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, 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 October 31, 1997.


                                       1
<PAGE>


                                      INDEX

                       ERIE FAMILY LIFE INSURANCE COMPANY


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

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

        Statements  of  Operations--Three  months ended  September  30, 1997 and
          1996, nine months ended September 30, 1997 and 1996

        Statements of Cash Flows--nine months ended September 30, 1997 and 1996

        Notes to Financial Statements--September 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>

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

Investments:
      Fixed Maturities, at fair value
        (amortized cost of $535,670,934
        and $509,627,188, respectively)                              $         550,980,864        $         515,529,699
      Equity Securities, at fair value
        (cost of $112,762,312 and $111,463,042,
        respectively)                                                          124,640,218                  116,552,145
      Real Estate                                                                1,645,529                    1,710,329
      Policy Loans                                                               4,916,919                    4,381,657
      Mortgage Loans on Real Estate                                             10,043,975                    8,955,760
      Other Invested Assets                                                      7,072,307                    6,787,226
                                                                     ---------------------        ---------------------

        Total Investments                                            $         699,299,812        $         653,916,816

Cash, including short-term investments of
   $28,166,277 and $7,789,063, respectively                                     26,672,611                    6,284,102
Premiums Receivable                                                              3,064,627                    2,974,305
Reinsurance Recoverable                                                            227,365                      212,583
Other Receivables                                                                  290,263                      567,216
Accrued Investment Income                                                       11,742,957                    9,792,095
Deferred Policy Acquisition Costs                                               63,176,281                   58,026,428
Reserve Credit For Reinsurance Ceded                                             4,668,635                    4,199,907
Other Assets                                                                     2,413,039                    4,677,208
                                                                     ---------------------        ---------------------

        Total Assets                                                 $         811,555,590        $         740,650,660
                                                                     =====================        =====================

</TABLE>

See notes to financial statements.

                                       3

<PAGE>


                        STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>

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

Liabilities:
      Policy Liabilities and Accruals:
        Future Life Policy Benefits                                  $          58,605,674        $          54,033,860
        Policy and Contract Claims                                               1,990,727                    1,703,105
        Annuity Deposits                                                       478,110,998                  450,570,003
        Universal Life Deposits                                                 66,140,483                   56,856,590
        Supplementary Contracts Not
          including Life Contingencies                                             819,762                      839,258
      Other Policyholder Funds                                                   7,744,231                    5,763,271
      Current Federal Income Tax                                                   618,979                      686,353
      Deferred Federal Income Tax                                               22,773,250                   15,614,492
      Reinsurance Premium Due                                                      273,219                      203,198
      Accounts Payable and Accrued Liabilities                                   3,500,216                    4,519,782
      Note Payable to Affiliate                                                 15,000,000                   15,000,000
      Due to Affiliate                                                             839,750                    1,049,007
      Dividends Payable                                                          2,551,504                    1,181,252
                                                                     ---------------------        ---------------------

        Total Liabilities                                            $         658,968,793        $         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 $9,510,773
        and $3,847,065, respectively                                            17,662,865                    7,144,549
      Retained Earnings                                                        130,513,932                  121,075,940
                                                                     ---------------------        ---------------------

        Net Shareholders' Equity                                     $         152,586,797        $         132,630,489
                                                                     ---------------------        ---------------------

        Total Liabilities and Shareholders'
          Equity                                                     $         811,555,590        $         740,650,660
                                                                     =====================        =====================
</TABLE>



See notes to financial statements.
                                       4

<PAGE>


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

                                                               Three Months Ended                        Nine Months Ended
                                                                   September 30                             September 30
                                                           1997                    1996              1997                   1996
<S>                                                  <C>                 <C>                    <C>                 <C>

Revenues:
  Policy:
  Life Premiums, net of premiums ceded of
    $887,210, $1,047,438, $2,608,848 and
    $2,601,268, respectively                         $     8,097,260     $      7,192,211       $    24,285,999     $    21,364,064
  Group                                                      564,167              488,260             1,657,792           1,469,294
                                                     ---------------     ----------------       ---------------     ---------------
Total Policy Revenues                                $     8,661,427     $      7,680,471       $    25,943,791     $    22,833,358

Investment Income, Net of Expenses of
  $328,986, $355,056, $976,860 and
  $1,057,275, respectively                                12,418,846           11,622,874            37,031,620          34,297,482
Realized Gain on Investment                                2,507,707              898,400             3,875,794           1,671,027
Other Income                                                 189,902              126,256               515,326             477,282
                                                     ---------------     ----------------       ---------------     ---------------
    Total Revenues                                   $    23,777,882     $     20,328,001       $    67,366,531     $    59,279,149
                                                     ---------------     ----------------       ---------------     ---------------

