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 September 30, 1996

                                       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 October 31, 1996.




                                      1

<PAGE>



                                             INDEX

                          ERIE FAMILY LIFE INSURANCE COMPANY


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Balance Sheets--September 30, 1996 and December 31, 1995

        Statements of  Income--Three  months ended  September 30, 1996 and 1995,
          nine months ended September 30, 1996 and 1995

        Statements of Changes in Cash Flows--nine months ended
          September 30, 1996 and 1995

        Notes to Financial Statements--September 30, 1996

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>

                                                                         September 30,               December 31,
ASSETS                                                                        1996                       1995
                                                                        -----------------          ---------------
                                                                          (Unaudited)
<S>                                                                        <C>                      <C>

Investments:
      Fixed Maturities, at fair value
        (amortized cost of $462,833,249
        and $401,771,542, respectively)                                    $459,652,931             $426,381,008
      Equity Securities, at fair value
        (cost of $127,396,033 and $125,763,874,
        respectively)                                                       131,624,985              126,324,721
      Real Estate                                                             1,731,595                1,796,395
      Policy Loans                                                            4,193,344                3,694,530
      Mortgage Loans on Real Estate                                           8,208,769                7,062,742
      Other Invested Assets                                                   6,896,276                4,165,721
                                                                           ------------             ------------

        Total Investments                                                  $612,307,900             $569,425,117

Cash, including short-term investments of
   $12,955,478 and $35,230,606, respectively                                 13,021,989               34,847,347
Premiums Receivable                                                           2,735,964                2,701,578
Reinsurance Recoverable                                                         108,471                  265,514
Other Receivables                                                               240,076                  254,674
Accrued Investment Income                                                    10,265,364                9,044,136
Deferred Policy Acquisition Costs                                            56,037,435               50,762,292
Reserve Credit For Reinsurance Ceded                                          3,965,831                3,484,190
Prepaid Federal Income Tax                                                      527,979                        0
Other Assets                                                                  2,235,045                3,009,313
                                                                           ------------             ------------

        Total Assets                                                       $701,446,054             $673,794,161
                                                                           ------------             ------------
</TABLE>


See notes to financial statements.


                                    3

<PAGE>



                STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
                                                                           September 30,                   December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY                                           1996                             1995
                                                                          --------------                  --------------
                                                                           (Unaudited)
<S>                                                                        <C>                             <C>

Liabilities:
      Policy Liabilities and Accruals:
        Future Life Policy Benefits                                        $ 52,491,729                    $ 48,768,739
        Policy and Contract Claims                                              771,907                         897,026
        Annuity Deposits                                                    435,289,915                     405,346,808
        Universal Life Deposits                                              54,079,694                      45,971,842
        Supplementary Contracts Not
          Including Life Contingencies                                          825,247                         872,745
      Other Policyholder Funds                                                2,941,967                       5,238,897
      Current Federal Income Tax                                                      0                         261,471
      Deferred Federal Income Tax                                            11,693,790                      16,979,255
      Reinsurance Premium Due                                                   115,933                         360,478
      Accounts Payable and Accrued Liabilities                                5,108,050                       2,728,133
      Note Payable to Affiliate                                              15,000,000                      15,000,000
      Due to Affiliate                                                          631,813                       1,392,365
      Dividends Payable                                                       2,362,504                       1,071,000
                                                                           ------------                    ------------

        Total Liabilities                                                  $581,312,549                    $544,888,759
                                                                           ------------                    ------------

Shareholders' Equity:
      Common Stock, $.40 Par Value Per Share;
      Authorized 15,000,000 Shares; 9,450,000
      Shares Issued And Outstanding (Note D)                               $  3,780,000                    $  3,465,000 
      Additional Paid-In Capital                                                630,000                         945,000
      Net Unrealized Appreciation (Depreciation) on
        Investment Securities, net of
        Deferred Taxes of $367,022 and
        $8,809,609, respectively                                                681,612                      16,360,704
      Retained Earnings                                                     115,041,893                     108,134,698
                                                                           ------------                    ------------

        Net Shareholders' Equity                                           $120,133,505                    $128,905,402
                                                                           ------------                    ------------

        Total Liabilities and Shareholders'
          Equity                                                           $701,446,054                    $673,794,161
                                                                           ------------                    ------------

</TABLE>


See notes to financial statements.


