UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 11, 2002
ERIE INDEMNITY COMPANY
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 0-24000 25-0466020
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
100 Erie Insurance Place, Erie, Pennsylvania 16530
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (814) 870-2000
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Item 5. OTHER EVENTS.
On December 11, 2002, Erie Indemnity Company issued a press release which is
filed as Exhibit 99.1 hereto and is incorporated herein by reference.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit Number Description
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99.1 Press release dated December 11, 2002
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ERIE INDEMNITY COMPANY
Erie Indemnity Company
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(Registrant)
Date: December 11, 2002 /s/ Philip A. Garcia
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(Philip A. Garcia, Executive Vice President & CFO)
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EXHIBIT 99.1
ERIE INDEMNITY SETS MANAGEMENT FEE AND INCREASES DIVIDEND
Erie, Pa. - December 11, 2002 -- At the December 10, 2002, regular meeting of
the board of directors of the Erie Indemnity Company (NASDAQ: ERIE), the board
approved an increase in shareholders' dividends. The board also set the
management fee rate and service fee rate charged to the Erie Insurance Exchange
for 2003.
The board of directors increased the regular quarterly dividend from $0.17 to
$0.19 on each Class A share and from $25.50 to 28.50 on each Class B share. The
dividend is payable January 20, 2003, to shareholders of record as of January 6,
2003, with a dividend ex-date of January 2, 2003. The dividend increases were a
result of the Company's continuing strong financial performance. The rise in the
dividend represents an 11.8 percent increase over the current dividend amount.
In a separate action, the board voted to reduce for 2003 the management fee rate
to 24 percent from the current 25 percent rate paid Erie Indemnity Company by
the Erie Insurance Exchange. If the 24 percent rate had been in effect for the
nine months ended September 30, 2002, the Company's net income per share would
have been reduced by $0.22 or 11.2 percent. The Company's board of directors has
the authority to change the management fee rate at its discretion, however the
maximum fee rate permissible by agreement is 25 percent. This action was taken
after the board's consideration and review of the relative financial position of
the Erie Insurance Exchange and the Erie Indemnity Company.
"Considering the Company's strong earnings position, as evidenced by third
quarter income per share growth, and the relative premium growth and surplus
position of the Erie Insurance Exchange, this action supports our long-term
strategic emphasis on underwriting profitability," says Jeffrey A. Ludrof,
president and CEO.
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The Company also will reduce the service fee rate paid to Erie Indemnity Company
by the Erie Insurance Exchange in 2003 for the management and administration of
its voluntary assumed reinsurance business from unaffiliated entities from 7
percent to 6 percent of the assumed voluntary reinsurance premiums. If the 6
percent rate had been in effect for the nine months ended September 30, 2002,
the Company's net income per share would have been reduced by $0.01.
Erie Indemnity Company management also announced a one-time charge of $.06 per
share, after taxes, will be recorded in the fourth quarter of 2002, to establish
an estimated allowance for returned management fees not expected to be collected
from Erie Insurance Exchange. Future changes in this allowance will be reflected
in the Company's statement of operations and are not expected to be material.
Management fees have previously been returned to Erie Insurance Exchange when
policyholders' canceled their coverage and premiums were returned. This charge
recognizes the management fee anticipated to be returned to the Erie Insurance
Exchange based on historical cancellation rates. Though not material to the
financial results or financial condition of the Company, management believes
that establishing the allowance is appropriate since it is a more conservative
basis of accounting for the management fee. The cash flows of the Erie Indemnity
Company are unaffected by the establishment of the allowance.
Erie Indemnity Company is the principal management company for the member
companies of the Erie Insurance Group, which includes the Erie Insurance
Exchange, Flagship City Insurance Company, Erie Insurance Company, Erie
Insurance Property and Casualty Company, Erie Insurance Company of New York and
Erie Family Life Insurance Company.
According to A.M. Best Company, Erie Insurance Group, based in Erie
Pennsylvania, is the 17th largest automobile insurer in the United States based
on direct premiums written and the 25th largest property/casualty insurer in the
United States based on total lines net premium written. The Group, rated A++,
(superior) by A.M. Best Company, has more than 3.4 million policies in force and
operates in 11 states and the District of Columbia.
News releases and more information about Erie Insurance Group are available at
http://www.erieinsurance.com
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"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995: Certain forward-looking statements contained herein involve risks and
uncertainties. These statements include certain discussions relating to
management fee revenue, cost of management operations, underwriting, premium and
investment income volume, business strategies, profitability and business
relationships and the Company's other business activities during 2002 and
beyond. In some cases, you can identify forward-looking statements by terms such
as "may," will," "should," "could," "would," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "project," "predict," "potential" and
similar expressions. These forward-looking statements reflect the Company's
current views about future events, are based on assumptions and are subject to
known and unknown risks and uncertainties that may cause results to differ
materially from those anticipated in those statements. Many of the factors that
will determine future events or achievements are beyond our ability to control
or predict.
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