/A
    
    
    
    35,143
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    1,827,255
    
    
    
    (4
    )Non-Executive Officer
    
    
    85,230
    
    
    
    N/A
    
    
    
    2003-2005
    
    
    
    0
    
    
    
    849,974
    
    
    
    (3
    )N/A
    
    
    
    24,494
    
    
    
    2004-2006
    
    
    
    0
    
    
    
    1,005,275
    
    
    
    (4
    )Employee Group
    
    
    N/A
    
    
    
    22,529
    
    
    
    2005-2007
    
    
    
    0
    
    
    
    1,171,090
    
    
    
    (4
    )
   (1)
    
    Reflects awards made under the Initial LTIP.(2)
    
    Reflects awards made under the New LTIP.(3)
    
    An executives target award is established by the Compensation Committee. Under the Initial LTIP, the
actual value of an executives phantom share units at the end of a performance period may be more or
less than the executives target amount. However, the maximum value of phantom share units earned by
an executive for the 2003-2005 performance period is $500,000.(4)
    
    An executives target award is established by the Compensation Committee. Under the New LTIP, the
actual number and value of the shares of EICs Class A Common Stock paid to an executive for restricted
performance shares at the end of a performance period may be more or less than the executives target.
However, the number of shares of EICs Class A Common Stock issued to an executive for his or her
restricted performance shares may not exceed 250,000 shares at the end of a performance period. 78




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Pension Plan
  PENSION PLAN TABLE
 Years of ServiceRemuneration
    
    15
    
    
    20
    
    
    25
    
    
    30$250,000
    
    $
    75,000
    
    
    $
    100,000
    
    
    $
    125,000
    
    
    $
    150,000300,000
    
    
    90,000
    
    
    
    120,000
    
    
    
    150,000
    
    
    
    180,000350,000
    
    
    105,000
    
    
    
    140,000
    
    
    
    175,000
    
    
    
    210,000400,000
    
    
    120,000
    
    
    
    160,000
    
    
    
    200,000
    
    
    
    240,000450,000
    
    
    135,000
    
    
    
    180,000
    
    
    
    225,000
    
    
    
    270,000500,000
    
    
    150,000
    
    
    
    200,000
    
    
    
    250,000
    
    
    
    300,000550,000
    
    
    165,000
    
    
    
    220,000
    
    
    
    275,000
    
    
    
    330,000600,000
    
    
    180,000
    
    
    
    240,000
    
    
    
    300,000
    
    
    
    360,000650,000
    
    
    195,000
    
    
    
    260,000
    
    
    
    325,000
    
    
    
    390,000700,000
    
    
    210,000
    
    
    
    280,000
    
    
    
    350,000
    
    
    
    420,000750,000
    
    
    225,000
    
    
    
    300,000
    
    
    
    375,000
    
    
    
    450,000800,000
    
    
    240,000
    
    
    
    320,000
    
    
    
    400,000
    
    
    
    480,000
    Director Compensation
 79




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Equity Compensation Plan Information
  Number ofNumber of securities
    
    
    Weighted average
    
    
    securitiesto be issued upon
    
    
    exercise price of
    
    
    remaining availableexercise of
    
    
    outstanding
    
    
    for future issuanceoutstanding options,
    
    
    options, warrants
    
    
    under equityPlan Category
    
    warrants and rights
    
    
    and rights
    
    
    compensation plansEquity compensation plans approved
by security holders
    
    
    204,479
    (1)
    
    
    N/A
    
    
    
    N/AEquity compensation plans not approved
by security holders
    
    
    25,820
    (2)
    
    
    N/A
    
    
    
    N/ATotal
    
    
    230,299
   (1)
    
    The number of shares designated are not issued by EIC but are purchased by EIC in the open
market and awarded to the participants pursuant to the terms of the respective plans.
Includes 82,270 restricted shares of EIC Class A Common Stock for closed performance
periods under the Initial LTIP. The total number of restricted performance shares awarded
under the New LTIP for the 2005-2007 and 2004-2006 performance periods was 57,672 and
64,537, respectively.(2)
    
