UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1997

                                      OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the transition period from ______ to ______

                           Commission file number 2-39458

                          ERIE FAMILY LIFE INSURANCE COMPANY
                 (Exact name of registrant as specified in its charter)

             PENNSYLVANIA                                   25-1186315
  (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                            Identification No.)


100 Erie Insurance Place, Erie, Pennsylvania                 16530
  (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code   (814) 870-2000


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

        Yes  X        No ___


Indicate the number of shares outstanding of each of the Registrant's classes of
common stock,  as of the latest  practicable  date:  9,450,000  shares of Common
Stock outstanding on July 31, 1997.

                                       1

<PAGE>



                                      INDEX


                          ERIE FAMILY LIFE INSURANCE COMPANY


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Statements of Financial Position--June 30, 1997 and December 31, 1996

        Statements of Operations--Three months ended June 30, 1997 and 1996, six
months ended June 30, 1997 and 1996

        Statements of Cash Flows--six months ended June 30, 1997 and 1996

        Notes to Financial Statements--June 30, 1997

Item 2. Management's Discussion and Analysis of Financial
               Condition and Results of Operations


PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES

                                       2
<PAGE>



Part I.  Financial Information

                                            STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>

                                                                          June 30,                 December 31,
ASSETS                                                                      1997                         1996
                                                                        ------------               ------------
                                                                        (Unaudited)
<S>                                                                  <C>                          <C>

Investments:
      Fixed Maturities, at fair value
        (amortized cost of $525,456,577
        and $509,627,188, respectively)                              $         528,923,507        $         515,529,699
      Equity Securities, at fair value
        (cost of $125,483,873 and $111,463,042,
        respectively)                                                          133,535,485                  116,552,145
      Real Estate                                                                1,667,129                    1,710,329
      Policy Loans                                                               4,768,532                    4,381,657
      Mortgage Loans on Real Estate                                              9,978,416                    8,955,760
      Other Invested Assets                                                      7,100,441                    6,787,226
                                                                         -----------------              ---------------     

        Total Investments                                            $         685,973,510        $         653,916,816

Cash, including short-term investments of
   $11,958,955 and $7,789,063, respectively                                     10,042,376                    6,284,102
Premiums Receivable                                                              3,042,386                    2,974,305
Reinsurance Recoverable                                                            381,713                      212,583
Other Receivables                                                                1,341,247                      567,216
Accrued Investment Income                                                       10,213,709                    9,792,095
Deferred Policy Acquisition Costs                                               61,628,420                   58,026,428
Reserve Credit For Reinsurance Ceded                                             4,502,587                    4,199,907
Prepaid Federal Income Tax                                                         460,711                            0
Other Assets                                                                     2,156,002                    4,677,208
                                                                         -----------------              ---------------

        Total Assets                                                 $         779,742,661        $         740,650,660
                                                                         =================              ===============
</TABLE>


See notes to financial statements.

                                       3

<PAGE>



                                                STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>


                                                                           June 30,                   December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY                                         1997                           1996
                                                                         ------------                 ------------
                                                                         (Unaudited)
<S>                                                                  <C>                          <C>

Liabilities:
      Policy Liabilities and Accruals:
        Future Life Policy Benefits                                  $          57,096,469        $          54,033,860
        Policy and Contract Claims                                               1,875,744                    1,703,105
        Annuity Deposits                                                       471,239,416                  450,570,003
        Universal Life Deposits                                                 63,058,271                   56,856,590
        Supplementary Contracts Not
          Including Life Contingencies                                             829,134                      839,258
      Other Policyholder Funds                                                   7,188,793                    5,763,271
      Current Federal Income Tax                                                         0                      686,353
      Deferred Federal Income Tax                                               16,906,836                   15,614,492
      Reinsurance Premium Due                                                      233,113                      203,198
      Accounts Payable and Accrued Liabilities                                   4,598,430                    4,519,782
      Note Payable to Affiliate                                                 15,000,000                   15,000,000
      Due to Affiliate                                                           1,008,529                    1,049,007
      Dividends Payable                                                          2,551,504                    1,181,252
                                                                         -----------------              ---------------

        Total Liabilities                                            $         641,586,239        $         608,020,171
                                                                         -----------------              ---------------