Benefits and Expenses:
  Death Benefits, net of reinsurance recoveries
   of $244,888, $271,318, $760,790 and
   $1,657,797 respectively                                 2,346,461            1,618,047             6,998,725           6,676,726
  Interest on Annuity Deposits                             6,851,856            6,305,008            20,570,532          18,899,418
  Interest on Universal Life Deposits                      1,029,153              821,821             2,873,383           2,318,720
  Surrender and Other Benefits                               269,319              215,326               882,066             796,802
  Increase in Liability  for Future Life Policy
    Benefits,  net of the increase in reserve
    credit for reinsurance  ceded of $166,048,
    $183,754 $468,728 and $481,641 respectively            1,343,157            1,277,405             4,103,086           3,241,349
  Amortization of Deferred Policy
    Acquisition Costs                                        693,000              684,486             2,253,404           2,072,515
  Commissions, net of reinsurance reimbursements
     of $331,582, $442,173, $927,307
     and  $945,771 respectively                              327,071              413,753             1,206,028           1,447,412
  General Expenses                                         1,602,345            1,234,778             5,008,760           4,147,494
  Taxes, Licenses and Fees                                   257,666            1,536,977               829,338           2,241,710
                                                     ---------------     ----------------       ---------------     ---------------
    Total Benefits and Expenses                      $    14,720,028     $     14,107,601       $    44,725,322     $    41,842,146
                                                     ---------------     ----------------       ---------------     ---------------

Income From Operations                                     9,057,854            6,220,400            22,641,209          17,437,003

Federal Income Tax
  Current                                                  3,146,011             (280,026)            6,605,161           2,647,678
  Deferred                                                   385,172            1,958,423             1,495,050           3,157,122
                                                     ---------------     ----------------       ---------------    ----------------
    Total Federal Income Tax                               3,531,183            1,678,397             8,100,211           5,804,800
                                                     ---------------     ----------------       ---------------    ----------------

Net Income                                           $     5,526,671     $      4,542,003       $    14,540,998    $     11,632,203
                                                     ===============     ================       ===============    ================

Net Income Per Share                                 $          0.58     $            .48       $          1.54    $          1.23
                                                     ===============     ================       ===============    ================

Dividends Declared Per Share                         $         0.135     $           .125       $          0.54    $           .50
                                                     ===============     ================       ===============    ================
</TABLE>
                                       5


<PAGE>


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


                                                                              Nine Months Ended            Nine Months Ended
                                                                              September 30, 1997          September 30, 1996
                                                                             --------------------         ------------------
<S>                                                                          <C>                          <C>

  Cash flows from operating activities:
  Net income                                                                 $      14,540,996            $      11,632,203
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Net amortization of bond and mortgage                                            926,033                      214,728
        premium and discount
  Amortization of deferred policy acquisition                                        2,253,404                    2,072,515
        costs
      Real Estate Depreciation                                                          64,800                       64,800
      Deferred federal income taxes                                                  1,495,050                    3,157,122
      Realized gains on investments                                                 (3,875,794)                  (1,671,027)
      Decrease in other assets                                                       2,264,169                      774,268
      Increase in other receivables                                                    276,953                       14,598
      Increase in premium receivable                                                   (90,322)                     (34,386)
      Increase in reinsurance recoverable
        and reserve credits                                                           (483,510)                    (324,598)
      Increase in accrued investment income                                         (1,950,862)                  (1,221,228)
      Increase in deferred policy acquisition
        costs                                                                       (7,403,257)                  (7,347,658)
      Increase in future policy benefits and claims                                  4,859,436                    3,597,871
      Increase (decrease) in other policyholder funds                                1,980,960                   (2,296,930)
      Increase (decrease) in reinsurance premium due                                    70,021                     (244,545)
      Increase (decrease) in accounts payable and accrued
        liabilities and due to affiliate                                            (1,228,824)                   1,619,365
      Decrease in Federal income taxes currently payable                               (67,374)                    (789,450)
          Net cash provided by operating                                     -----------------            -----------------
            activities                                                              13,631,879                    9,217,648
                                                                             -----------------            -----------------

  Cash flows from investing activities:
      Fixed Maturity Securities:
        Maturities                                                           $      18,504,108            $      12,215,710
        Sales                                                                       17,755,850                   14,257,447
        Purchases                                                                  (64,669,917)                 (87,753,820)
      Equity Securities:
        Sales                                                                       38,613,027                   13,600,665
        Purchases                                                                  (34,596,577)                 (13,660,263)
      Loans made to policyholders                                                   (1,053,304)                    (981,689)
      Payments received on policy loans                                                518,041                      482,875
      Purchase of other invested assets                                               (774,745)                  (3,150,344)
      Sale of other invested assets                                                    475,464                      349,789
      Purchase of mortgage loans                                                    (1,183,667)                  (1,968,775)
      Principal payments received on mortgage
        loans                                                                           95,714                      995,442
                                                                             ------------------           -----------------
  Net cash used in investing activities                                            (26,316,006)                 (65,612,963)
                                                                             ------------------           -----------------

