Hello everyone and welcome to the Erie Indemnity Company fourth quarter and year-end 2008 earnings conference. At the request of Erie Indemnity, the conference is being recorded for instant replay purposes. At this time, all participants are in a listen-only mode. Following the prepared remarks from management we will open the call for questions and answers. Now I would like to introduce your host for today's call, Ms. Karen Kraus Phillips, Vice President and Director of Investor Relations. Please go ahead ma'am.

Thank you Dale and good morning everyone. We appreciate all you joining us today. On today's call, management will discuss our fourth quarter and year-end 2008 results. Joining me are Terry Cavanaugh, President and CEO; Executive Vice President and Chief Financial Officer, Phil Garcia; Jim Tanous, Executive Vice President, Secretary and General Counsel; Mike Zavasky, Executive Vice President, Insurance Operations; and George Lucore, Executive Vice President, Field Operations. Today's prepared remarks will be approximately 30 minutes. Following those remarks we will open the call for questions. We issued our earnings release and additional supplements yesterday afternoon. If you need a copy of the press release or any of these exhibits, you can find these in the Investor Relations section of our Web site at ErieInsurance.com. We also filed Form 10-K with the SEC. On today's call, the management of Erie Indemnity Company will share important information about current and future initiatives being undertaken at the company. As a result, certain forward-looking statements may be incorporated into their comments. These forward-looking statements reflect the company's current views about future events and are based on assumptions subject to known and unknown risks and uncertainties. These risks and uncertainties may cause results to differ materially from those anticipated as described in those statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. For information on important factors that may cause such differences, please see the Risk Factors in our latest 10-K filing with the SEC filed February 26, 2008, and in the related press release and 8-K. In this call, we will discuss some non-GAAP measures. You can find a reconciliation of those measures to GAAP measures in the press release and in the supplement posted on our investor Web site at ErieInsurance.com. This call is being recorded, and the recording is the property of Erie Indemnity Company. It is not intended for reproduction or rebroadcast by any other party without the prior written consent of Erie Indemnity Company. A replay will be available on our Web site today after 12:30 PM Eastern Time. Your participation on this call will constitute consent to the recording, publication, webcast, broadcast and use of your name, voice and comments by Erie Indemnity. If you do not agree with these terms, please disconnect at this time. And now I'll turn the call over to Erie's President and CEO, Terry Cavanaugh, Terry?

Thank you, Karen. Good morning and thank you for joining us. I'll begin with a brief discussion of our fourth quarter and full year results and give you an idea where we are headed in 2009. Then I’ll turn it over to Phil to review the financial results for the quarter and the full year. We are all keenly aware of the economic challenges facing our country, our families and our businesses. The volatility in the credit, investment and real estate markets has taken its toll, and as of yet they don't appear to be stabilizing. Our fourth quarter 2008 results bear that out as we experienced a net loss for the quarter of $0.12 per share. The investment portfolios of Erie Indemnity Company, Erie Insurance Exchange and Erie Family Life were exposed to considerable realized losses for the quarter. A significant portion of these losses, particularly in the Exchange and the Indemnity Company, were part of our proactive tax management strategy. We expect to see considerable cash inflows from 2008 tax refunds this year as a result of this strategy. Nonetheless, the realized capital losses we incurred in Indemnity and Erie Family Life significantly affected our financial results, both net income and operating income. Our operating income for the quarter was $0.29, far below the $0.69 we saw at the close of the fourth quarter in 2007. Additional losses from our equity of earnings from Erie Family Life of $0.07 and the losses from our limited partnerships of $0.18 also contributed to the decline. As a result of being well capitalized, the balance sheet at [ph] Indemnity and the Exchange withstood the impacts and remain strong. By the end of the year, Erie Indemnity Company’s shareholder equity was nearly $800 million. The exchange policyholder surplus was over $4 billion…

