##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended September 30, 2005
 Commission file number 2-39458
 ERIE FAMILY LIFE INSURANCE COMPANY
 
  PENNSYLVANIA
    
    25-1186315(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 100 Erie Insurance Place, Erie, Pennsylvania
    
    16530(Address of principal executive offices)
    
    (Zip code)
  
   
  þ o
 o þ
 o þ




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PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Statements of Financial Position  September 30, 2005 and December 31, 2004Statements of Operations  Three and nine months ended September 30, 2005 and 2004Statements of Comprehensive Income  Three and nine months ended September 30, 2005 and 2004Statements of Cash Flows  Nine months ended September 30, 2005 and 2004Notes to Financial Statements  September 30, 2005Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.
    
    Quantitative and Qualitative Disclosures About Market RiskItem 4.
    
    Controls and ProceduresPART II. OTHER INFORMATIONItem 1.
    
    Legal ProceedingsItem 6.
    
    ExhibitsSIGNATURESExhibit 31.1Exhibit 31.2Exhibit 32
  2




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PART I. FINANCIAL INFORMATION
 
  
 (Dollars in thousands)September 30
    
    
    December 312005
    
    
    2004(Unaudited)ASSETSINVESTMENTSFixed maturities at fair value (amortized cost
of $1,352,328 and $1,297,913, respectively)
    
    $
    1,390,561
    
    
    $
    1,366,898Equity securities at fair value
(cost of $73,890 and $59,426, respectively)
    
    
    80,210
    
    
    
    66,375Limited partnerships
(cost of $15,147 and $15,234, respectively)
    
    
    16,741
    
    
    
    15,467Real estate mortgage loans
    
    
    5,980
    
    
    
    6,124Real estate
    
    
    1,136
    
    
    
    1,044Policy loans
    
    
    11,357
    
    
    
    10,671Total investments
    
    
    1,505,985
    
    
    
    1,466,579Cash and cash equivalents
    
    
    2,011
    
    
    
    22,446Premiums receivable from policyholders
    
    
    163
    
    
    
    168Reinsurance recoverable
    
    
    2,395
    
    
    
    2,527Other receivables
    
    
    277
    
    
    
    319Accrued investment income
    
    
    19,226
    
    
    
    16,031Deferred policy acquisition costs
    
    
    129,581
    
    
    
    119,117Reserve credit for reinsurance ceded
    
    
    37,666
    
    
    
    29,420Securities lending collateral
    
    
    62,744
    
    
    
    0Prepaid federal income taxes
    
    
    0
    
    
    
    789Other assets
    
    
    7,184
    
    
    
    4,044Total assets
    
    $
    1,767,232
    
    
    $
    1,661,440
  3




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(Dollars in thousands)September 30
    
    
    December 312005
    
    
    2004(Unaudited)LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESPolicy Liabilities and Accruals:Future life and accident and health policy benefits
    
    $
    142,550
    
    
    $
    124,016Policy and contract claims
    
    
    3,775
    
    
    
    3,153Annuity deposits
    
    
    1,012,226
    
    
    
    984,870Universal life deposits
    
    
    173,338
    
    
    
    163,489Supplementary contracts not
including life contingencies
    
    
    741
    
    
    
    702Other policyholder funds
    
    
    10,207
    
    
    
    6,048Federal income taxes payable
    
    
    972
    
    
    
    0Deferred income taxes
    
    
    37,693
    
    
    
    48,066Reinsurance premium due
    
    
    1,325
    
    
    
    2,581Securities lending collateral
    
    
    62,744
    
    
    
    0Accounts payable and accrued expenses
    
    
    14,840
    
    
    
    10,581Notes payable to Erie Indemnity Company
    
    
    40,000
    
    
    
    40,000Due to affiliates
    
    
    2,525
    
    
    
    4,327Dividends payable
    
    
    4,158
    
    
    
    2,079Total liabilities
    
    
    1,507,094
    
    
    