Shareholders' Equity:
      Common Stock, $.40 Par Value Per Share;
      Authorized 15,000,000 Shares; 9,450,000
      Shares Issued And Outstanding                                  $           3,780,000        $           3,780,000
      Additional Paid-In Capital                                                   630,000                      630,000
      Net Unrealized Appreciation on Investment
        Securities, net of Deferred Tax of $4,029,531
        and $3,847,065, respectively                                             7,483,409                    7,144,549


      Retained Earnings                                                        126,263,013                  121,075,940
                                                                         -----------------              ---------------             

        Net Shareholders' Equity                                     $         138,156,422        $         132,630,489
                                                                         -----------------              ---------------

        Total Liabilities and Shareholders'
          Equity                                                     $         779,742,661        $         740,650,660
                                                                         =================              ================

</TABLE>


See notes to financial statements.

                                       4
<PAGE>



                      STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>



                                                                Three Months Ended                           Six Months Ended
                                                                         June 30                                  June 30
                                                           ----------------------------------        ------------------------------
                                                           1997                    1996              1997                   1996
<S>                                                    <C>                 <C>                    <C>                <C>

Revenues:
  Policy:
  Life Premiums, net of premiums ceded of
    $1,010,431, $855,925, $1,721,638 and
    $1,553,830, respectively                           $     8,264,957     $     7,510, 874       $    16,188,741    $    14,171,853
  Group                                                        549,381              474,511             1,093,623            981,034
                                                       ---------------     ----------------       ---------------    ---------------
Total Policy Revenues                                  $     8,814,338     $      7,985,385       $    17,282,364    $    15,152,887
Investment Income, Net of Expenses of
 $353,852, $351,953, $691,074 and
 $702,219, respectively                                     12,211,491           11,401,321            24,612,774         22,674,608
Realized Gain on Investment                                    746,305              762,305             1,368,087            772,627
Other Income                                                   185,125              214,534               325,424            351,026
                                                       ---------------     ----------------       ---------------    ---------------
    Total Revenues                                     $    21,957,259     $     20,363,545       $    43,588,649    $    38,951,148
                                                       ---------------     ----------------       ---------------    ---------------
Benefits and Expenses:
 Death Benefits, net of reinsurance recoveries
   of $509,248, $1,041,816, $515,902 and
   $1,386,479, respectively                                  2,220,839            2,093,802             4,652,264          5,058,679
  Interest on Annuity Deposits                               6,870,451            6,179,451            13,718,676         12,594,410
  Interest on Universal Life Deposits                          941,881              755,779             1,844,231          1,496,899
  Surrender and Other Benefits                                 325,978              299,051               612,746            581,476
  Increase in Liability for Future Life Policy
    Benefits,  net of the increase in reserve 
    credit for  reinsurance  ceded of $584,646,
    $170,431,  $720,510 and $297,887, respectively             935,151            1,073,958             2,759,929          1,963,944
  Amortization of Deferred Policy
    Acquisition Costs                                          756,093              763,222             1,560,404          1,388,029
  Commissions                                                  640,487              550,081               878,957          1,033,660
  General Expenses                                           1,983,824            1,305,059             3,406,414          2,912,715
  Taxes, Licenses and Fees                                     285,218              351,236               571,673            704,733
                                                       ---------------     ----------------       ---------------    ---------------
    Total Benefits and Expenses                        $    14,959,922     $     13,371,639       $    30,005,294    $    27,734,545
                                                       ---------------     ----------------       ---------------    ---------------

Income From Operations                                       6,997,337            6,991,906            13,583,355         11,216,603

Federal Income Tax
  Current                                                    1,795,374            1,915,273             3,459,150          2,927,704
  Deferred                                                     588,700              665,239             1,109,878          1,198,699
                                                       ---------------     ----------------       ---------------    ---------------
    Total Federal Income Tax                                 2,384,074            2,580,512             4,569,028          4,126,403
                                                       ---------------     ----------------       ---------------    ---------------

Net Income                                             $     4,613,263     $      4,411,394       $     9,014,327    $     7,090,200
                                                       ===============     ================       ===============    ===============