Thanks, Terry. Good morning everyone. The company sustained a net loss per share, diluted, of $0.12 in the fourth quarter 2008 as the upheaval in the financial markets produce realized capital losses on investments. Primary contributor to the net loss for the quarter was capital losses from the sale and impairment of bonds, preferred and common stock, of $32.8 million before tax or $0.41 per share after tax. Net operating income for the quarter was $0.29 per share, down from $0.69 per share in the fourth quarter of ’07. Our net operating income includes results of earnings from our limited partnership investments and our 21.6% equity stake in the earnings of Erie Family Life. Losses from our limited partnerships were $14.6 million before tax or $0.18 per share after tax compared to earnings of $0.14 per share after tax in the fourth quarter of 2007. Our equity and losses of EFL was $3.7 million or $0.07 per share compared to break even in ‘07. I’ll discuss both of these items in more detail when I discuss our investment operations. Looking at our management operations for the fourth quarter ‘08, you’ll see that the management fee revenue was flat compared to a year ago. The fee rate for both quarters was 25% of our direct written premiums at the Property and Casualty Group, which increased 0.6% during the fourth quarter of ’08 compared to the same period in 2007. Rate reductions during the quarter, which decreased direct written premiums by $4.8 million were offset by policies in force growth of 2.9% during the quarter. Private passenger auto policies grew year over year by 2% with retention rates on the line hitting 91.8%. Homeowners policies in force grew 2.9% with a retention of 91.1%. These growth rates are encouraging considering market conditions,…

Thanks, Phil. Dale, we can open the call for questions now.

(Operator instructions) And we will take our first question from Michael Phillips with Stifel Nicolaus. Please go ahead. Michael Phillips – Stifel Nicolaus: Thank you, good morning everybody.

Good morning, Michael.

Good morning. Michael Phillips – Stifel Nicolaus: I want to start out on the investment side. I usually don't hit on that, so I thought I would start with that this time. It might be helpful if you could just spend a second or two kind of going through a little of the history of kind of why we are in some of the alternative investments that we are in, just as a bit of a backdrop. And then kind of segue into that, the question really is how committed are you to staying in those, I guess particularly the private equity? That's obviously quite lumpy.

Okay. So we have in the portfolio you are referring to, the alternative investments, you’re talking about the Exchange or Indemnity? Michael Phillips – Stifel Nicolaus: Well, I guess both – if it makes a difference for your answer in terms in terms of historical. But obviously, I’m just looking at the Indemnity now in terms of the lumpiness with your earnings.

All right. With respect to the Exchange, as you know, we have been fairly aggressive investors. On our portfolio in the Exchange we match off our insurance liabilities with very conservative investment-grade corporate bonds and munis. We then invest the surplus of the Exchange, which is substantial. Generally about half the surplus is invested in common stocks and the other half is invested in alternative assets. There are three portfolios within the alterative assets. There’s mezzanine, which we view as part of our high yield investment portfolio. There is private equity, which we view as a play on the common stock portfolio of the Exchange. And then we also have the real estate. We are not direct real estate investors, so about half that portfolio of alternative assets is invested in real estate around the world with partners that are experts in real estate. So, that’s the strategy at the Exchange. The same sort of strategy exists at Erie Indemnity Company. We have about $300 million there, about half of that portfolio is real estate investments. Michael Phillips – Stifel Nicolaus: Okay. That's helpful. It sounds like just from that the commitment to stay this way is – you’ve seen a lot of companies –

Yes. It’s a fairly illiquid portfolio.

There is a secondary market. But I think, based upon what you heard about our balance sheets and our liquidity, we think there is – we’ve made some good investments, and we will continue to monitor it on a quarter by quarter basis. Michael Phillips – Stifel Nicolaus: I'm not asking for – because of the capital issues at all, because I don't think they’re (inaudible). It's just a matter of what it does to the earnings on a quarterly basis.

Right. Yes, it's pretty illiquid, and there's a secondary market for it, but you can imagine that it's not real efficient right now. Michael Phillips – Stifel Nicolaus: Thanks. I appreciate that. Just back to the – I guess the traditional stuff. Can you talk about how much of your – the mix of your business in personal lines has changed from, if at all from your single auto accounts to kind of the package auto/home? How is that changing over time? And is it going the way you want it to?

I might turn it over to some guys that have a broader or a longer-term perspective than I do, and from that, I know, George or Mike, do you have a sense of that in terms of whether –

I would say that at least 80% of our accounts are dual accounts at this point. We have the orphan auto policy – this is George Lucore by the way – accounts that we have would generally be the sons and daughters of policyholders that don’t have the opportunity for supporting other lines of coverage. But we have a strong series of discounts that support multi-lining with Erie Insurance, including of course multi-cost discounted on our (inaudible) life insurance policy discounts. I don't have the exact figure. I can get back to you with the exact figure. But I feel safe to tell you that it's probably 80% are multi-policy holders, and that's very much in line with our target.

And we don't see a big change in that.

No, we don't see any changes at all.

All right. Michael Phillips – Stifel Nicolaus: Part of the reason I was asking is, are there auto-only policies that maybe you’re losing because of the more competitive environment in the auto that you don’t lose because of the package? You’re pretty competitive in homeowners.

