UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended March 31, 2004

o 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 incorporation or organization)		(I.R.S. Employer 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

Not applicable

Former name, former address and former fiscal year, if changed since last report

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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes o No þ

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 May 10, 2004.

INDEX

ERIE FAMILY LIFE INSURANCE COMPANY


PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (Restated)
		Statements of Financial Position — March 31, 2004 (Unaudited) and December 31, 2003
		Statements of Operations (Unaudited) — Three months ended March 31, 2004 and 2003
		Statements of Comprehensive Income (Unaudited) — Three months ended March 31, 2004 and 2003
		Statements of Cash Flows (Unaudited) — Three months ended March 31, 2004 and 2003
		Notes to Financial Statements — March 31, 2004
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
PART II. OTHER INFORMATION
Item 6.		Exhibits and Reports on Form 8-K
SIGNATURES
Certification
Certification
Certifications

PART I. FINANCIAL INFORMATION

ERIE FAMILY LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION (Restated)


	(Dollars in thousands)
	March 31,		December 31,
ASSETS	2004		2003
	(Unaudited)
Investments:
Fixed maturities at fair value (amortized cost of $1,245,569 and $1,203,607, respectively)	$	1,349,147	$	1,280,327
Equity securities at fair value (cost of $56,608 and $56,608, respectively)		64,666		62,948
Limited partnerships at fair value (cost of $11,609 and $12,203, respectively)		11,711		12,241
Real estate mortgage loans		6,261		6,305
Real estate		1,106		1,127
Policy loans		10,097		9,951

Total investments		1,442,988		1,372,899
Cash and cash equivalents		103,936		91,667
Premiums receivable from policyholders		6,924		7,344
Reinsurance recoverable		2,741		2,960
Other receivables		352		137
Accrued investment income		18,418		15,088
Deferred policy acquisition costs		95,839		98,207
Reserve credit for reinsurance ceded		22,209		20,758
Prepaid federal income taxes		0		1,983
Other assets		10,269		18,520

Total assets	$	1,703,676	$	1,629,563

See Notes to Financial Statements.

ERIE FAMILY LIFE INSURANCE COMPANY
STATEMENTS OF FINANCIAL POSITION (Restated)


	(Dollars in thousands)
	March 31,		December 31,
LIABILITIES AND SHAREHOLDERS’ EQUITY	2004		2003
	(Unaudited)
Liabilities:
Policy Liabilities and Accruals:
Future policy benefits	$	111,786	$	108,089
Policy and contract claims		3,294		3,653
Annuity deposits		948,061		932,553
Universal life deposits		153,434		150,421
Supplementary contracts not including life contingencies		709		579
Other policyholder funds		7,561		9,856
Federal income taxes payable		522		0
Deferred income taxes		56,325		46,813
Reinsurance premium due		786		1,875
Securities lending collateral		79,228		65,495
Accounts payable and accrued expenses		22,840		9,239
Notes payable to Erie Indemnity Company		40,000		40,000
Due to affiliates		2,085		3,442
Dividends payable		2,079		1,985

Total liabilities		1,428,710		1,374,000

Shareholders’ Equity:
Common stock, $.40 par value per share; authorized 15,000,000 shares; 9,450,000 shares issued and outstanding		3,780		3,780
Additional paid-in capital		630		630
Accumulated other comprehensive income		59,569		44,603
Retained earnings		210,987		206,550

Total shareholders’ equity		274,966		255,563

Total liabilities and shareholders’ equity	$	1,703,676	$	1,629,563

See Notes to Financial Statements.