</TABLE>
                                       6
<PAGE>


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


                                                                           Nine Months Ended              Nine Months Ended
                                                                           September 30, 1997            September 30, 1996
                                                                          --------------------          -------------------
<S>                                                                        <C>                          <C>

Cash flows from financing activities:
    Increase in annuity and supplementary
      contract deposits                                                    $       27,521,499           $      29,895,609
    Increase in Universal Life Deposits                                             9,283,893                   8,107,852
    Dividends paid to shareholders                                                 (3,732,756)                 (3,433,504)
                                                                           ------------------           -----------------
        Net cash provided by financing
          activities                                                       $       33,072,636           $      34,569,957
                                                                           ------------------           -----------------
Net increase (decrease) in cash and
   short-term cash investments                                                     20,388,509                 (21,825,358)
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                                                          $       26,672,611           $      13,021,989
                                                                           ==================           =================


Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
    Interest                                                               $          483,750           $         485,635
    Income taxes                                                                    6,473,896                   3,437,128

</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, 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 September 30, 1997, 78.8% of total invested
assets were invested in fixed  maturities.  Preferred  stocks represent 13.3% or
$92.9  million  and  common  stocks  represent  4.5% or $31.7  million  of total
invested assets at September 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 September 30, 1997 consist of investments in
bonds of $535 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, 1997 the
carrying value of fixed maturities was $550,980,864,  or 78.8% of total invested
assets. At September 30, 1997, the amortized cost,  carrying/market value, gross
unrealized  gains and gross  unrealized  losses  for  fixed  maturities  were as
follows:

                           Fixed Maturities at 9-30-97
<TABLE>
<CAPTION>

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

U.S. Treasuries & Agency                      $        12,966,919   $        13,598,661   $           641,054     $          9,312
Foreign Governments                                     2,987,352             2,921,250                     0               66,102
States & Political Subdivisions                         2,760,825             3,001,244               240,419                    0
Special Revenue                                        14,915,439            15,578,422               906,733              243,750
Public Utilities                                       81,088,837            82,652,198             2,193,335              629,974
U.S. Industrial & Miscellaneous                       409,057,555           420,751,069            13,200,799            1,507,285
Foreign Industrial & Miscellaneous                     11,894,007            12,478,020               596,359               12,346
                                              -------------------   -------------------   -------------------     ----------------
Total Fixed Maturities                        $       535,670,934   $       550,980,864   $        17,778,699     $      2,468,769

</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 $350
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 September 30, 1997, the Company's five largest  investments in corporate debt
securities  totaled  $32,569,653,  none  of  which  individually  exceeded  $8.0
million. These investments had a market value of $33.6 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, 1997.  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, 1997,  common and
preferred  stock held by the  Company  had a cost of  $112,762,312  and a market
value of $124,640,218,  representing an unrealized gain of $11,877,906.  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,  94.7% or
$87.9 million of which are of the "highest" or "high" quality, as defined by the
NAIC.  The  remaining  $5.0  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, 9-30-97
<TABLE>
<CAPTION>

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

Common Stock
  Banks, Trusts & Insurance
    Companies                             $           730,500   $           884,375     $       153,875       $             0
  Industrial & Miscellaneous                       27,567,876            30,845,425           5,705,017             2,427,468
                                          -------------------   -------------------     ---------------       ---------------
    Total Common Stock                             28,298,376            31,729,800           5,858,892             2,427,468
Preferred Stocks
  Public Utilities                                  4,000,000             4,030,080              30,080                     0
  U.S. Banks, Trusts &
    Insurance Companies                            56,358,065            62,061,370           5,921,785               218,480
  Foreign Banks, Trusts &
    Insurance Companies                             7,765,000             7,931,400             322,600               156,200
  U.S. Industrial & Miscellaneous                  12,440,871            14,847,568           2,406,697                     0
  Foreign Industrial &
    Miscellaneous                                   3,900,000             4,040,000             140,000                     0
                                          -------------------   -------------------     ---------------       ---------------
    Total Preferred Stock                          84,463,936            92,910,418           8,821,162               374,680

Total Equity Securities                   $       112,762,312   $       124,640,218     $    14,680,054       $     2,802,148

</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 September 30, 1997, the Company did not own any derivatives.

NOTE E - DIVIDEND DECLARED

On September 15,1997,  the Board of Directors of the Company approved the fourth
quarter  dividend of $ .135 per share.  The dividend  will be paid on January 2,
1998 to shareholders of record as of December 17, 1997.



