The Exchange implemented rate increases in 2019, 2018, and 2017 in order to meet loss cost expectations. As the Exchange writes policies with annual terms only, rate actions take 12 months to be fully recognized in written premium and 24 months to be fully recognized in earned premiums. Since rate changes are realized at renewal, it takes 12 months to implement a rate change to all policyholders and another 12 months to earn the increased or decreased premiums in full. As a result, certain rate actions approved in 2018 were reflected in 2019, and recent rate actions in 2019 will be reflected in 2020. The Exchange continuously evaluates pricing and product offerings to meet consumer demands.
Changes in premium levels attributable to the growth in policies in force directly affects the profitability of the Exchange and has a direct bearing on our management fee. Our continued focus on underwriting discipline and the maturing of pricing sophistication models has contributed to the Exchange's steady policy retention ratios and increased average premium per policy. The continued growth of its policy base is dependent upon the Exchange's ability to retain existing, and attract new, subscribers/policyholders. A lack of new policy growth or the inability to retain existing customers could have an adverse effect on the Exchange's premium level growth, and consequently our management fee.
We have audited the accompanying statements of financial position of Erie Indemnity Company (the "Company") as of December 31, 2019 and 2018, the related statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
(3) A one-time adjustment was made in 2017 to reclassify stranded tax effects of the components of accumulated other comprehensive income ("AOCI") (loss) resulting from enactment of Tax Cuts and Jobs Act ("TCJA") from AOCI (loss) to retained earnings. See Note 2, "Significant Accounting Policies".
We allocate a portion of our management fee revenue, currently 25% of the direct and affiliated assumed written premiums of the Exchange, between the two performance obligations we have under the subscriber’s agreement. The first performance obligation is to provide policy issuance and renewal services to the subscribers (policyholders) at the Exchange, and the second is to act as attorney-in-fact on behalf of the Exchange, as well as the service provider for its insurance subsidiaries, with respect to all administrative services. The transaction price, including management fee revenue and administrative service reimbursement revenue, is allocated based on the estimated standalone selling prices developed using industry information and other available information for similar services. We update the transaction price allocation annually based upon the most recent information available. There was no material change to the allocation in 2019.
The first performance obligation is to provide policy issuance and renewal services that result in executed insurance policies between the Exchange or one of its insurance subsidiaries and the subscriber (policyholder). Our customer, the subscriber (policyholder), receives economic benefits when substantially all the policy issuance or renewal services are complete and an insurance policy is issued or renewed by the Exchange or one of its insurance subsidiaries. It is at the time of policy issuance or renewal that the allocated portion of revenue is recognized.
At December 31, 2019, the plan awards for the 2017-2019 performance period, which will be granted as a cash award were fully vested. Distributions will be made in 2020 once peer group financial information becomes available. The estimated plan award based upon the peer group information as of September 30, 2019 is $7.8 million. At December 31, 2018, the awards paid in cash for the 2016-2018 performance period were fully vested and resulted in an $8.2 million payment to participants in June 2019. At December 31, 2017, the awards paid in cash for the 2015-2017 performance period were fully vested and resulted in a $8.3 million payment to plan participants in June 2018. At December 31, 2016, the awards for the 2014-2016 performance period were fully vested. Participants had the option of receiving either cash or stock for the 2014-2016 awards. The cash award of $4.7 million was paid in June 2017 and the stock award of 46,884 shares with an average share price of $122.40 and a market value of $5.7 million were purchased for plan participants in June 2017. The ECDC has determined that the plan awards for the 2018-2020 and 2019-2021 performance periods will be paid in cash.
We lease the home office from the Exchange. See Note 8, "Leases". Lease expense totaled $6.1 million, $6.0 million, and $5.9 million in 2019, 2018, and 2017, respectively. Operating expenses, including utilities, cleaning, repairs, real estate taxes, and property insurance, totaled $16.7 million, $13.5 million, and $12.2 million in 2019, 2018, and 2017, respectively. The Exchange and its subsidiaries reimburse us for rent costs and related operating expenses of shared facilities used to perform administrative services, which are allocated based upon usage or square footage occupied. Reimbursements related to the use of this space totaled $4.2 million, $3.9 million, and $4.0 million in 2019, 2018, and 2017, respectively. We also had a lease commitment with EFL for a field office until 2018. Annual rentals paid to EFL under this lease totaled $0.4 million in both 2018 and 2017.