ERIE FAMILY LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS (Unaudited) (Restated)


	Three Months Ended		Three Months Ended
	March 31, 2004		March 31, 2003
	(Dollars in thousands, except per share data)
Revenues:
Net Policy Revenue:
Life premiums	$	13,112	$	12,242
Group life and other premiums		867		847

Total net policy revenue		13,979		13,089
Net investment income		18,755		18,584
Net realized gains on investments		2,848		2,162
Equity in earnings of limited partnerships		155		280
Other income		318		177

Total revenues		36,055		34,292

Benefits and Expenses:
Death benefits		4,904		3,841
Interest on annuity deposits		10,910		9,935
Interest on universal life deposits		1,736		1,779
Surrender and other benefits		320		273
Increase in future life policy benefits		2,247		1,788
Amortization of deferred policy acquisition costs		228		2,184
Commissions		542		1,341
General expenses		3,878		4,422
Taxes, licenses and fees		834		677

Total benefits and expenses		25,599		26,240

Income before income taxes		10,456		8,052

Provision for federal income taxes (benefit):
Current		2,487		3,725
Deferred		1,453		(931	)

Total provision for federal income taxes		3,940		2,794

Net income	$	6,516	$	5,258

Net income per share	$	0.69	$	0.56

Dividends declared per share	$	0.22	$	0.21

See Notes to Financial Statements.

ERIE FAMILY LIFE INSURANCE COMPANY
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Restated)


	Three Months Ended			Three Months Ended
	March 31, 2004			March 31, 2003
	(Dollars in thousands)
Net income	$	6,516		$	5,258

Unrealized gains on securities:
Unrealized holding gains arising during period, net of related offsets		25,873			13,354
Less: Gains included in net income		(2,848	)		(2,162	)

Net unrealized holding gains arising during period, net of related offsets		23,025			11,192
Income tax expense related to unrealized gains		8,059			3,917

Unrealized appreciation of investments, net of taxes		14,966			7,275

Comprehensive income	$	21,482		$	12,533

See Notes to Financial Statements.

ERIE FAMILY LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended			Three Months Ended
	March 31, 2004			March 31, 2003
	(Dollars in thousands)
CASH FLOWS USED IN OPERATING ACTIVITIES:
Premiums collected	$	10,790		$	10,341
Net investment income received		16,480			14,478
Miscellaneous income		318			177
Benefits to policyholders		(18,870	)		(16,031	)
Commissions paid to agents		(1,340	)		(3,948	)
Salaries and wages paid		(3,326	)		(3,038	)
General operating expenses paid		(4,183	)		(3,883	)
Taxes, licenses and fees paid		(1,291	)		(1,175	)
Income taxes recovered (paid)		19			(14	)

Net cash used in operating activities		(1,403	)		(3,093	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of investments:
Fixed maturities		(70,733	)		(182,931	)
Equity securities		0			(5,590	)
Limited partnerships		(5	)		(650	)
Sales/maturities of investments:
Sales of fixed maturities		49,784			76,777
Calls/maturities of fixed maturities		3,530			29,032
Equity securities		0			3,154
Limited partnerships		800			1,617
Increase in collateral from securities lending		13,733			32,519
Net mortgage loans		44			300
Net policy loans		(146	)		(54	)

Net cash used in investing activities		(2,993	)		(45,826	)

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Annuity and supplementary contract deposits and interest		33,603			72,153
Annuity and supplementary contract surrenders and withdrawals		(17,966	)		(12,318	)
Universal life deposits and interest		4,820			5,093
Universal life surrenders		(1,807	)		(1,251	)
Dividends paid to shareholders		(1,985	)		(1,985	)

Net cash provided by financing activities		16,665			61,692

Net increase in cash and cash equivalents		12,269			12,773
Cash and cash equivalents at beginning of period		91,667			97,022

Cash and cash equivalents at end of period	$	103,936		$	109,795

See Notes to Financial Statements.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(All dollar amounts are in thousands)

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 in conformity 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 three-month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on August 20, 2004.