                                      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 $5,526,671,  or $.58 per share, in the third quarter of
1997 from  $4,542,003  or $.48 per  share,  in the  third  quarter  of 1996,  an
increase of 21.7%.  The increase in  nonrecurring  realized gains on investments
from $898,400 in the third quarter of 1996 to $2,507,707 in the third quarter of
1997 was the primary  reason for the increase in net income.  Operating  results
continued to be strong as total policy  revenue grew by 12.8% to  $8,661,427  in
the current period. Investment income net of expenses rose 6.8% from $11,622,874
in the third quarter of 1996 to $12,418,846 in the third quarter of 1997.

REVENUES, BENEFITS, AND EXPENSES

Policy  Revenues.  Total policy  revenues  increased  12.8% to $8,661,427 in the
third quarter of 1997 from $7,680,471 in the third quarter of 1996.  Included in
these  totals are first year life  policy  revenues of  $1,712,541  in the third
quarter of 1997 and  $1,618,493  in the third  quarter of 1996,  an  increase of
5.8%.

Group policy  revenues  increased  from $488,260 in the third quarter of 1996 to
$564,167 in the third quarter of 1997.

Deposits.  First  year and  single  universal  life and  annuity  deposits  were
$10,480,444  in the third quarter of 1997 and $7,423,011 in the third quarter of
1996, an increase of 41%.  Included in these amounts are  structured  settlement
annuities sold to the Erie Insurance Group property/casualty affiliate companies
which  totaled  $4,030,897  in the third  quarter of 1997 and  $2,581,252 in the
third quarter of 1996.

Net Investment  Income.  Net investment  income in the third quarter of 1997 was
$12,418,846 compared to $11,622,874 in the third quarter of 1996, an increase of
6.8%.  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 1997,  the  Company
generated realized gains on investments of $2,507,707.  During the third quarter
of 1996,  the Company had  realized  gains on  investments  of  $898,400.  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 45% in
the third quarter of 1997 to $2,346,461,  compared to  $1,618,047,  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 11% from $7,126,829 in the third quarter of
1996 to $7,881,009  in the third  quarter of 1997.  This increase was due to the
$70 million in deposits made by Policyholders  during the 12-month period ending
September 30, 1997. At September 30, 1997,  annuity deposits  accruing  interest
were $478  million  and  universal  life  deposits  accruing  interest  were $66
million.  During the third  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.

Amortization of Deferred Policy  Acquisition  Costs (DPAC).  The amortization of
deferred policy  acquisition costs totaled $684,486 in the third quarter of 1996
and $693,000 in the third quarter of 1997.

Commissions.  Commissions  decreased $86,682 to $327,071 in the third quarter of
1997.  The decrease in commission  expense  reflects  lower  accruals for travel
incentive  programs  in the third  quarter of 1997  versus the third  quarter of
1996.  Excluding the effect of travel  incentive  costs,  commissions  increased
$33,318 or 8.1%. 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 $1,602,345 in the third quarter of
1997  compared to  $1,234,778  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 by $1,279,311 to
$257,666 in the third quarter of 1997. The decrease in taxes, licenses, and fees
reflects  lower accruals for state life and health  guaranty  assessments in the
third  quarter of 1997 versus the third quarter of 1996. No accruals were needed
during  the third  quarter of 1997.  The  remaining  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  third  quarter  amounted  to
$3,531,183  compared to  $1,678,397  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 nine  months  ended  September  30,  1997 was  $13,631,879,  compared to
$9,217,648 for the nine months ended September 30, 1996. The Company's liquidity
position  remains strong as invested assets grew by $45 million during the first
nine months of 1997 to $699 million at September 30, 1997.

Premium  from the sale of new  policies  combined  with the  premium on existing
policies accounted for approximately 36.4% of total revenue in the third quarter
of 1997  and  37.8%  for the same  period  in 1996.  Investment  income,  net of
expenses, generated 52.2% of total revenue in 1997 and 57.2% 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  $14,396,286 in the
third quarter of 1997 and $10,762,252 in the third quarter of 1996.

The Company's current commitments for expenditures as of September 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 September 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
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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 September 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 September 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 $702 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

New Chief Financial Officer Appointed

Philip A. Garcia,  CPA, FLMI,  ACS, was named executive vice president and chief
financial  officer on October 1, 1997.  Mr. Garcia has been with the Company for
the past 17 years  and had been  senior  vice  president  and  controller  since
September 1993.


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, 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      November 5, 1997
                                              /s/ Jan R. Van Gorder
                                (Jan R. Van Gorder, Executive Vice President,
                                         Secretary and General Counsel)


                                              /s/ Philip A. Garcia
                            (Philip A. Garcia, Executive Vice President & CFO)


                                      15
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