    Represents total share credits in deferred stock accounts as of December 31, 2005 under
EICs deferred stock compensation plan for its outside directors. 80




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Compensation Committee Interlocks and Insider Participation
  Report of the Executive Compensation and Development Committee
 http://www.erieinsurance.com
      81




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Review of Executive Compensation
   Director Compensation
   
  82




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Shares of
    
    
    Percentage ofName of Individual
    
    Common Stock
    
    
    Outstandingor Identity of Group
    
    Beneficially Owned(1)(2)
    
    
    Common Stock(3)5% or Greater Holders:Erie Insurance Exchange
Erie, Pennsylvania
    
    
    5,055,562
    
    
    
    53.50
    %Erie Indemnity Company
Erie, Pennsylvania
    
    
    2,043,900
    
    
    
    21.63
    %Directors and Nominees
for Director:Kaj Ahlmann
    
    
    0
    
    
    
    0John T. Baily
    
    
    218
    
    
    
    0J. Ralph Borneman, Jr.
    
    
    1,536
    
    
    
    0Wilson C. Cooney
    
    
    0
    
    
    
    0Patricia Garrison-Corbin
    
    
    100
    
    
    
    0John R. Graham
    
    
    0
    
    
    
    0Jonathan Hirt Hagen
    
    
    300
    
    
    
    0Susan Hirt Hagen(4)
    
    
    300
    
    
    
    0C. Scott Hartz
    
    
    0
    
    
    
    0F. William Hirt
    
    
    26,649
    
    
    
    0Claude C. Lilly, III
    
    
    0
    
    
    
    0Jeffrey A. Ludrof
    
    
    100
    
    
    
    0Robert C. Wilburn
    
    
    500
    
    
    
    0Executive Officers(6):Jan R. Van Gorder(5)
    
    
    75
    
    
    
    0John J. Brinling, Jr.(7)
    
    
    1,260
    
    
    
    0Philip A. Garcia
    
    
    1,275
    
    
    
    0Douglas F. Ziegler
    
    
    570
    
    
    
    0All Directors and
Executive Officers
as a Group (17 persons)
    
    
    32,881
    
    
    
    0
 83




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##### Table of Contents



(1)
    
    Information furnished by the named persons.(2)
    
    Under the rules of the SEC, a person is deemed to be the beneficial owner of
securities if the person has, or shares, voting power, which includes the
power to vote, or to direct the voting of, such securities, or investment
power, which includes the power to dispose, or to direct the disposition, of
such securities. Under these rules, more than one person may be deemed to be
the beneficial owner of the same securities. Securities beneficially owned
also include securities owned jointly, in whole or in part, or individually by
the persons spouse, minor children or other relatives who share the same
home. The information set forth in the above table includes all shares of
Common Stock over which the named individuals, individually or together, share
voting power or investment power. This table does not reflect shares of
Common Stock as to which beneficial ownership is disclaimed.(3)
    
    Less than 1% unless otherwise indicated.(4)
    
    Mrs. Hagen owns 300 shares directly. Mrs. Hagen and her husband, Thomas B.
Hagen, are limited partners of the Hagen Family Limited Partnership and Thomas
B. Hagen is the general partner. As the general partner of the Hagen Family
Limited Partnership, Thomas B. Hagen has sole voting power and investment
power over the shares owned by the partnership. Mrs. Hagen disclaims
beneficial ownership of 154,182 shares (1.63%) held in the Hagen Family
Limited Partnership and the 300 shares held by Thomas B. Hagen.(5)
    
    Of this total, 30 shares are held directly by Mr. Van Gorder and each of his
three sons owns 15 shares.(6)
    
    Excludes Mr. Ludrof, who is listed under Directors and Nominees for Director.(7)
    