    1,389,912SHAREHOLDERS EQUITYCommon stock, $.40 par value per share;
authorized 15,000,000 shares; 9,450,000
shares issued and outstanding
    
    
    3,780
    
    
    
    3,780Additional paid-in capital
    
    
    630
    
    
    
    630Accumulated other comprehensive income
    
    
    23,192
    
    
    
    39,252Retained earnings
    
    
    232,536
    
    
    
    227,866Total shareholders equity
    
    
    260,138
    
    
    
    271,528Total liabilities and shareholders equity
    
    $
    1,767,232
    
    
    $
    1,661,440
  4




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Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars in thousands, except per share data)REVENUESNet Policy Revenue:Life premiums
    
    $
    14,032
    
    
    $
    13,458
    
    
    $
    42,214
    
    
    $
    40,359Group life and other premiums
    
    
    870
    
    
    
    819
    
    
    
    2,650
    
    
    
    2,522Total net policy revenue
    
    
    14,902
    
    
    
    14,277
    
    
    
    44,864
    
    
    
    42,881Net investment income
    
    
    20,949
    
    
    
    19,705
    
    
    
    62,698
    
    
    
    59,642Net realized gains on investments
    
    
    267
    
    
    
    1,103
    
    
    
    429
    
    
    
    9,507Equity in (losses) earnings of
limited partnerships
    
    
    (201
    )
    
    
    203
    
    
    
    3,487
    
    
    
    1,070Other income
    
    
    126
    
    
    
    203
    
    
    
    494
    
    
    
    759Total revenues
    
    
    36,043
    
    
    
    35,491
    
    
    
    111,972
    
    
    
    113,859BENEFITS AND EXPENSESDeath benefits
    
    
    3,353
    
    
    
    5,096
    
    
    
    13,405
    
    
    
    13,479Interest on annuity deposits
    
    
    11,464
    
    
    
    11,076
    
    
    
    33,814
    
    
    
    33,121Interest on universal life deposits
    
    
    1,917
    
    
    
    1,775
    
    
    
    5,634
    
    
    
    5,262Interest on surplus notes and other
affiliate interest
    
    
    713
    
    
    
    713
    
    
    
    2,136
    
    
    
    2,143Surrender and other benefits
    
    
    392
    
    
    
    306
    
    
    
    1,075
    
    
    
    921Increase in future life policy benefits
    
    
    4,967
    
    
    
    1,982
    
    
    
    10,288
    
    
    
    6,014Amortization of deferred policy
acquisition costs
    
    
    3,046
    
    
    
    1,942
    
    
    
    7,222
    
    
    
    (1,423
    )Commissions
    
    
    509
    
    
    
    15
    
    
    
    1,315
    
    
    
    1,601General expenses
    
    
    5,194
    
    
    
    4,171
    
    
    
    15,211
    
    
    
    12,146Taxes, licenses and fees
    
    
    872
    
    
    
    798
    
    
    
    2,750
    
    
    
    2,655Total benefits and expenses
    
    
    32,427
    
    
    
    27,874
    
    
    
    92,850
    
    
    
    75,919Income before income taxes
    
    
    3,616
    
    
    
    7,617
    
    
    
    19,122
    
    
    
    37,940Provision for income taxes
    
    
    709
    
    
    
    2,618
    
    
    
    6,136
    
    
    
    13,179Net income
    
    $
    2,907
    
    
    $
    4,999
    
    
    $
    12,986
    
    
    $
    24,761Net income per share
    
    $
    0.31
    
    
    $
    0.53
    
    
    $
    1.37
    
    
    $
    2.62Dividends declared per share
    
    $
    0.44
    
    
    $
    0.44
    
    
    $
    0.88
    
    
    $
    0.88
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Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302005
    