                                  4

<PAGE>



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

                                                                Three Months Ended                     Nine Months Ended
                                                                    September 30                          September 30
                                                           -------------------------              ---------------------------
                                                           1996                 1995              1996                   1995
<S>                                                    <C>                 <C>                  <C>                 <C>

Revenues:
  Policy:
  Life Premiums, net of premiums ceded of
    $1,047,438, $745,847, $2,601,268 and
    $2,192,838, respectively                           $     7,192,211     $      6,620,756     $    21,364,064     $    19,183,841
  Group                                                        488,260              574,419           1,469,294           1,748,359
                                                       ---------------     ----------------     ---------------     ---------------
Total Policy Revenues                                  $     7,680,471     $      7,195,175     $    22,833,358     $    20,932,200

Investment Income, net of expenses of
  $355,056, $96,558, $1,057,275 and
  $285,701, respectively                                    11,622,874           10,465,117          34,297,482          30,509,963
Realized gain on investment                                    898,400            4,690,581           1,671,027           6,006,298
Other Income                                                   568,431              386,776           1,423,054           1,159,373
                                                       ---------------     ----------------     ---------------     ---------------
    Total Revenues                                     $    20,770,176     $     22,737,649     $    60,224,921     $    58,607,834
                                                       ---------------     ----------------     ---------------     ---------------

Benefits and Expenses:
  Death Benefits, net of reinsurance
    recoveries of $271,318, $411,521,
    $1,657,797 and $905,961, respectively                    1,618,047            1,711,884           6,676,726           5,909,477
  Interest on annuity deposits                               6,305,008            5,925,301          18,899,418          17,127,396
  Interest on universal life deposits                          821,821              661,424           2,318,720           1,902,364
  Surrender and other benefits                                 215,326              235,312             796,802             806,959
  Increase in liability for future life policy
    Benefits, net of the increase in reserve
    credit for  reinsurance  ceded of $183,754,
    $200,038, $481,641 and $528,442,
    respectively                                             1,277,405              979,292           3,241,349           2,846,884
  Amortization of deferred policy
    acquisition costs                                          684,486              481,446           2,072,515           1,212,483
  Commissions                                                  855,927              725,244           2,393,184           2,081,545
  General expenses                                           1,234,779            1,491,922           4,147,494           4,563,721
  Taxes, licenses and fees                                   1,536,977              513,977           2,241,710           2,756,789
                                                       ---------------     ----------------     ---------------     ---------------
    Total Benefits and Expenses                        $    14,549,776     $     12,725,802     $    42,787,918     $    39,207,618
                                                       ---------------     ----------------     ---------------     ---------------

Income From Operations                                       6,220,400           10,011,847          17,437,003          19,400,216

Federal Income Tax
  Current                                                     (280,026)           2,640,871           2,647,678           5,151,372
  Deferred                                                   1,958,423              434,921           3,157,122           1,069,081
                                                       ---------------     ----------------     ---------------     ---------------
    Total Federal Income Tax                                 1,678,397            3,075,792           5,804,800           6,220,453
                                                       ---------------     ----------------     ---------------     ---------------

Net Income                                             $     4,542,003     $      6,936,055     $    11,632,203     $    13,179,763
                                                       ---------------     ----------------     ---------------     ---------------

Net Income Per Share                                   $           .48     $           0.73     $          1.23     $          1.39
                                                       ---------------     ----------------     ---------------     ---------------


Dividends Declared Per Share                           $          .125     $          0.113     $           .50     $          0.34
                                                       ---------------     ----------------     ---------------     ---------------
</TABLE>