NOTE B — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During the second quarter of 2004, the Company completed a comprehensive analysis of its deferred policy acquisition cost (DAC) asset in response to a material weakness in internal control. The analysis indicated that amounts previously reported as deferred policy acquisition costs and related amortization were incorrectly calculated. Accordingly, the Company has restated its’ previously issued financial statements. The impact of the restatement to net income and net income per share for the quarters ended March 31, 2003 and 2004, and deferred policy acquisition costs and shareholders’ equity as of December 31, 2003 and March 31, 2004 is as follows:


	Three Months Ended		Three Months Ended
	March 31, 2004		March 31, 2003
	(Dollars in thousands, except per share data)
As originally reported:
Net income	$	5,830	$	5,406
Net income per share	$	0.62	$	0.57
As restated:
Net income	$	6,516	$	5,258
Net income per share	$	0.69	$	0.56


	March 31,		December 31,
	2004		2003
	(Dollars in thousands)
As originally reported:
Deferred policy acquisition costs	$	100,553	$	103,874
Shareholders’ equity	$	278,030	$	259,247
As restated:
Deferred policy acquisition costs	$	95,839	$	98,207
Shareholders’ equity	$	274,966	$	255,563

In connection with the above described restatement, the following footnotes have been revised to reflect restatements: A, D, E, F, and H.

NOTE C — INVESTMENTS

At March 31, 2004 and 2003, marketable equity securities consist of nonredeemable preferred stock while fixed maturities consist of bonds, notes and redeemable preferred stock. Management considers all fixed maturities as available-for-sale. Management determines the appropriate classification of fixed maturities at the time of purchase and reevaluates such designation as of each statement of financial position date. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of deferred federal income taxes, reported as a separate component of Comprehensive Income and Shareholders’ Equity.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE C — INVESTMENTS (Continued)

The following is a summary of available-for-sale securities:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
March 31, 2004
Fixed Maturities:
Bonds:
U.S. treasuries and government agencies	$	67,161	$	2,697	$	0	$	69,858
Public utilities		147,103		13,532		73		160,562
U.S. banks, trusts and insurance companies		168,522		13,361		148		181,735
U.S. industrial and miscellaneous		540,176		51,226		163		591,239
Mortgage-backed		158,604		6,360		79		164,885
Asset-backed		8,023		478		0		8,501
Foreign		148,964		16,194		147		165,011

Total bonds		1,238,553		103,848		610		1,341,791
Redeemable preferred stock		7,016		340		0		7,356

Total fixed maturities		1,245,569		104,188		610		1,349,147

Equity Securities:
Nonredeemable preferred stock:
Public utilities		1,864		121		0		1,985
U.S. banks, trusts and insurance companies		13,909		2,361		0		16,270
U.S. industrial and miscellaneous		17,119		2,321		0		19,440
Foreign		23,716		3,255		0		26,971

Total equity securities		56,608		8,058		0		64,666

Total available-for-sale securities	$	1,302,177	$	112,246	$	610	$	1,413,813

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE C — INVESTMENTS (Continued)


			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Gains		Losses		Fair Value
December 31, 2003
Fixed Maturities:
Bonds:
U.S. treasuries and government agencies	$	61,176	$	1,543	$	37	$	62,682
Public utilities		141,154		10,377		528		151,003
U.S. banks, trusts and insurance companies		158,731		9,358		836		167,253
U.S. industrial and miscellaneous		547,363		41,077		776		587,664
Mortgage-backed		145,394		3,622		182		148,834
Asset-backed		5,032		330		0		5,362
Foreign		137,741		13,314		933		150,122

Total bonds		1,196,591		79,621		3,292		1,272,920
Redeemable preferred stock		7,016		391		0		7,407

Total fixed maturities		1,203,607		80,012		3,292		1,280,327

Equity Securities:
Nonredeemable preferred stock:
Public utilities		1,864		136		0		2,000
U.S. banks, trusts and insurance companies		13,909		1,921		0		15,830
U.S. industrial and miscellaneous		17,119		1,775		20		18,874
Foreign		23,716		2,528		0		26,244

Total equity securities		56,608		6,360		20		62,948

Total available-for-sale securities	$	1,260,215	$	86,372	$	3,312	$	1,343,275

Realized gains and losses on the sales of investments are recognized in income using the specific identification method. Investments that have declined in value below cost and for which the decline is considered to be other-than-temporary by management are written down to estimated realizable value. The impairments are made on an individual security basis and are recorded as a component of net realized gains on investments in the Statements of Operations.