    
    2004
    
    
    2005
    
    
    2004(Dollars in thousands)Net income
    
    $
    2,907
    
    
    $
    4,999
    
    
    $
    12,986
    
    
    $
    24,761Unrealized (losses) gains on securities:Unrealized holding (losses) gains arising
during period, net of offsets to shadow
deferred acquisition costs
    
    
    (24,566
    )
    
    
    32,572
    
    
    
    (24,279
    )
    
    
    1,131Less: gains included in net income
    
    
    (267
    )
    
    
    (1,103
    )
    
    
    (429
    )
    
    
    (9,507
    )Net unrealized holding (losses) gains
arising during period, net of offsets to
shadow deferred acquisition costs
    
    
    (24,833
    )
    
    
    31,469
    
    
    
    (24,708
    )
    
    
    (8,376
    )Income tax (expense) benefit related to
unrealized (losses) gains
    
    
    8,692
    
    
    
    (11,014
    )
    
    
    8,648
    
    
    
    2,932Unrealized (depreciation) appreciation of
investments, net of taxes
    
    
    (16,141
    )
    
    
    20,455
    
    
    
    (16,060
    )
    
    
    (5,444
    )Comprehensive (loss) income
    
    ($
    13,234
    )
    
    $
    25,454
    
    
    ($
    3,074
    )
    
    $
    19,317
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Nine Months Ended September 302005
    
    
    2004(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIESPremiums collected
    
    $
    47,780
    
    
    $
    39,359Net investment income received
    
    
    60,598
    
    
    
    57,217Miscellaneous income
    
    
    494
    
    
    
    759Benefits to policyholders
    
    
    (54,202
    )
    
    
    (51,818
    )Commissions paid to agents
    
    
    (4,670
    )
    
    
    (4,401
    )Salaries and wages paid
    
    
    (11,882
    )
    
    
    (9,212
    )General operating expenses paid
    
    
    (11,364
    )
    
    
    (10,689
    )Taxes, licenses and fees paid
    
    
    (2,674
    )
    
    
    (2,396
    )Interest paid
    
    
    (1,475
    )
    
    
    (1,475
    )Income taxes paid
    
    
    (6,100
    )
    
    
    (7,982
    )Net cash provided by operating activities
    
    
    16,505
    
    
    
    9,362CASH FLOWS FROM INVESTING ACTIVITIESPurchase of investments:Fixed maturities
    
    
    (248,503
    )
    
    
    (198,238
    )Equity securities
    
    
    (14,464
    )
    
    
    (3,529
    )Limited partnerships
    
    
    (6,806
    )
    
    
    (963
    )Sales/maturities of investments:Sales of fixed maturities
    
    
    145,946
    
    
    
    139,824Calls/maturities of fixed maturities
    
    
    47,778
    
    
    
    24,773Equity securities
    
    
    0
    
    
    
    3,492Limited partnerships
    
    
    8,798
    
    
    
    2,864Increase (decrease) in collateral from securities lending
    
    
    62,744
    
    
    
    (32,391
    )(Investment) redemption of securities lending collateral
    
    
    (62,744
    )
    
    
    32,391Net mortgage loans
    
    
    144
    
    
    
    134Real estate additions
    
    
    (154
    )
    
    
    0Net policy loans
    
    
    (686
    )
    
    
    (497
    )Net cash used in investing activities
    
    
    (67,947
    )
    
    
    (32,140
    )CASH FLOWS FROM FINANCING ACTIVITIESAnnuity and supplementary
contract deposits and interest
    
    
    92,712
    
    
    
    92,615Annuity and supplementary
contract surrenders and withdrawals
    
    
    (65,317
    )
    
    
    (52,589
    )Universal life deposits and interest
    
    
    14,671
    
    
    
    14,761Universal life surrenders
    
    
    (4,822
    )
    
    
    (4,960
    )Dividends paid to shareholders
    
    
    (6,237
    )
    
    
    (6,143
    )Net cash provided by financing activities
    
    
    31,007
    
    
    