                                          5

<PAGE>



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

                                                                       Nine Months Ended                 Nine Months Ended
                                                                      September 30, 1996                September 30, 1995
                                                                      -------------------               ------------------
<S>                                                                   <C>                               <C>

Cash flows from operating activities:
Net income                                                            $      11,632,203                 $      13,179,763
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Net amortization of bond and mortgage
      premium and discount                                                      214,728                            97,508
    Amortization of deferred policy acquisition
      costs                                                                   2,072,515                         1,212,483
    Real Estate Depreciation                                                     64,800                            76,671
    Deferred federal income taxes                                             3,157,122                         1,069,081
    Realized gains on investments                                            (1,671,027)                       (6,006,298)
    Decrease (Increase) in other assets                                         774,268                           (47,779)
    Decrease (Increase) in other receivables                                     14,598                          (131,402)
    Increase in premium receivable                                              (34,386)                         (120,666)
    Increase in reinsurance receivable
      and reserve credits                                                      (324,598)                         (591,444)
    Increase in accrued investment income                                    (1,221,228)                       (1,354,435)
    Increase in deferred policy acquisition
      costs                                                                  (7,347,658)                       (5,399,628)
    Increase in future policy benefits and claims                             3,597,871                         3,261,685
    Decrease in other policyholder funds                                     (2,296,930)                       (3,213,927)
    (Decrease) Increase in reinsurance premium due                             (244,545)                           24,571
    Increase (Decrease) in accounts payable and accrued
      liabilities and due to affiliate                                        1,619,365                          (872,460)
    (Decrease) Increase in current Federal income taxes                        (789,450)                        1,134,099
                                                                      -----------------                 -----------------
      Net cash provided by operating
          activities                                                  $       9,217,648                 $       2,317,822
                                                                      -----------------                 -----------------

Cash flows from investing activities:
    Fixed Maturity Securities:
    Held-to-Maturity:
      Maturities                                                      $               0                 $       3,906,728
    Available-for-Sale:
      Maturities                                                             12,215,710                         1,548,146
      Sales                                                                  14,257,447                        40,382,164
      Purchases                                                             (87,753,820)                      (89,247,603)
    Equity Securities:
      Sales                                                                  13,600,665                        16,421,802
      Purchases                                                             (13,660,263)                      (21,109,082)
    Loans made to policyholders                                                (981,689)                         (751,650)
    Payments received on policy loans                                           482,875                           376,861
    Purchase of other invested assets                                        (3,150,344)                       (1,425,662)
    Sale of other invested assets                                               349,789                            80,331
    Purchase of mortgage loans                                               (1,968,775)                                0
    Principal payments received on mortgage
      loans                                                                     995,442                           552,499
                                                                      -----------------                 -----------------
        Net cash used in investing activities                         $     (65,612,963)                $     (49,265,466)
                                                                      -----------------                 -----------------
</TABLE>

                                    6

<PAGE>



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

                                                                       Nine Months Ended                 Nine Months Ended
                                                                      September 30, 1996                September 30, 1995
                                                                      -------------------               ------------------
<S>                                                                   <C>                               <C>

Cash flows from financing activities:
    Increase in annuity and supplementary
      contract deposits                                               $       29,895,609                $      46,932,277
    Increase in Universal Life Deposits                                        8,107,852                        7,087,376
    Dividends paid to stockholders                                            (3,433,504)                      (3,087,000)
                                                                      ------------------                -----------------
        Net cash provided by financing
          activities                                                  $       34,569,957                $      50,932,653
                                                                      ------------------                -----------------
Net increase (decrease) in cash and cash
   equivalents                                                               (21,825,358)                       3,985,009
Cash and cash equivalents at beginning of year                                34,847,347                        6,559,213
                                                                      ------------------                -----------------
Cash and cash equivalents at end of quarter                           $       13,021,989                $      10,544,222
                                                                      ------------------                -----------------


Supplemental  disclosures  of cash flow  information:  Cash paid during the year
for:
    Interest                                                          $          485,635                $             632
    Income taxes                                                               3,437,128                        4,017,273
</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 nine month  period ended  September  30, 1996 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 1996. 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, 1995.