The components of net realized gains on investments as reported in the Statements of Operations are included below. There were no impairment charges recorded in the first quarter of 2004.

Included in the first quarter of 2003 gross realized losses are impairment charges of $3.5 million related to fixed maturities.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE C — INVESTMENTS (Continued)


	Three Months Ended			Three Months Ended
	March 31, 2004			March 31, 2003
Fixed maturities:
Gross realized gains	$	2,930		$	7,004
Gross realized losses		(93	)		(4,833	)

Net realized gains		2,837			2,171
Equity securities:
Gross realized gains		11			0
Gross realized losses		0			(9	)

Net realized gains (losses)		11			(9	)
Net realized gains on investments	$	2,848		$	2,162

The gross unrealized losses at March 31, 2004 span the various investment categories of fixed maturities and equity securities. The gross unrealized losses are aged as follows:


						Estimated		Number
	Unrealized			Amortized		Fair		of
	Loss			Cost		Value		Holdings
Six months or less		($70	)	$	23,231	$	23,161		9
Six to 12 months		(498	)		34,710		34,212		15
Greater than 18 months		(42	)		4,711		4,669		2

		($610	)	$	62,652	$	62,042		26

No investments in an unrealized loss position at March 31, 2004 had a decline in market value that was considered by management to be other-than-temporary, thereby causing the investment to be impaired based on Company policy. There were no market conditions, industry characteristics or fundamental operating results of a specific issuer that suggested impairment of any of the listed investments.

The Company participates in a securities lending program whereby certain securities from its portfolio are loaned to other institutions for short periods of time. A fee is paid to the Company by the borrower. Company policy requires collateral equal to 102% of the fair value of the loaned securities. The Company maintains full ownership rights to the securities loaned and continues to earn interest on them. In addition, the Company has the ability to sell the securities while they are on loan. The Company has an indemnification agreement with the lending agent in the event a borrower becomes insolvent or fails to return securities. Securities lending collateral is recorded by the Company as a liability. The proceeds from the collateral are invested in cash and short-term investments and are reported on the Statements of Financial Position as cash and cash equivalents. The Company shares a portion of the interest received on these short-term investments with the lending agent. Revenue received for the three months ended March 31, 2004 and 2003, related to this program totaled $28 and $21, respectively.

The Company had loaned securities with a market value of $77.5 million and $64.1 million and secured collateral of $79.2 million and $65.5 million at March 31, 2004 and December 31, 2003, respectively. The Company records the loaned securities on its Statements of Financial Position as part of its invested assets. The Company has incurred no losses on the loan program since the program’s inception.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE C — INVESTMENTS (Continued)

Limited partnerships at March 31, 2004 include U.S. and foreign real estate and mezzanine debt investments. Real estate limited partnerships represent 91.0%, while mezzanine debt limited partnerships represent 9.0%, of the total carrying value at March 31, 2004. These partnerships are recorded at fair value using the equity method. The Company has not guaranteed any of the partnership liabilities.

The components of equity in earnings of limited partnerships as reported in the Statements of Operations are as follows:


	Three Months Ended		Three Months Ended
	March 31, 2004		March 31, 2003
Mezzanine debt	$	20		($88	)
Real estate		135		368

	$	155	$	280

NOTE D — DEFERRED POLICY ACQUISITION COST ASSET

The Company incurs significant costs in connection with acquiring new business. Many of these acquisition costs, which vary with and are primarily related to the production of new business, are deferred as an asset and are then amortized over a period of time. The Company periodically reviews the DAC asset to assess recoverability from future income. If less than the full amount of DAC is determined to be recoverable, a portion of such costs are expensed at the time of determination.