Net Income Per Share                                   $          0.49     $            .47       $          0.95    $           .75
                                                       ===============     ================       ===============    ===============

Dividends Declared Per Share                           $          0.27     $            .25       $         0.405    $          .375
                                                       ===============     ================       ===============    ===============

</TABLE>

                                       5
<PAGE>



                      Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>



                                                                               Six Months Ended            Six Months Ended
                                                                                  June 30, 1997               June 30, 1996
                                                                             ----------------------      --------------------
<S>                                                                          <C>                          <C>

  Cash flows from operating activities:
  Net income                                                                 $       9,014,327            $       7,090,200
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Net amortization of bond and mortgage
        premium and discount                                                           617,579                      141,408
      Amortization of deferred policy acquisition
        costs                                                                        1,560,404                    1,388,029
      Real Estate Depreciation                                                          43,200                       43,200
      Deferred federal income taxes                                                  1,109,878                    1,198,699
      Realized gains on investments                                                 (1,368,087)                    (772,627)
      Decrease in other assets                                                       2,521,206                      634,908
      Increase in other receivables                                                   (774,031)                     (12,364)
      (Increase) decrease in premium receivable                                        (68,081)                      56,121
      Increase in reinsurance recoverable
        and reserve credits                                                           (471,810)                  (1,026,165)
      Increase in accrued investment income                                           (421,614)                    (894,079)
      Increase in deferred policy acquisition
        costs                                                                       (5,162,396)                  (4,937,298)
      Increase in future policy benefits and claims                                  3,235,248                    3,033,063
      Increase (decrease) in other policyholder funds                                1,425,522                   (2,923,734)
      Increase (decrease) in reinsurance premium due                                    29,915                     (194,232)
      Increase (decrease) in accounts payable and accrued
        liabilities and due to affiliate                                                38,170                     (557,441)
      Decrease in Federal income taxes currently payable                            (1,147,064)                    (448,278)
                                                                             -----------------            ----------------- 
          Net cash provided by operating
            activities                                                              10,182,366                    1,819,410
                                                                             -----------------            -----------------

  Cash flows from investing activities:
      Fixed Maturity Securities:
        Maturities                                                           $      14,553,515            $      11,946,698
        Sales                                                                        5,883,300                   12,962,200
        Purchases                                                                  (36,738,163)                 (75,664,630)
      Equity Securities:
        Sales                                                                       14,809,173                   10,396,371
        Purchases                                                                  (27,607,708)                 (10,182,008)
      Loans made to policyholders                                                     (734,309)                    (646,908)
      Payments received on policy loans                                                347,434                      320,875
      Purchase of other invested assets                                               (603,581)                  (2,836,640)
      Sale of other invested assets                                                    284,763                      220,693
      Purchase of mortgage loans                                                    (1,086,241)                  (1,968,775)
      Principal payments received on mortgage
        loans                                                                           63,759                      965,877
                                                                             ------------------           -----------------
  Net cash used in investing activities                                            (30,828,058)                 (54,486,247)
                                                                             ------------------           -----------------
</TABLE>
                                       6

<PAGE>



                 Statements of Cash Flows--Continued (Unaudited)
<TABLE>
<CAPTION>



                                                                             Six Months Ended             Six Months Ended
                                                                                June 30, 1997               June 30, 1996
                                                                           ----------------------       -----------------
<S>                                                                        <C>                          <C>


Cash flows from financing activities:
    Increase in annuity and supplementary
      contract deposits                                                            20,659,289                  23,861,642
    Increase in Universal Life Deposits                                             6,201,681                   5,346,568
    Dividends paid to shareholders                                                 (2,457,004)                 (2,252,252)
                                                                           ------------------           -----------------
        Net cash provided by financing
          activities                                                       $       24,403,966           $      26,955,958
                                                                           ------------------           -----------------
Net increase (decrease) in cash and
   short-term cash investments                                                      3,758,274                 (25,710,879)
   Cash and short-term cash investments at
   beginning of year                                                                6,284,102                  34,847,347
                                                                           ------------------           -----------------
   Cash and short-term cash investments at
   end of quarter                                                          $       10,042,376           $       9,136,468
                                                                           ==================           =================


Supplemental  disclosures  of cash flow  information:  Cash paid during the year
for:
    Interest                                                               $          483,750           $         483,750
    Income taxes                                                                    4,473,896                   3,375,983

</TABLE>
                                       7
<PAGE>



NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and with  the  instructions  to Form  10-Q and  Rule  10-01 of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results  for the  six  month  period  ended  June  30,  1997  are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 1997. For further  information,  refer to the financial  statements
and footnotes  thereto  included in the Company's annual report on Form 10-K for
the year ended December 31, 1996.