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 September 30, 1996, 75.1% of total invested
assets were invested in fixed  maturities.  Preferred  stocks represent 18.9% or
$115.6  million  and  common  stocks  represent  2.6% or $16.0  million of total
invested assets at September 30, 1996, while real estate and mortgage loans make
up only 1.6% 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 September 30, 1996 consist of investments in
bonds of $458  million  and  investments  in  redeemable  preferred  stock of $2
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 September  30, 1996 the carrying  value of fixed
maturities was $459,652,931, or 75.1% of total invested assets. At September 30,
1996, the amortized cost,  carrying/market  value,  gross  unrealized  gains and
gross unrealized losses for fixed maturities were as follows:

                        Fixed Maturities at 9-30-96
<TABLE>
<CAPTION>

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

U.S. Treasuries & Agency                      $         6,124,827   $         6,397,289   $         272,462  $               0
Mortgage-Backed Certificates                              375,219               389,102              13,886                  3
Industrial Miscellaneous                              305,495,146           303,503,917           5,020,718          7,011,947
Public Utilities                                      100,230,682            98,436,370           1,500,809          3,295,121
States & Political Subdivisions                         2,062,745             2,275,590             212,845                  0
Special Revenue                                        48,544,630            48,650,663           1,260,864          1,154,831
                                              -------------------   -------------------   -----------------  -----------------
Total Fixed Maturities                        $       462,833,249   $       459,652,931   $       8,281,584  $      11,461,902

</TABLE>

                                  8

<PAGE>



NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Continued)

The  bond  investments  included  in the  fixed  maturity  category  consist  of
high-quality, marketable securities, 96.9% or $445.5 million of which, are rated
at investment  grade levels  (Baa/BBB or better).  Included in this  investment-
grade  category  are $296  million of bonds  characterized  as of the  "highest"
quality  or "Class 1"  securities  as  defined by the  National  Association  of
Insurance  Commissioners  (NAIC).  Below  investment-grade  bonds  totaled $14.2
million at September 30, 1996 and are a very  manageable  3.1% of total invested
assets. None of the bonds included in the below  investment-grade  category were
considered "low" quality at September 30, 1996. All of the securities classified
as below investment-grade are current and in good standing. 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 September 30, 1996, the Company's five largest  investments in corporate debt
securities  totaled  $30,758,772,  none  of  which  individually  exceeded  $6.7
million. These investments had a market value of $29.9 million.

In  compliance  with  "Accounting  for  Certain  Investments  in Debt and Equity
Securities  (FAS  115)," the Company has  classified  all of its fixed  maturity
portfolio as  available-for-sale at September 30, 1996. 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 September 30, 1996,  common and
preferred  stock held by the  Company  had a cost of  $127,396,033  and a market
value of  $131,624,985,  representing an unrealized gain of $4,228,952.  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,  96.8% or
$111.9  million of which are of the "highest" or "high"  quality,  as defined by
the NAIC.  The remaining  $3.7 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, 9-30-96
<TABLE>
<CAPTION>

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

Common Stock
  Banks & Insurance                       $         2,065,459   $         3,862,939     $     1,797,480       $             0
  Industrial & Miscellaneous                       11,625,706            12,128,718             738,862               235,850
Preferred Stocks
  Public Utilities                                  5,273,282             5,220,800                   0                52,482
  Banks & Insurance                                77,230,715            77,993,300           1,934,060             1,171,475
  Industrial & Miscellaneous                       31,200,871            32,419,228           1,492,482               274,125
                                          -------------------   -------------------     ---------------       ---------------
Total Equity Securities                   $       127,396,033   $       131,624,985     $     5,962,884       $     1,733,932
</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 book values presented
in the financial statements.

At September 30, 1996, the Company did not own any derivatives.