    43,684Net (decrease) increase in cash and cash equivalents
    
    
    (20,435
    )
    
    
    20,906Cash and cash equivalents at beginning of period
    
    
    22,446
    
    
    
    26,172Cash and cash equivalents at end of period
    
    $
    2,011
    
    
    $
    47,078
  7




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Financial Accounting Standard Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated(in thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueSeptember 30, 2005Fixed maturitiesBonds:U.S. treasuries and government agencies
    
    $
    45,041
    
    
    $
    541
    
    
    $
    175
    
    
    $
    45,407Public utilities
    
    
    180,676
    
    
    
    7,907
    
    
    
    1,229
    
    
    
    187,354U.S. banks, trusts and insurance companies
    
    
    235,338
    
    
    
    7,899
    
    
    
    1,404
    
    
    
    241,833U.S. industrial and miscellaneous
    
    
    561,582
    
    
    
    21,623
    
    
    
    4,327
    
    
    
    578,878Mortgage-backed securities
    
    
    157,513
    
    
    
    2,254
    
    
    
    1,739
    
    
    
    158,028Asset-backed securities
    
    
    16,435
    
    
    
    156
    
    
    
    124
    
    
    
    16,467Foreign
    
    
    153,593
    
    
    
    7,860
    
    
    
    1,028
    
    
    
    160,425Total bonds
    
    
    1,350,178
    
    
    
    48,240
    
    
    
    10,026
    
    
    
    1,388,392Redeemable preferred stock
    
    
    2,150
    
    
    
    19
    
    
    
    0
    
    
    
    2,169Total fixed maturities
    
    
    1,352,328
    
    
    
    48,259
    
    
    
    10,026
    
    
    
    1,390,561Equity securitiesNonredeemable preferred stock:U.S. banks, trusts and insurance companies
    
    
    33,909
    
    
    
    2,014
    
    
    
    0
    
    
    
    35,923U.S. industrial and miscellaneous
    
    
    18,801
    
    
    
    1,739
    
    
    
    0
    
    
    
    20,540Foreign
    
    
    21,180
    
    
    
    2,569
    
    
    
    2
    
    
    
    23,747Total equity securities
    
    
    73,890
    
    
    
    6,322
    
    
    
    2
    
    
    
    80,210Total fixed maturities and equity securities
    
    $
    1,426,218
    
    
    $
    54,581
    
    
    $
    10,028
    
    
    $
    1,470,771
 9




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Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Estimated(in thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueDecember 31, 2004Fixed maturitiesBonds:U.S. treasuries and government agencies
    
    $
    60,126
    
    
    $
    1,048
    
    
    $
    98
    
    
    $
    61,076Public utilities
    
    
    160,516
    
    
    
    11,313
    
    
    
    219
    
    
    
    171,610U.S. banks, trusts and insurance companies
    
    
    193,461
    
    
    
    9,148
    
    
    
    709
    
    
    
    201,900U.S. industrial and miscellaneous
    
    
    566,633
    
    
    
    34,721
    
    
    
    976
    
    
    
    600,378Mortgage-backed securities
    
    
    157,289
    
    
    
    3,713
    
    
    
    609
    
    
    
    160,393Asset-backed securities
    
    
    10,946
    
    
    
    348
    
    
    
    77
    
    
    
    11,217Foreign
    
    
    141,926
    
    
    
    12,080
    
    
    
    686
    
    
    
    153,320Total bonds
    
    
    1,290,897
    
    
    
    72,371
    
    
    
    3,374
    
    
    
    1,359,894Redeemable preferred stock
    
    
    7,016
    
    
    
    94
    
    
    
    106
    
    
    
    7,004Total fixed maturities
    
    
    1,297,913
    
    
    
    72,465
    
    
    
    3,480
    
    
    
    1,366,898Equity securitiesNonredeemable preferred stock:U.S. banks, trusts and insurance companies
    
    
    19,909
    
    
    
    2,078
    
    
    