NOTE B -- RECLASSIFICATIONS

Certain amounts as previously  reported have been reclassified to conform to the
current year's presentation.

NOTE C -- INVESTMENTS

The total  invested  assets  of the  Company  consist  of  investments  in fixed
maturities,  preferred  stock,  common stock,  real estate,  mortgage and policy
loans and other  invested  assets.  At June 30,  1997,  77.1% of total  invested
assets were invested in fixed  maturities.  Preferred  stocks represent 15.5% or
$106.2  million  and  common  stocks  represent  4.0% or $27.3  million of total
invested  assets at June 30, 1997,  while real estate and mortgage loans make up
only 1.7% of total invested  assets.  Mortgage loan and real estate  investments
have the potential for higher  returns but also carry more risk,  including less
liquidity  and  greater  uncertainty  of  rate  of  return.  Consequently  these
investments have been kept to a minimum.

The Company's fixed  maturities at June 30, 1997 consist of investments in bonds
of $525 million. It is the Company's objective that the fixed maturity portfolio
be of very high  quality and well  diversified  within each market  sector.  The
portfolio  is  conservatively  managed  with  the goal of  achieving  reasonable
returns while limiting  exposure to risk. At June 30, 1997 the carrying value of
fixed maturities was 528,923,507, or 77.1% of total invested assets. At June 30,
1997, the amortized cost,  carrying/market  value,  gross  unrealized  gains and
gross unrealized losses for fixed maturities were as follows:

                           Fixed Maturities at 6-30-97
<TABLE>
<CAPTION>


                                                                         Carrying/                Gross                Gross
                                                  Amortized                Market              Unrealized           Unrealized
                                                     Cost                  Value                   Gains               Losses
<S>                                           <C>                   <C>                   <C>                     <C>


U.S. Treasuries & Agency                      $        34,610,348   $        34,815,714   $           762,984     $        557,618
Foreign Governments                                     2,986,937             2,940,000                     0               46,937
States & Political Subdivisions                         2,760,615             2,995,991               235,377                    0
Special Revenue                                        14,230,910            14,612,838               443,645               61,716
Public Utilities                                       89,578,403            89,539,018             1,954,506            1,993,891
U.S. Industrial & Miscellaneous                       374,228,771           376,571,656             6,969,096            4,626,213
Foreign Industrial & Miscellaneous                      7,060,593             7,448,290               387,697                    0
                                              -------------------   -------------------   -------------------     ----------------
Total Fixed Maturities                        $       525,456,577   $       528,923,507   $        10,753,305     $      7,286,375

</TABLE>
                                       8
<PAGE>



NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Continued)


The  bond  investments  included  in the  fixed  maturity  category  consist  of
high-quality, marketable securities, all of which, are rated at investment grade
levels (Baa/BBB or better).  Included in this investment-grade category are $322
million  of  bonds  characterized  as of the  "highest"  quality  or  "Class  1"
securities  as defined by the National  Association  of Insurance  Commissioners
(NAIC).  Generally, the fixed maturity securities in the Company's portfolio are
rated by external rating agencies.  If not externally  rated,  they are rated by
the Company on a basis consistent with the basis used by the rating agencies.

If management  determines that any declines in market value of these investments
are other than temporary,  the securities will be written-down to the realizable
value of the investment and reflected in the income  statement.  If a bond is in
default of  interest  payments  and it is  determined  that  liquidation  of the
security would be in the Company's  best interest,  the security will be sold to
return the proceeds to income producing assets.

At June 30, 1997,  the  Company's  five largest  investments  in corporate  debt
securities  totaled  $32,589,945,  none  of  which  individually  exceeded  $7.9
million. These investments had a market value of $32.7 million.