Well, our rate – our retention of personal – private passenger auto actually increased this year to over 91%. So, it’s quite the contrary. We’re holding on to more private passenger automobile. Michael Phillips – Stifel Nicolaus: All right. Good. Just a kind of high level here – the shopping behavior in personal auto – I'm sticking with that too. There’s sense of there’s more shopping because of tightening the budgets around, and have you seen that in your markets? And do you see a kind of a sense of that how that might be different for the different segments of auto, so kind of either the standard preferred versus the non-standard kind of thing?

Well, we've – this is George Lucore once again. We read the same studies that I think everyone does, and of course with the increased incidence of online shopping and the ease of that means of comparing prices and the shifting demographics, we do understand and recognize there is an increased opportunity for online price comparison. And we of course though make it easy to compare our prices online for those who are seeking an alternative options. But our retention, as noted, is continuing to increase along – across the entire spectrum, and we don’t see that deteriorating at any point soon.

As a matter of fact, as I mentioned in my prepared remarks, application growth is up from January, so we think we are actually benefiting in some regards with regard to this economy.

Michael Phillips – Stifel Nicolaus: George, you said that applications were up this year so far 12%, is that correct?

Okay. Thanks. I will hop off for now. Thanks to everybody, and Phil, hopefully I will see you again before we say our final good-byes.

Thanks, Michael.

Thank you.

Thanks, Michael.

(Operator instructions) We will take our next question with Dan Schlemmer with FPK. Please go ahead. Dan Schlemmer – FPK: Hi, good morning.

Good morning, Dan. Dan Schlemmer – FPK: Question on the cost of the management operations, that it said sort of a big increase year over year, but there was a specific adjustment. And then really just keying on the comment in the release. It said non-commission expenses would have increased sort of 7.2% on an apples to apples basis, and it talks a little bit about – in here about just changes in compensation. I just wonder if you can comment – and I mean, that sounded a little bit high to me. And I don’t know if there is something unusual going on in the year over year comps outside of that one adjustment, or you know I guess just current economy, I sort of would have guessed at a lower number.

You are talking about – so after adjusting the year to year comparisons, we are at about seven and change. Dan Schlemmer – FPK: Yes.

Then we pointed out that there's two areas that really drove that level up. The market share expense, that's really our co-op advertising campaign we have with our agents. We put about another $3 million into that over and above the prior year in the fourth quarter of ’08. And then we have some additional technology spend of $3.6 million, that’s what’s really driving the number. Salaries and wages and benefits were really kind of flat for the quarter, Dan, adjusted for that adjustment in the fourth quarter of 2007. Dan Schlemmer – FPK: Okay. And sort of I guess in that – sort of staying on the theme of general economic drivers – new car sales, I think we are all seeing the numbers are horrible, and I'm just wondering if you can comment on – as the Detroit sells fewer new cars, how that flows through your book over time. Presumably, a new car is more expensive to insure, and that probably drives fee income down. Or that’s sort of what people would expect a priority. And then also on underwriting income and competitive position, do you have a sense that you are better or worse off with people maintaining their older cars longer versus buying a new car, and how that flows through on your – both your competitive position and on the underwriting side.

I think you asked about six questions there. Dan Schlemmer – FPK: Yes, I'm sorry about that. The question's really – the question really boils down to what’s –

I'll try to respond to this. If I don't – my point was, if I don't get (inaudible) there, don't take it (inaudible) repeat it. Clearly, and as I mentioned again in my prepared remarks, we are concerned about what we call the exposure growth or lack thereof both in terms of personal product lines and commercial product lines. And to your example of obviously somebody who would normally buy a car every four years now, because of the economy, is not doing that, is clearly a concern of ours. We are not seeing that dramatically. You have two examples there – one, they are not buying it, and they also may drop coverage because now they own the car. We are not seeing that, and as a matter of fact as we indicated, we are getting more new customers. So, again on a policy basis, our exposure is growing. And to date, I can’t say that we are seeing any change in exposure mix based upon the value of the automobile. One your second question, I guess about underwriting profitability, again, another concern as it relates to again auto, homeowners, and the commercial business. And clearly in an economy like this, either people are either reluctantly starting to do some things that they would normally not do in terms of changing maintenance patterns, etc. – and there is a watch for that. But again, we’ve not seen that in any sort of our numbers yet to date in terms of either frequency or severity in our claims counts. Dan Schlemmer – FPK: And I guess, in terms of competitive position, is there any sense that Erie is better than the competition on this segment versus that segment? And as you have fewer new cars and more older cars, that just the price issue is going to benefit Erie or work to Erie's detriment?