    2
    
    
    
    21,985U.S. industrial and miscellaneous
    
    
    18,801
    
    
    
    1,873
    
    
    
    0
    
    
    
    20,674Foreign
    
    
    20,716
    
    
    
    3,000
    
    
    
    0
    
    
    
    23,716Total equity securities
    
    
    59,426
    
    
    
    6,951
    
    
    
    2
    
    
    
    66,375Total fixed maturities and equity securities
    
    $
    1,357,339
    
    
    $
    79,416
    
    
    $
    3,482
    
    
    $
    1,433,273
 10




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Less than 12 months
    
    
    12 months or longer
    
    


    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Number of(in thousands)
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    HoldingsFixed maturitiesBonds:U.S. treasuries and
government agencies
    
    $
    20,781
    
    
    $
    154
    
    
    $
    1,978
    
    
    $
    21
    
    
    $
    22,759
    
    
    $
    175
    
    
    
    8Public utilities
    
    
    53,337
    
    
    
    836
    
    
    
    9,347
    
    
    
    393
    
    
    
    62,684
    
    
    
    1,229
    
    
    
    25U.S. industrial,
miscellaneous, banks,
trusts and insurance
companies
    
    
    218,741
    
    
    
    4,239
    
    
    
    38,047
    
    
    
    1,492
    
    
    
    256,788
    
    
    
    5,731
    
    
    
    103Mortgage-backed securities
    
    
    84,524
    
    
    
    1,230
    
    
    
    16,155
    
    
    
    509
    
    
    
    100,679
    
    
    
    1,739
    
    
    
    29Asset-backed securities
    
    
    1,973
    
    
    
    27
    
    
    
    2,895
    
    
    
    97
    
    
    
    4,868
    
    
    
    124
    
    
    
    2Foreign
    
    
    46,383
    
    
    
    536
    
    
    
    11,368
    
    
    
    492
    
    
    
    57,751
    
    
    
    1,028
    
    
    
    22Total fixed maturities
    
    
    425,739
    
    
    
    7,022
    
    
    
    79,790
    
    
    
    3,004
    
    
    
    505,529
    
    
    
    10,026
    
    
    
    189Equity securitiesNonredeemable preferred
stock
    
    
    1,006
    
    
    
    2
    
    
    
    0
    
    
    
    0
    
    
    
    1,006
    
    
    
    2
    
    
    
    1Total fixed maturity and
equity securities
    
    $
    426,745
    
    
    $
    7,024
    
    
    $
    79,790
    
    
    $
    3,004
    
    
    $
    506,535
    
    
    $
    10,028
    
    
    
    190
 U.S. Treasury Obligations and Government Agencies
 Corporate Bonds (public utilities, U.S. industrial, miscellaneous, banks, trust and insurance
companies, and foreign)
 Mortgage-Backed Securities
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Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 30(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Fixed maturities:Gross realized gains
    
    $
    1,668
    
    
    $
    1,186
    
    
    $
    4,693
    
    
    $
    9,860Gross realized losses
    
    
    (1,401
    )
    
    
    (45
    )
    
    
    (4,271
    )
    
    
    (358
    )Net realized gains
    
    
    267
    
    
    
    1,141
    
    
    
    422
    
    
    
    9,502Equity securities/Limited partnerships:Gross realized gains
    
    
    0
    
    
    
    5
    
    
    
    11
    
    
    
    102Gross realized losses
    
    
    0
    
    
    
    (43
    )
    
    
    (4
    )
    
    
    (97
    )Net realized gains (losses)
    
    
    0
    
    
    
    (38
    )
    
    
    7
    
    
    
    5Net realized gains on investments
    
    $
    267
    
    
    $
    1,103
    
    
    $
    429
    
    
    $
    9,507
   Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 30(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Mezzanine debt
    
    $
    0
    
    
    $
    43
    
    
    $
    557
    
    
    $
    77Real estate
    
    
    (201
    )
    