Fixed  maturities  are classified as  held-to-maturity  when the Company has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost. The amortized cost of fixed  maturities
classified  as  held-to-maturity  is adjusted for  amortization  of premiums and
accretion   of  discounts  to   maturity.   The  Company   currently   holds  no
held-to-maturity   securities.   Management   believes  that  having  all  fixed
maturities classified as available-for-sale securities will allow the Company to
meet its liquidity  needs and provide  greater  flexibility  for its  investment
managers to  restructure  the  Company's  investments  in response to changes in
market   conditions   or   strategic   direction.   Securities   classified   as
available-for-sale  are carried at market value with unrealized gains and losses
included in shareholders' equity.

Equity  securities  consist of common and preferred  stocks which are carried on
the  balance  sheet at  current  market  value.  At June 30,  1997,  common  and
preferred  stock held by the  Company  had a cost of  $125,483,873  and a market
value of  $133,535,485,  representing an unrealized gain of $8,051,612.  As with
the fixed maturity portfolio, the Company's preferred stock portfolio provides a
source  of highly  predictable  current  income  that is very  competitive  with
high-grade  bonds.  These  securities  are well  diversified  within each market
sector  and  support  the  investment  return  provided  to  Policyholders.  The
preferred  stocks are of very  high-quality and extremely  marketable,  96.0% or
$102 million of which are of the "highest" or "high" quality,  as defined by the
NAIC.  The  remaining  $4.2  million of  preferred  stocks have a "medium"  NAIC
rating.  There are no preferred  stocks in the Company's  portfolio rated in the
"low," "lowest," or "in or near default" quality  categories  established by the
NAIC.

                                       9
<PAGE>



NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Continued)


                           Equity Securities, 6-30-97
<TABLE>
<CAPTION>


                                                                                          Gross                   Gross
                                                                     Market             Unrealized             Unrealized
                                                Cost                  Value               Gains                   Losses
<S>                                       <C>                   <C>                     <C>                   <C>


Common Stock
  Banks, Trusts & Insurance
    Companies                             $           730,500   $           723,750     $             0       $         6,750
  Industrial & Miscellaneous                       24,586,562            26,571,757           2,786,493               801,298
                                          -------------------   -------------------     ---------------       ---------------
    Total Common Stock                             25,317,062            27,295,507           2,786,493               808,048
Preferred Stocks
  Public Utilities                                  4,000,000             3,980,000                   0                20,000
  U.S. Banks, Trusts &
    Insurance Companies                            66,974,440            71,313,617           4,757,187               418,010
  Foreign Banks, Trusts &
    Insurance Companies                             7,765,000             7,800,000             185,000               150,000
  Industrial & Miscellaneous                       17,527,371            19,186,361           1,658,990                     0
  Foreign Industrial &
    Miscellaneous                                   3,900,000             3,960,000              60,000                     0
                                          -------------------   -------------------     ---------------       ---------------
    Total Preferred Stock                         100,166,811           106,239,978           6,661,177               588,010

Total Equity Securities                   $       125,483,873   $       133,535,485     $     9,447,670       $     1,396,058
</TABLE>

Real estate  investments are carried on the statements of financial  position at
cost, less allowances for depreciation and possible losses.  Commercial mortgage
loans  on real  estate  are  carried  at their  unpaid  balances,  adjusted  for
amortization  of premium or discount,  less allowances for possible loan losses.
Policy loans are carried at their unpaid balances.

The fair values of the Company's  investments  in real estate,  mortgage  loans,
policy loans, and other invested assets, approximate the values presented in the
financial statements.

At June 30, 1997, the Company did not own any derivatives.




                                       10

<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
         RESULTS OF OPERATION


The following  discussion and analysis  should be read in  conjunction  with the
financial  statements  and related notes found on pages 3 through 10, since they
contain  important  information  that is helpful  in  evaluating  the  Company's
operating results and financial condition.

OVERVIEW

Erie  Family  Life  Insurance  Company  (the  Company)  is  incorporated  in the
Commonwealth of Pennsylvania.  The Company is primarily  engaged in the business
of underwriting and selling nonparticipating individual and group life insurance
policies,  including  universal life, and annuity products.  The Company markets
its products through independent Agents and is licensed in eleven states and the
District of Columbia in the Eastern U.S. and is subject to the  supervision  and
regulation  of the  states in which it does  business.  A large  portion  of the
Company's business is written in Pennsylvania.