    Includes 630 shares held directly by Mr. Brinling, 315 shares held in an
Individual Retirement Account for Mr. Brinling and 315 shares held in an
Individual Retirement Account for his wife. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 84




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Report of the Audit Committee
 http://www.erieinsurance.com
 85




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Communication with Audit Committees Independence Discussions with
Audit Committees
    
  86




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Audit Fees
 
 2005Erie Indemnity
    
    
    Erie InsuranceCompany &
    
    
    Exchange &Subsidiaries
    
    
    Subsidiary
    
    
    Erie Family Life
    
    
    TotalAudit Fees
    
    $
    1,026,325
    
    
    $
    198,030
    
    
    $
    357,577
    
    
    $
    1,581,932Audit-Related Fees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0All Other Fees
    
    
    6,000
    
    
    
    0
    
    
    
    0
    
    
    
    6,000Total Fees
    
    $
    1,032,325
    
    
    $
    198,030
    
    
    $
    357,577
    
    
    $
    1,587,932
 2004Erie Indemnity
    
    
    Erie InsuranceCompany &
    
    
    Exchange &Subsidiaries
    
    
    Subsidiary
    
    
    Erie Family Life
    
    
    TotalAudit Fees
    
    $
    1,356,597
    
    
    $
    169,273
    
    
    $
    361,876
    
    
    $
    1,887,746Audit-Related Fees
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0
    
    
    
    5,163
    
    
    
    5,163All Other Fees
    
    
    6,000
    
    
    
    0
    
    
    
    0
    
    
    
    6,000Total Fees
    
    $
    1,362,597
    
    
    $
    169,273
    
    
    $
    367,039
    
    
    $
    1,898,909
 87




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##### Table of Contents



Part IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  (1)
    The following financial statements of the Company and the reports of independent
certified public accountants are incorporated herein by reference to Item 8 of this Form
10-K.




| |  | Reports of Independent Registered Public Accounting Firms
Statements of Financial Position  December 31, 2005 and
2004
Statements of Operations for the years ended December 31, 2005,
2004 and 2003
Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003

Statements of Shareholders Equity for the years ended December 31, 2005, 2004 and 2003
Notes to Financial Statements
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The following financial statement schedules are included herein:
| | --- | ----------------------------------------------------------------

PageSchedule I  Summary of Investments Other Than
Investments in Related Parties
    
    
    90Schedule III  Supplementary Insurance Information
    
    
    91Schedule IV  Reinsurance
    
    
    93




| |     | 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                                                                                                                                                                                                                                
|
| |     | See Exhibit Index on Page 94 hereof.                                                                                                                                                                                                    
|
| |     | 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.      

88



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SIGNATURES
  
 
 
 
 
 Board of Directors
 /s/ Kaj Ahlmann
    
    /s/ Susan Hirt HagenKaj Ahlmann
    
    Susan Hirt Hagen/s/ John T. Baily
    
    /s/ C. Scott HartzJohn T. Baily
    
    C. Scott Hartz/s/ J. Ralph Borneman, Jr.
    
    /s/ F. William HirtJ. Ralph Borneman, Jr.
    
    F. William Hirt/s/ Wilson C. Cooney
    
    /s/ Claude C. Lilly, IIIWilson C. Cooney
    
    Claude C. Lilly, III/s/ Patricia Garrison-Corbin
    
    /s/ Jeffrey A. LudrofPatricia Garrison-Corbin
    
    Jeffrey A. Ludrof/s/ John R. Graham
    
    /s/ Robert C. WilburnJohn R. Graham
    
    Robert C. Wilburn/s/ Jonathan HagenJonathan Hagen
 89




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##### Table of Contents



SCHEDULE I  SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
 December 31, 2005Cost or
    
    
    
    
    