    
    160
    
    
    
    2,930
    
    
    
    993($
    201
    )
    
    $
    203
    
    
    $
    3,487
    
    
    $
    1,070
   12




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Accounting and Reporting by Insurance Enterprises
 Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments
       13




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##### Table of Contents



(in thousands)GroupThree Months Ended
    
    Traditional
    
    
    Universal
    
    
    Fixed
    
    
    Life &
    
    
    CorporateSeptember 30, 2005
    
    Life
    
    
    Life
    
    
    Annuities
    
    
    Other
    
    
    Account
    
    
    TotalTotal policy revenue, net of
reinsurance
    
    $
    10,399
    
    
    $
    3,633
    
    
    $
    0
    
    
    $
    870
    
    
    $
    0
    
    
    $
    14,902Net investment and other
income
    
    
    1,824
    
    
    
    2,387
    
    
    
    14,523
    
    
    
    59
    
    
    
    2,081
    
    
    
    20,874Net realized gains on
investments
    
    
    24
    
    
    
    29
    
    
    
    184
    
    
    
    1
    
    
    
    29
    
    
    
    267Total revenues
    
    
    12,247
    
    
    
    6,049
    
    
    
    14,707
    
    
    
    930
    
    
    
    2,110
    
    
    
    36,043Less: Total benefits and
expenses
    
    
    13,526
    
    
    
    4,901
    
    
    
    13,280
    
    
    
    643
    
    
    
    77
    
    
    
    32,427Income (loss) before taxes
    
    ($
    1,279
    )
    
    $
    1,148
    
    
    $
    1,427
    
    
    $
    287
    
    
    $
    2,033
    
    
    $
    3,616
 GroupNine Months Ended
    
    Traditional
    
    
    Universal
    
    
    Fixed
    
    
    Life &
    
    
    CorporateSeptember 30, 2005
    
    Life
    
    
    Life
    
    
    Annuities
    
    
    Other
    
    
    Account
    
    
    TotalTotal policy revenue, net of
reinsurance
    
    $
    31,560
    
    
    $
    10,654
    
    
    $
    1
    
    
    $
    2,649
    
    
    $
    0
    
    
    $
    44,864Net investment and other
income
    
    
    5,421
    
    
    
    7,156
    
    
    
    43,623
    
    
    
    174
    
    
    
    10,305
    
    
    
    66,679Net realized gains on
investments
    
    
    37
    
    
    
    46
    
    
    
    292
    
    
    
    1
    
    
    
    53
    
    
    
    429Total revenues
    
    
    37,018
    
    
    
    17,856
    
    
    
    43,916
    
    
    
    2,824
    
    
    
    10,358
    
    
    
    111,972Less: Total benefits and
expenses
    
    
    36,754
    
    
    
    14,410
    
    
    
    39,537
    
    
    
    1,917
    
    
    
    232
    
    
    
    92,850Income before taxes
    
    $
    264
    
    
    $
    3,446
    
    
    $
    4,379
    
    
    $
    907
    
    
    $
    10,126
    
    
    $
    19,122
 14




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(in thousands)GroupThree Months Ended
    
    Traditional
    
    
    Universal
    
    
    Fixed
    
    
    Life &
    
    
    CorporateSeptember 30, 2004
    
    Life
    
    
    Life
    
    
    Annuities
    
    
    Other
    
    
    Account
    
    
    TotalTotal policy revenue, net of
reinsurance
    
    $
    9,983
    
    
    $
    3,475
    
    
    $
    0
    
    
    $
    819
    
    
    $
    0
    
    
    $
    14,277Net investment and other
income
    
    
    1,699
    
    
    
    2,246
    
    
    
    13,785
    
    
    
    47
    
    
    
    2,334
    
    
    
    20,111Net realized gains on
investments
    
    
    99
    
    
    
    124
    
    
    
    794
    
    
    
    2
    
    
    