Net income increased to $4,613,262,  or $.49 per share, in the second quarter of
1997 from  $4,411,394  or $.47 per  share,  in the second  quarter  of 1996,  an
increase  of 4.6%.  Operating  results  continued  to be strong as total  policy
revenue grew by 10% to $8,814,338 in the current period.  Investment  income net
of  expenses  grew by 7%  from  $11,401,321  in the  second  quarter  of 1996 to
$12,211,491 in the second quarter of 1997.

REVENUES, BENEFITS, AND EXPENSES

Policy Revenues. Total policy revenues increased 10% to $8,814,338 in the second
quarter of 1997 from $7,985,385 in the second quarter of 1996. Included in these
totals are first year life policy  revenues of $1,647,211 in the second  quarter
of 1997 and  $1,640,924  in the second  quarter of 1996, an increase of .4%. New
policy  production  remained  strong compared to the sales results in the second
quarter of 1996 which were bolstered by the Company's  participation in the Erie
Insurance Group travel incentive program "California Dreamin."

Group policy  revenues  increased from $474,511 in the second quarter of 1996 to
$549,381 in the second quarter of 1997.

Deposits.  First  year and  single  universal  life and  annuity  deposits  were
$11,519,126 in the second quarter of 1997 and  $11,287,614 in the second quarter
of 1996, an increase of 2%. Included in these amounts are structured  settlement
annuities sold to the Erie Insurance Group property/casualty affiliate companies
which  totaled  $2,417,209 in the second  quarter of 1997 and  $3,138,433 in the
second quarter of 1996.

Net Investment  Income.  Net investment income in the second quarter of 1997 was
$12,211,491  compared to  $11,401,321 in the second quarter of 1996, an increase
of 7%.  Fueling the growth in  investment  income was the  Company's  cash flows
generated from annuity and universal life deposits and operating income.

Realized  Gain on  Investment.  During the second  quarter of 1997,  the Company
generated  realized gains on investments of $746,305.  During the second quarter
of 1996,  the Company had  realized  gains on  investments  of  $762,305.  These
amounts consisted of gains from the sale of securities.

                                       11
<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
         RESULTS OF OPERATION (Continued)


Death Benefits.  Net death benefits on life insurance  policies  increased 6% in
the second quarter of 1997 to $2,220,839,  compared to $2,093,802,  for the same
period in 1996. Death benefit  experience must be analyzed for long-term trends,
rather than over short  periods  where  unusual  fluctuations  may influence the
results.  This is particularly  true for a company the size of Erie Family Life,
which is growing rapidly.  The Company's mortality experience has been good over
the past several years and the Company believes that its underwriting philosophy
and practices are sound.

Interest on Annuity and Universal  Life  Deposits.  Interest on deposits held by
the Company for Policyholders  rose 13% from $6,935,230 in the second quarter of
1996 to $7,812,332 in the second  quarter of 1997.  This increase was due to the
$67 million in deposits made by Policyholders  during the 12-month period ending
June 30, 1997. At June 30, 1997,  annuity deposits  accruing  interest were $471
million and universal life deposits accruing  interest were $63 million.  During
the second  quarter of 1997,  the interest rate  credited on universal  life and
annuity  deposits  remained  unchanged.  The current  interest  rate credited on
universal  life  deposits is in the 5.25% to 6.00% range while the rate credited
on annuity deposits is in the 5.00% to 6.00% range.

Commissions.  Commissions increased $90,406 to $640,487 in the second quarter of
1997. The commission  increase was due to an increase in renewal policy revenues
of 13%. The commission  costs,  which vary with and are primarily related to the
production of new business, have been deferred.  These costs are being amortized
over the premium  paying  period of the related  policies in  proportion  to the
ratio of the annual premium revenue to the total anticipated premium revenue.