    
    Amount at whichAmortized
    
    
    Market
    
    
    Shown in theType of Investment
    
    Cost
    
    
    Value
    
    
    Balance Sheet(in thousands)Fixed Maturities Available-for-SaleU.S. Treasuries and Government Agencies
    
    $
    37,091
    
    
    $
    37,195
    
    
    $
    37,195Public Utilities
    
    
    183,441
    
    
    
    188,932
    
    
    
    188,932U.S. Banks, Trusts, and Insurance Companies
    
    
    232,128
    
    
    
    237,235
    
    
    
    237,235U.S. Industrial and Miscellaneous
    
    
    562,747
    
    
    
    574,672
    
    
    
    574,672Mortgage-Backed Securities
    
    
    155,603
    
    
    
    155,756
    
    
    
    155,756Asset-Backed Securities
    
    
    15,862
    
    
    
    15,801
    
    
    
    15,801Foreign Governments
    
    
    3,970
    
    
    
    4,195
    
    
    
    4,195Foreign Banks, Trusts, and Insurance Companies
    
    
    50,504
    
    
    
    50,552
    
    
    
    50,552Foreign Industrial and Miscellaneous
    
    
    105,300
    
    
    
    110,727
    
    
    
    110,727Foreign Public Utilities
    
    
    3,000
    
    
    
    3,002
    
    
    
    3,002Total Fixed Maturities Available-for-Sale
    
    $
    1,349,646
    
    
    $
    1,378,067
    
    
    $
    1,378,067Equity SecuritiesNonredeemable Preferred Stocks:U.S. Banks, Trusts, and Insurance Companies
    
    $
    33,909
    
    
    $
    35,693
    
    
    $
    35,693U.S. Industrial and Miscellaneous
    
    
    20,801
    
    
    
    22,292
    
    
    
    22,292Foreign Banks, Trusts and Insurance Companies
    
    
    21,180
    
    
    
    22,681
    
    
    
    22,681Foreign Industrial and Miscellaneous
    
    
    3,000
    
    
    
    3,879
    
    
    
    3,879Total Equity Securities
    
    $
    78,890
    
    
    $
    84,545
    
    
    $
    84,545Limited Partnerships
    
    $
    15,341
    
    
    $
    16,671
    
    
    $
    16,671Mortgage Loans
    
    
    5,930
    
    
    
    5,930
    
    
    
    5,930Real Estate Investment Property
    
    
    1,219
    
    
    
    1,219
    
    
    
    1,219Policy Loans
    
    
    11,667
    
    
    
    11,667
    
    
    
    11,667Total Investments
    
    $
    1,462,693
    
    
    $
    1,498,099
    
    
    $
    1,498,099
 90




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SCHEDULE III  SUPPLEMENTARY INSURANCE INFORMATION
 At December 31Deferred
    
    
    FuturePolicy
    
    
    Policy
    
    
    
    
    
    
    OtherAcquisition
    
    
    Benefits &
    
    
    Unearned
    
    
    PolicySegment
    
    Costs
    
    
    Deposits
    
    
    Premium
    
    
    Claims(in thousands)2005Ordinary Life Insurance
    
    $
    121,966
    
    
    $
    320,247
    
    
    $
    310
    
    
    $
    5,205Accident & Health
    
    
    0
    
    
    
    952
    
    
    
    0
    
    
    
    0Group Life & Other
    
    
    0
    
    
    
    4,145
    
    
    
    6
    
    
    
    662Annuities
    
    
    11,846
    
    
    
    1,021,442
    
    
    
    0
    
    
    
    0Corporate
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    133,812
    
    
    $
    1,346,786
    
    
    $
    316
    
    
    $
    5,8672004Ordinary Life Insurance
    
    $
    115,529
    
    
    $
    283,861
    
    
    $
    310
    
    
    $
    2,866Accident & Health
    
    
    0
    
    
    
    766
    
    
    
    0
    
    
    
    0Group Life & Other
    
    
    0
    
    
    
    3,580
    
    
    