    84
    
    
    
    1,103Total revenues
    
    
    11,781
    
    
    
    5,845
    
    
    
    14,579
    
    
    
    868
    
    
    
    2,418
    
    
    
    35,491Less: Total benefits and
expenses
    
    
    10,185
    
    
    
    3,844
    
    
    
    12,745
    
    
    
    1,023
    
    
    
    77
    
    
    
    27,874Income (loss) before taxes
    
    $
    1,596
    
    
    $
    2,001
    
    
    $
    1,834
    
    
    ($
    155
    )
    
    $
    2,341
    
    
    $
    7,617
 GroupNine Months Ended
    
    Traditional
    
    
    Universal
    
    
    Fixed
    
    
    Life &
    
    
    CorporateSeptember 30, 2004
    
    Life
    
    
    Life
    
    
    Annuities
    
    
    Other
    
    
    Account
    
    
    TotalTotal policy revenue, net of
reinsurance
    
    $
    29,940
    
    
    $
    10,419
    
    
    $
    1
    
    
    $
    2,521
    
    
    $
    0
    
    
    $
    42,881Net investment and other
income
    
    
    5,121
    
    
    
    6,842
    
    
    
    41,821
    
    
    
    141
    
    
    
    7,546
    
    
    
    61,471Net realized gains on
investments
    
    
    818
    
    
    
    1,000
    
    
    
    6,656
    
    
    
    22
    
    
    
    1,011
    
    
    
    9,507Total revenues
    
    
    35,879
    
    
    
    18,261
    
    
    
    48,478
    
    
    
    2,684
    
    
    
    8,557
    
    
    
    113,859Less: Total benefits and
expenses
    
    
    30,173
    
    
    
    4,995
    
    
    
    38,552
    
    
    
    1,966
    
    
    
    233
    
    
    
    75,919Income before taxes
    
    $
    5,706
    
    
    $
    13,266
    
    
    $
    9,926
    
    
    $
    718
    
    
    $
    8,324
    
    
    $
    37,940
     15




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Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 30(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Direct policy revenue
    
    $
    20,601
    
    
    $
    19,498
    
    
    $
    61,776
    
    
    $
    57,172Policy revenue ceded
    
    
    (5,699
    )
    
    
    (5,221
    )
    
    
    (16,912
    )
    
    
    (14,291
    )Net policy revenue
    
    $
    14,902
    
    
    $
    14,277
    
    
    $
    44,864
    
    
    $
    42,881Death benefits
    
    $
    5,954
    
    
    $
    6,790
    
    
    $
    19,877
    
    
    $
    17,836Reinsurance recoveries
    
    
    (2,601
    )
    
    
    (1,694
    )
    
    
    (6,472
    )
    
    
    (4,357
    )Net death benefits
    
    $
    3,353
    
    
    $
    5,096
    
    
    $
    13,405
    
    
    $
    13,479Increase in future life policy benefits
    
    $
    9,784
    
    
    $
    3,941
    
    
    $
    18,534
    
    
    $
    11,406Reinsurance reserve credits
    
    
    (4,817
    )
    
    
    (1,959
    )
    
    
    (8,246
    )
    
    
    (5,392
    )Net increases in future life policy
benefits
    
    $
    4,967
    
    
    $
    1,982
    
    
    $
    10,288
    
    
    $
    6,014Commissions
    
    $
    2,489
    
    
    $
    2,126
    
    
    $
    7,316
    
    
    $
    7,234Reinsurance commission
allowance
    
    
    (1,980
    )
    
    
    (2,111
    )
    
    
    (6,001
    )
    
    
    (5,633
    )Net commissions
    
    $
    509
    
    
    $
    15
    
    
    $
    1,315
    
    
    $
    1,601
 16




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17




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Nine Months Ended September 30(in thousands)
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    12,986
    
    
    $
    24,761Adjustments to reconcile net income to net cash
provided by operating activities:Amortization of deferred policy acquisition costs
    