NOTE D - STOCK SPLIT

On May 1, 1996 a three-for-one common stock split in which two additional shares
were  issued for each  share held was  approved  by the  Company's  shareholders
effective for shareholders of record May 2, 1996. The par value of each share of
the common stock was changed to $.40 per share, the number of authorized  shares
was  increased  to  15,000,000  shares  and the  number  of  shares  issued  and
outstanding was increased to 9,450,000.  All per share data in the  accompanying
financial statements have been restated to reflect this change.


NOTE E - DIVIDENDS DECLARED

On June 17, 1996 and September  17, 1996,  the Board of Directors of the Company
approved the third and fourth  quarter  dividends  totaling $.25 per share.  The
third  quarter  dividend  of $.125 per share was paid on  October  1,  1996,  to
shareholders of record as of September 20, 1996. The fourth quarter  dividend of
$.125 per share will be paid on January 2, 1997 to  shareholders of record as of
December 20, 1996.

                                        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  decreased to $4,542,003,  or $.48 per share, in the third quarter of
1996 from $6,936,055 or $.73 per share, in the third quarter of 1995, a decrease
of 35%.  The  decrease  in  nonrecurring  realized  gains  on  investments  from
$4,690,581 in the third quarter of 1995 to $898,400 in the third quarter of 1996
was the  primary  reason  for the  decrease  in net  income.  Operating  results
continued to be strong as total policy revenue grew by 6.7% to $7,680,471 in the
current period.  Investment  income net of expenses grew by 11% from $10,465,117
in the third quarter of 1995 to $11,622,874 in the third quarter of 1996.

REVENUES, BENEFITS, AND EXPENSES

Policy Revenues. Total policy revenues increased 6.7% to $7,680,471 in the third
quarter of 1996 from $7,195,175 in the third quarter of 1995.  Included in these
totals are first year life policy revenues of $1,618,493 in the third quarter of
1996 and  $1,445,842  in the third  quarter of 1995,  an increase  of 12%.  This
growth  in  first  year  policy   revenues  was   bolstered  by  the   Company's
participation in the Erie Insurance Group travel incentive program,  "California
Dreamin'." This  multi-line  promotion  offers  successful ERIE Agents a trip to
Palm Springs,  California  in early 1997. A minimum level of life  production is
required to qualify.

Group policy  revenues  decreased  from $574,419 in the third quarter of 1995 to
$488,260 in the third  quarter of 1996.  The 1995 group  policy  revenue  amount
included  $130,000 in annuity  loads on  structured  settlement  premiums.  This
annuity  load was  charged to pay the 2% annuity  premium  tax on  non-qualified
annuities.  Effective  January 1, 1996, the  Pennsylvania  tax on  non-qualified
annuities  was  repealed.  In  response  to  this  tax  change,  the 2%  load on
structured settlement premium has been discontinued by the Company.

Deposits.  First  year and  single  universal  life and  annuity  deposits  were
$7,423,011 in the third quarter of 1996 and  $11,463,800 in the third quarter of
1995,  representing a decrease of 35%.  Included in these amounts are structured
settlement  annuities  sold  to  the  Erie  Insurance  Group   property/casualty
affiliate  companies  which totaled  $2,581,252 in the third quarter of 1996 and
$6,396,124 in the third quarter of 1995.

Net Investment  Income.  Net investment  income in the third quarter of 1996 was
$11,622,874 compared to $10,465,117 in the third quarter of 1995, an increase of
11%.  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 third  quarter of 1996,  the  Company
generated realized gains on investments of $898,400. During the third quarter of
1995, the Company had realized gains on investments of $4,690,581. These amounts
consisted of gains from the sale of securities.

                                            11

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

Death Benefits.  Net death benefits on life insurance  policies  decreased 5% in
the third quarter of 1996 to $1,618,047,  compared to  $1,711,884,  for the same
period in 1995. 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 extremely
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 8% from  $6,586,725 in the third quarter of
1995 to $7,126,829  in the third  quarter of 1996.  This increase was due to the
$68 million in deposits made by Policyholders  during the 12-month period ending
September 30, 1996. At September 30, 1996,  annuity deposits  accruing  interest
were $435  million  and  universal  life  deposits  accruing  interest  were $54
million.  During the third  quarter  of 1996,  the  interest  rate  credited  on
universal  life remained  unchanged  while the interest rate credited on annuity
deposits increased by .25%. The current interest rate credited on universal life
deposits  is in the 6.25% to 7.00%  range  while the rate  credited  on  annuity
deposits is in the 5.00% to 6.00% range.