    6
    
    
    
    287Annuities
    
    
    3,588
    
    
    
    984,870
    
    
    
    0
    
    
    
    0Corporate
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    119,117
    
    
    $
    1,273,077
    
    
    $
    316
    
    
    $
    3,1532003Ordinary Life Insurance
    
    $
    91,328
    
    
    $
    255,843
    
    
    $
    251
    
    
    $
    3,406Accident & Health
    
    
    0
    
    
    
    338
    
    
    
    0
    
    
    
    0Group Life & Other
    
    
    0
    
    
    
    2,908
    
    
    
    5
    
    
    
    247Annuities
    
    
    6,879
    
    
    
    932,553
    
    
    
    0
    
    
    
    0Corporate
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    98,207
    
    
    $
    1,191,642
    
    
    $
    256
    
    
    $
    3,653
  91




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##### Table of Contents



SCHEDULE III  SUPPLEMENTARY INSURANCE INFORMATION
 For the Years Ended December 31,AmortizationNet
    
    
    Benefits,
    
    
    of DeferredPolicy
    
    
    Investment
    
    
    Claims
    
    
    Acquisition
    
    
    OperatingSegment
    
    Revenues(a)
    
    
    Income(b)
    
    
    & Losses
    
    
    Costs
    
    
    Expenses(in thousands)2005Ordinary Life Insurance
    
    $
    55,963
    
    
    $
    15,980
    
    
    $
    38,425
    
    
    $
    8,215
    
    
    $
    20,011Accident & Health
    
    
    317
    
    
    
    24
    
    
    
    182
    
    
    
    0
    
    
    
    240Group Life & Other
    
    
    3,211
    
    
    
    216
    
    
    
    2,884
    
    
    
    0
    
    
    
    375Annuities
    
    
    1
    
    
    
    56,116
    
    
    
    44,916
    
    
    
    410
    
    
    
    8,591Corporate
    
    
    0
    
    
    
    12,539
    
    
    
    0
    
    
    
    0
    
    
    
    312Total
    
    $
    59,492
    
    
    $
    84,875
    
    
    $
    86,407
    
    
    $
    8,625
    
    
    $
    29,5292004Ordinary Life Insurance
    
    $
    53,184
    
    
    $
    15,017
    
    
    $
    30,964
    
    
    
    ($2,026
    )
    
    $
    17,459Accident & Health
    
    
    299
    
    
    
    16
    
    
    
    274
    
    
    
    0
    
    
    
    297Group Life & Other
    
    
    3,063
    
    
    
    185
    
    
    
    4,275
    
    
    
    0
    
    
    
    393Annuities
    
    
    2
    
    
    
    54,774
    
    
    
    44,209
    
    
    
    2,839
    
    
    
    5,547Corporate
    
    
    0
    
    
    
    10,632
    
    
    
    0
    
    
    
    0
    
    
    
    310Total
    
    $
    56,548
    
    
    $
    80,624
    
    
    $
    79,722
    
    
    $
    813
    
    
    $
    24,0062003Ordinary Life Insurance
    
    $
    52,045
    
    
    $
    15,128
    
    
    $
    27,906
    
    
    $
    5,597
    
    
    $
    17,075Accident & Health
    
    
    254
    
    
    
    8
    
    
    
    123
    
    
    
    0
    
    
    
    150Group Life & Other
    
    
    3,628
    
    
    
    161
    
    
    
    2,670
    
    
    
    0
    
    
    
    304Annuities
    
    
    5
    
    
    
    54,528
    
    
    
    42,109
    
    
    
    1,880
    
    
    
    4,681Corporate
    
    
    0
    
    
    
    8,900
    
    
    
    0
    
    
    
    0
    
    
    
    173Total
    
    $
    55,932
    
    
    $
    78,725
    
    
    $
    72,808
    
    
    $
    7,477
    
    
    $
    22,383
   (a)
    