Not to date. The blending of characteristics and rating plans at Erie as well as our competitors is really quite broad now. So those lines blur a little bit. But we have, like, 58 different touch points in our rating system, and we feel that’s a very good and wide spectrum to be able to respond to the majority of the driving public out there. And to date, we’ve not really seen – as a matter of fact, I believe our value proposition based (inaudible) the capital and the Exchange is managed – our capital structure, we are again at an advantage based upon what we can do as opposed to a disadvantage. Dan Schlemmer – FPK: Very helpful. I think you got all six of the questions. So, thanks very much.

Thanks, Dan.

Thank you. And we will take our next question with Ron Bobman with Capital Returns. Please go ahead. Ron Bobman – Capital Returns: Hi, good morning. Thanks a lot.

Hi, Ron.

Hi, Ron. Ron Bobman – Capital Returns:

Right. You are talking about the alternative assets, which is our limited partnership investments in both private equity, mezzanine, and real estate. Generally, there is a quarter lag, so what we have in our year-end financial statement is the reports from those managers really for the third quarter. That’s just generally accepted in the industry in this investment class. We get, as you said the source of the information is from the actual managers who are now subject to fair value accounting and audits of fair value accounting. Now, their audits aren’t done till year end, and again since there is a quarter lag, those audits will be done now and will be reflected in our first quarter numbers. But they are subject to the fair value accounting and taking a hard look at their marks on all the investments that they have in the funds. Ron Bobman – Capital Returns: And it sounds like – a couple of sort of follow-up questions, you don't use much in the way of sort of discretion or forward-looking sort of trend analysis. You largely sort of rely upon their – as the manager – their direction as to what, in this case, the 09/30 [ph] value was on these assets.

Well, we do trend analysis, and we have some ideas and trends – from that trend analysis of where the returns are going. But we can’t record those in our financial statements. We rely on what they tell us. We do some independent reviews of our managers during the year and we did that again this year to make sure they’re doing – giving us values under the new fair market value accounting rules. So, we’ve done that again this year, we did it last year. So there’s a lot of due diligence around this portfolio as far as we’re concerned.

And I would say that while we had a good process last year, we have a better process this year. There was more rigor around it, and we are watching this class closely. Ron Bobman – Capital Returns: And one – as I approach Dan Schlemmer’s question count – the real estate portion, which I think you ballparked it at about half of the alternatives. Is that mostly – what sort a level in the capital structure? Is it sort of the equity type investments in real estate, predominantly? Is it the senior debt mortgages that these managers are investing in? Or is some mix?

It’s primarily equity, and it’s across all real estate classes. So we have office, we have warehouse, we have residential, we have multi-family, and it’s global. Ron Bobman – Capital Returns: Got you.

So, it’s everywhere. And it’s all equity investments pretty much. Ron Bobman – Capital Returns: Okay. Thanks a lot, and continued good luck.

Thanks, Ron.

(Operator instructions) And we will take a follow-up question with Michael Phillips. Please go ahead. Michael Phillips – Stifel Nicolaus: Hi, thanks. I only had five last time, so I need to get back to six – just to make it fair. This is a random one, and I will admit it. It’s probably for George – but anybody else – is there a – how much value is there in zip code rating plus-four? A lot of people talk about it. I don't know if that it's kind of the way that the market is these days. Is there really value in that? If there is, where you guys with that?

Well, that's probably a question for Mike Zavasky. We’ll let the underwriter answer that one.

There is value in zip code rating plus four, but there is greater value beyond zip code rating. And we are looking heavily at greater pricing sophistication levels that go well beyond zip code rating plus four. So, I wouldn’t dismiss it, but I would say that it is only part way to where we intend to go. Michael Phillips – Stifel Nicolaus: Can you describe what you mean by that? The greater than – what does that mean?

There is a lot more that can be done beyond just geographic characteristics and is more into the usage of the vehicles and more into other characteristics of demographic information. Michael Phillips – Stifel Nicolaus: Okay. Fair enough. Thank you, guys.

Thanks, Michael.

This does conclude our question and answer session. I would like to turn it back over to Karen Phillips for any additional remarks. Please go ahead.

Thanks, Dale. For those of you who also may have been listening on the webcast, apparently we had some issues with sound via our vendor. The webcast has been recorded. The call has been recorded, and it will be archived. So you can be assured of that. It will be archived around 12.30 PM Eastern Time today on ErieInsurance.com. And as always if you have any questions, give me call at 814-870-4665. And thanks again for joining us and make it a great day.

Once again ladies and gentlemen, this does conclude today’s conference. We thank you for your participation. You may now disconnect.