General Expenses. General expenses amount to $1,983,824 in the second quarter of
1997  compared to  $1,305,059  for the same period in 1996.  The majority of the
increase in general  expenses  was due to  increases  in employee  salaries  and
benefits.  Employee salary and benefits  expenses rose due to employee merit pay
increases and employee  benefit cost increases.  General  expenses include wages
and salaries,  Employee benefits,  data processing expenses,  occupancy expenses
and other office and general  administrative  expenses of the  Company.  Certain
general  expenses  of the  Company are  deferred  as policy  acquisition  costs.
Medical  inspection  and exam fees  related to new business  production,  wages,
salaries and Employee  benefits of underwriting  personnel,  and bonuses paid to
branch sales Employees for the production of life and annuity business,  are all
deferred.  Deferred  acquisition  costs are  amortized  over the premium  paying
period of the related  policies in proportion to the ratio of the annual premium
revenue to the total anticipated premium revenue.

Certain operating expenses of the Company are paid by Erie Indemnity Company and
reimbursed  monthly  by the  Company.  Additionally,  a  portion  of the  common
overhead expenses of the Erie Insurance Group are allocated to Erie Family Life.
These expenses comprise the majority of Company general expenses. Erie Indemnity
Company is a 21.6  percent  shareholder  of Erie Family Life  Insurance  Company
stock and the management company for the Erie Insurance Exchange.

Taxes,  Licenses,  and Fees.  Taxes,  licenses  and fees  decreased  $66,018  to
$285,218  in the  second  quarter  of 1997.  This  decrease  was  caused  by the
recognition   of  premium  tax  credits  now  available  for  annuity   guaranty
assessments paid in prior years.

                                       12
<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
         RESULTS OF OPERATION (Continued)



Federal  Income  Tax.  Federal  Income Tax in the  second  quarter  amounted  to
$2,384,074  compared to  $2,580,512  for the same period in 1996.  The Company's
effective  federal income tax rates in 1997 and 1996 differ primarily due to the
recognition of, or limitations on, capital losses.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of an entity's  ability to secure enough cash to meet its
contractual obligations and operating needs.  Generally,  insurance premiums and
deposits are collected prior to claims and benefit disbursements and these funds
are invested to provide  necessary  cash flows in future  years.  The  Company's
major sources of cash from operations are life insurance  premiums,  annuity and
universal  life deposits and  investment  income.  The net positive cash flow is
used to fund Company commitments and to build the investment portfolio,  thereby
increasing future investment returns.  Net cash provided by operating activities
for the six months ended June 30, 1997 was  $10,182,366,  compared to $1,819,410
for the six months ended June 30, 1996. The Company's liquidity position remains
strong as invested  assets  grew by $32  million  during the first six months of
1997 to $686 million at June 30, 1997.

Premium  from the sale of new  policies  combined  with the  premium on existing
policies  accounted  for  approximately  40.1% of total  revenue  in the  second
quarter of 1997 and 39.2% for the same period in 1996. Investment income, net of
expenses, generated 55.6% of total revenue in 1997 and 56.0% in 1996.

Annuity  and  universal  life  deposits,  which do not  appear as revenue on the
financial  statements,  also  generate  cash.  These  deposits  do not involve a
mortality or morbidity  risk and are accounted  for using methods  applicable to
comparable   "interest-bearing   obligations"   of  other  types  of   financial
institutions.  This method of accounting  records deposits as a liability rather
than as a revenue.  Annuity and universal life deposits were  $17,049,670 in the
second quarter of 1997 and $22,171,683 in the second quarter of 1996.

The Company's  current  commitments  for  expenditures  as of June 30, 1997, are
primarily for policy death benefits, policy surrenders and withdrawals,  general
operating expenses,  federal income taxes, and dividends to shareholders.  These
commitments  are met by cash flows from policy  revenue,  annuity and  universal
life  deposits and  investment  income.  Management  believes its cash flow from
operations,  its liquid assets and marketable  securities and its line of credit
with PNC Bank will enable the Company to meet any foreseeable cash requirements.
At June 30,  1997,  the  Company's  line of  credit  with PNC Bank  totaled  $10
million, none of which was outstanding.