    Net of reinsurance ceded(b)
    
    Net investment income is allocated based on average reserves 92




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##### Table of Contents



SCHEDULE IV  REINSURANCE
 Ceded toGross
    
    
    Other
    
    
    NetAmount
    
    
    Companies
    
    
    Amount(in thousands)December 31, 2005Life insurance in force
    
    $
    32,508,227
    
    
    $
    14,460,521
    
    
    $
    18,047,706Premiums for the year:Life Insurance
    
    
    80,111
    
    
    
    24,148
    
    
    
    55,963Annuities
    
    
    1
    
    
    
    0
    
    
    
    1Accident & Health
    
    
    617
    
    
    
    300
    
    
    
    317Group Life & Other
    
    
    3,211
    
    
    
    0
    
    
    
    3,211Total Premiums
    
    $
    83,940
    
    
    $
    24,448
    
    
    $
    59,492December 31, 2004Life insurance in force
    
    $
    30,086,967
    
    
    $
    12,478,433
    
    
    $
    17,608,534Premiums for the year:Life Insurance
    
    
    75,367
    
    
    
    22,184
    
    
    
    53,183Annuities
    
    
    2
    
    
    
    0
    
    
    
    2Accident & Health
    
    
    602
    
    
    
    303
    
    
    
    299Group Life & Other
    
    
    3,064
    
    
    
    0
    
    
    
    3,064Total Premiums
    
    $
    79,035
    
    
    $
    22,487
    
    
    $
    56,548December 31, 2003Life insurance in force
    
    $
    27,077,945
    
    
    $
    9,788,882
    
    
    $
    17,289,063Premiums for the year:Life Insurance
    
    
    68,777
    
    
    
    16,732
    
    
    
    52,045Annuities
    
    
    5
    
    
    
    0
    
    
    
    5Accident & Health
    
    
    537
    
    
    
    283
    
    
    
    254Group Life & Other
    
    
    3,628
    
    
    
    0
    
    
    
    3,628Total Premiums
    
    $
    72,947
    
    
    $
    17,015
    
    
    $
    55,932
  93




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##### Table of Contents



SequentiallyExhibit
    
    
    
    NumberedNumber
    
    Description of Exhibit
    
    Page10.34*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and Jeffrey A. Ludrof10.35*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and Jan R. Van Gorder10.36*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and Philip A. Garcia10.37*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and John J. Brinling, Jr.10.38*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and Douglas F. Ziegler10.39*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and Michael J. Krahe10.40*
    
    Addendum to Employment Agreement effective December 12, 2003
by and between Erie Indemnity Company and Thomas B. Morgan10.41*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and Jeffrey A. Ludrof10.42*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and Jeffrey A. Ludrof10.43*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and Jan R. Van Gorder10.44*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and Philip A. Garcia10.45*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and John J. Brinling, Jr.10.46*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and Michael J. Krahe10.47*
    
    Insurance bonus agreement effective December 23, 2003 by
and between Erie Indemnity Company and Thomas B. Morgan10.48**
    
    Annual Incentive Plan effective March 2, 200410.49**
    
    Long-Term Incentive Plan effective March 2, 2004
 94




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##### Table of Contents



EXHIBIT INDEX
(PURSUANT TO ITEM 601 OF REGULATION S-K) SequentiallyExhibit
    
    
    
    NumberedNumber
    
    Description of Exhibit
    
    Page14*
    
    Code of Conduct31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    9631.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    9732
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes  Oxley Act of 2002
    
    
    98
   *
    
    Such exhibit is incorporated by reference to the like titled exhibit in the Registrants
Original Form 10-K Annual Report for the year ended December 31, 2003 that was filed with the
Commission on March 8, 2004.**
    
    Such exhibit is incorporated by reference to the like titled exhibit in the Registrants
Original Form 10-K Annual Report for the year ended December 31, 2004 that was filed with the
Commission on February 24, 2005. 95