Amortization of Deferred Policy  Acquisition  Costs (DPAC).  The amortization of
deferred policy  acquisition costs totaled $481,446 in the third quarter of 1995
and $684,486 in the third quarter of 1996.

Commissions.  Commissions increased $130,683 to $855,927 in the third quarter of
1996. Most of this commission  increase was due to an increase in renewal policy
revenues  of 5.4% along with an increase in the  average  commission  rate.  The
average commission rate increased due to an increase in persistency for policies
in their second  policy year.  Second year renewal  commission  rates are higher
than third and  subsequent  year  commission  rates and increases in second year
persistency  will  result in an increase in the  average  commission  rate.  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 $1,234,779 in the third quarter of
1996  compared to  $1,491,922  for the same period in 1995.  The majority of the
decrease in general  expenses was due to decreases in data  processing  expense.
This  decrease  was due to lower  computer  usage  charges and less  charges for
system maintenance and enhancement. 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 increased  $1,023,000 to
$1,536,977 in the third  quarter of 1996.  This increase was caused by the state
life  and  health  insurance  guaranty   assessments.   The  accrual  for  these
assessments  totaled  $1,200,000 in the third quarter of 1996 and $17,000 in the
third quarter of 1995. In 1995,  $332,000 of the state life and health insurance
guaranty  assessments  were paid in the first  quarter and $854,000 were paid in
the  second  quarter.  The  remaining  decrease  was caused by the repeal of the
Pennsylvania  tax on  non-qualified  annuities  beginning  January 1, 1996.  The
Pennsylvania  non-qualified annuity tax increased the Company's premium taxes by
$193,000 in the third quarter of 1995.

                                         12

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


Federal  Income  Tax.  Federal  Income  Tax in the  third  quarter  amounted  to
$1,678,397  compared to  $3,075,792  for the same period in 1995.  The Company's
effective  federal income tax rates in 1996 and 1995 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 nine  months  ended  September  30,  1996 was  $9,217,648,  compared  to
$2,317,822 for the nine months ended September 30, 1995. The Company's liquidity
position  remains strong as invested assets grew by $43 million during the first
nine months of 1996 to $612 million at September 30, 1996.

Premium  from the sale of new  policies  combined  with the  premium on existing
policies accounted for approximately 37.0% of total revenue in the third quarter
of 1996  and  31.6%  for the same  period  in 1995.  Investment  income,  net of
expenses, generated 56.0% of total revenue in 1996 and 46.0% in 1995.

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  $10,762,252 in the
third quarter of 1996 and $14,697,756 in the third quarter of 1995.

The Company's current commitments for expenditures as of September 30, 1996, are
primarily for policy death benefits, policy surrenders and withdrawals,  general
operating expenses,  federal income taxes, and dividends to stockholders.  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 September 30, 1996,  the  Company's  line of credit with PNC Bank totaled $10
million, none of which was outstanding.


                                         13

<PAGE>



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


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 pay out which
may be made in 1996 without prior Pennsylvania  insurance  commissioner approval
is $9,373,000.

The Company's 1995 year-end Risk Based Capital Analysis as reflected in its 1995
statutory  annual  statement  shows total adjusted  capital of  $75,548,251  and
authorized  control  level risk  based  capital of  $10,608,713.  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 September 30, 1996,
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 September 30, 1996, 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 $604 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>


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 September 30, 1996.









                                     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        November 7, 1996               /s/ Stephen A. Milne
                                     (Stephen A. Milne, President & CEO)

                                         /s/ Thomas M. Sider
                          (Thomas M. Sider, Executive Vice President & CFO)


                                 15

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