The amount of dividends Erie Family Life, a Pennsylvania-domiciled life insurer,
can pay to its  shareholders  without  the prior  approval  of the  Pennsylvania
Insurance  Commissioner  is limited by statute to not more than the  greater of:
(a) 10 percent of its statutory surplus as regards  policyholders as reported on
its last annual  statement,  or (b) the net income of the insurer as reported on
its last annual statement, not including any pro rata distributions of any class
of the insurer's own securities.  Accordingly, the maximum dividend payout which
may be  made  in  1997  without  prior  Pennsylvania  Commissioner  approval  is
$10,516,000.


                                       13
<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
         RESULTS OF OPERATION (Continued)



The Company's 1996 year-end Risk Based Capital Analysis as reflected in its 1996
statutory  annual  statement  shows total adjusted  capital of  $83,833,559  and
authorized  control  level risk  based  capital of  $11,835,459.  These  results
demonstrate a strong capital position for the Company.

FINANCIAL CONDITION

RESERVE LIABILITIES

The Company's primary commitment is its obligation to meet the payment of future
benefits  under the terms of its life insurance and annuity  contracts.  To meet
these future obligations,  the Company establishes life insurance reserves based
upon the type of  policy,  the age of the  insured,  and the number of years the
policy has been in force.  The Company also  establishes  annuity and  universal
life reserves  based on the amount of  Policyholder  deposits  (less  applicable
policy charges) plus interest earned on those deposits.  On June 30, 1997, there
was no  material  difference  between the  carrying  value and fair value of the
Company's  investment-type  policies.  These life insurance and annuity reserves
are supported  primarily by the Company's  long-term,  fixed-income  investments
because the underlying policy reserves are generally also of a long-term nature.

INVESTMENTS

The Company's  investment  strategies and portfolios are structured to match the
features of the life  insurance and annuity  products  sold by the Company.  The
Company's   annuities  and  life  insurance  policies  are  long-term  products,
therefore  the  Company's  investment  strategy  takes a  long-term  perspective
emphasizing  investment  quality,   diversification,   and  superior  investment
returns.  The  Company's  investments  are  prudently  managed on a total return
approach that focuses on current income and capital appreciation.

The Company's invested assets are also exceptionally liquid in order to meet the
short and long-term  commitments  to our  Policyholders.  At June 30, 1997,  the
Company's investment portfolio of cash and money market investments,  investment
grade bonds,  common stocks,  and preferred  stocks,  all of which are extremely
marketable, totaled $673 million or 86% of total assets. These resources provide
the liquidity the Company requires to meet the unforeseen demands on its funds.


"Safe Harbor"  Statement Under the Private  Securities  Litigation Reform Act of
1995:  Statements  contained herein expressing the beliefs of management such as
those contained in "Note C to the Financial  Statements",  the "Revenue Benefits
and Expenses - Death  Benefits",  the "Liquidity and Capital  Resources" and the
"Investments" sections hereof, and the other statements which are not historical
facts contained in this report are forward looking statements that involve risks
and uncertainties. These risks and uncertainties include but are not limited to:
legislative,  judicial,  and  regulatory  changes,  the  impact  of  competitive
products  and  pricing,   product   development,   geographic  spread  of  risk,
catastrophic  events,  better  (or  worse)  morbidity  rates,   fluctuations  of
securities markets, and technological difficulties and advancements.

                                       14
<PAGE>





OTHER MATTERS

Retirement of Chief Financial Officer

Thomas M. Sider,  executive  vice president and chief  financial  officer of the
Erie  Insurance  Group has  retired  from the  Company on June 30, 1997 after 29
years of  service.  Mr.  Sider  leaves the  company in a  position  of  superior
financial  strength and will  continue on as an advisor to the Company until his
replacement is named.


Item 6.  Exhibits and Reports on Form 8-K

Exhibit 27 - Financial Data Schedule

All other exhibits 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.

The Company did not file any reports on Form 8-K during the  three-month  period
ending June 30, 1997.









                                   SIGNATURES

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 thereunto duly authorized.


                                            Erie Family Life Insurance Company
                                                       (Registrant)

Date      August 5, 1997
                                               /s/ Stephen A. Milne
                                        (Stephen A. Milne, President & CEO)


                                                 /s/ Philip A. Garcia
                          (Philip A. Garcia, Senior Vice President & Controller)


                                       15
<PAGE>