    
    7,222
    
    
    
    (1,423
    )Other amortization
    
    
    716
    
    
    
    764Deferred federal income tax (benefit) expense
    
    
    (1,725
    )
    
    
    4,073Realized gains on investments
    
    
    (429
    )
    
    
    (9,507
    )Equity in earnings of limited partnerships
    
    
    (3,487
    )
    
    
    (1,070
    )Decrease (increase) in premium and other receivables
    
    
    10
    
    
    
    (3
    )Increase in accrued investment income
    
    
    (3,195
    )
    
    
    (3,532
    )Policy acquisition costs deferred
    
    
    (10,756
    )
    
    
    (10,960
    )Decrease (increase) in other assets
    
    
    3
    
    
    
    (101
    )Increase in reinsurance recoverables and reserve credits
    
    
    (8,114
    )
    
    
    (3,682
    )Decrease in prepaid federal income taxes
    
    
    1,761
    
    
    
    1,124Increase in future policy benefits and claims
    
    
    19,156
    
    
    
    11,514Increase (decrease) in other policyholder funds
    
    
    4,159
    
    
    
    (2,896
    )Decrease in reinsurance premium due
    
    
    (1,256
    )
    
    
    (612
    )(Decrease) increase in accounts payable and due to affiliates
    
    
    (546
    )
    
    
    912Net cash provided by operating activities
    
    $
    16,505
    
    
    $
    9,362
       18




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19




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
  CRITICAL ACCOUNTING ESTIMATES
 Insurance liabilities
  Accounting and Reporting
by Insurance Enterprises Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for
Realized Gains and Losses from the Sale of Investments
     20




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
 FINANCIAL OVERVIEW
    REVENUES
 Analysis of Policy Revenue
   Analysis of Investment-related Income
   21




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
    Pretax annualized total returnsTwo year period endedSeptember 30, 2005Erie Family Life Insurance Company indices:Fixed maturities
    
    
    4.41
    %Preferred stock
    
    
    7.68Market indices:Lehman Brothers U.S. Aggregate
    
    
    3.24
    %
 BENEFITS AND EXPENSES
 Analysis of Policy-related Benefits and Expenses
   22




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
    Analysis of Other Expenses
   23




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
 
 FINANCIAL CONDITION
 Investments
      Reserve Liabilities
 
 24




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
  LIQUIDITY AND CAPITAL RESOURCES
     25




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
  FACTORS THAT MAY AFFECT FUTURE RESULTS
 Products with Interest Rate Guarantees
   Initial
    
    
    
    
    
    CurrentGuaranteed
    
    Policy
    
    
    Guaranteed
    
    
    DepositInterest Rate
    
    Years
    
    
    Interest Rate
    
    
    Liabilities(in thousands)4.5%
    
    
    1 - 5
    
    
    
    4.5
    %
    
    $
    244,1094.5
    
    
    6 -10
    
    
    
    4.0
    
    
    
    111,3604.5
    
    Over 10
    
    
    3.5
    
    
    
    198,0113.0
    
    All Years
    
    
    3.0
    
    
    
    38,6341.5
    
    All Years
    
    
    1.5
    
    
    
    49,709
   Market Conditions for Competing Products
  26




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL
OPERATIONS
 Introduction of ErieConnection (R)
 Connection
 27




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:
 28




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
       29




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Changes in Internal Control Over Financial Reporting
  30




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ITEM I. LEGAL PROCEEDINGS
       31




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ITEM 6. EXHIBITS
 Exhibits
 ExhibitNumber
    
    Description of Exhibit31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
200232
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 32




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##### Table of Contents



Erie Family Life Insurance Company(Registrant)Date: November 2, 2005
    
    /s/ Jeffrey A. Ludrof(Jeffrey A. Ludrof, President & CEO)/s/ Philip A. Garcia(Philip A. Garcia, Executive Vice President & CFO)
 33