The DAC on traditional life insurance products is amortized in relation to estimated gross premiums in accordance with Statement of Financial Accounting Standard No. 60, Accounting and Reporting by Insurance Enterprises. The DAC on the annuity and universal life products is amortized in relation to estimated gross profits in accordance with Statement of Financial Accounting Standard No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments (FAS 97).

During the second quarter of 2004, the Company completed a comprehensive analysis of its deferred acquisition cost asset. As described further in Note B, this analysis resulted in a restatement of previously issued financial statements.

In accordance with FAS 97, the Company periodically evaluates certain assumptions in use to determine DAC and amortization related to its interest sensitive products. In the first quarter 2004 evaluation, the Company modified certain assumptions related to interest rate spreads causing an unlocking as provided under accounting guidance. As a result of unlocking assumptions, DAC as of March 31, 2004 increased by $1.7 million and net income for the first quarter 2004 increased by $1.1 million.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE E — SEGMENT INFORMATION

The Company offers a range of products and services, but operates as one reportable life insurance segment. The Company’s Traditional Life insurance line includes permanent life, endowment life, term life and whole life policies. The Universal Life line includes all fixed universal life products sold by the Company. The Company does not sell variable universal life products. The Fixed Annuities line includes fixed ordinary deferred annuities, tax advantaged deferred annuities, annuities in pay-out and structured settlements. Neither variable nor equity indexed annuity products are sold by the Company. The Group Life and Other line includes group life insurance and disability income products. The Corporate Account line includes investment income earned from surplus not specifically allocable to any one product type. Investment-related income is allocated based on the assumption that the fixed maturities and preferred stock portfolios support the insurance product lines and the limited partnership and remaining fixed maturity investments support the Corporate Account.


							Group
Three Months Ended	Traditional		Universal		Fixed		Life &		Corporate
March 31, 2004	Life		Life		Annuities		Other		Account		Total
(Restated)
Total policy revenue, net of reinsurance	$	9,644	$	3,468	$	0	$	867	$	0	$	13,979
Total investment-related and other income		1,850		2,474		15,208		51		2,493		22,076

Total revenues		11,494		5,942		15,208		918		2,493		36,055
Less: Total benefits and expenses		10,295		2,803		12,011		490		0		25,599

Income before taxes	$	1,199	$	3,139	$	3,197	$	428	$	2,493	$	10,456

Three Months Ended March 31, 2003

(Restated)
Total policy revenue, net of reinsurance	$	8,963	$	3,279	$	1	$	846	$	0	$	13,089
Total investment-related and other income		1,892		2,386		14,846		41		2,038		21,203

Total revenues		10,855		5,665		14,847		887		2,038		34,292
Less: Total benefits and expenses		8,946		4,444		12,040		810		0		26,240

Income before taxes	$	1,909	$	1,221	$	2,807	$	77	$	2,038	$	8,052

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE F — REINSURANCE

The Company has entered into various reinsurance treaties for the purpose of ceding the excess of life insurance face amounts over Company established retention limits. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company considers all of its reinsurance assets to be collectible; therefore, no allowance has been established for uncollectible amounts.

Generally, the Company’s retention limit is $300 per life for individual coverage. For its two newest products, ERIE Flagship Term2 and ERIE Target Term, the Company has first dollar quota share treaties with several unaffiliated reinsurers. The Company reinsures 50% and 90% of the ERIE Flagship Term2 and Erie Target Term products, respectively, subject to the Company’s $300 retention limit. For its disability income product, the Company has a 50% quota share agreement with its reinsurer. As of March 31, 2004 and 2003, $10.0 billion and $7.4 billion, respectively, of life insurance in force was ceded to other companies. The Company’s most significant reinsurance business is with Generali USA Reassurance Company, which reinsures a portion of the Company’s life and accident and health business. At March 31, 2004, the amount of in-force life insurance ceded to Generali totaled approximately $5.8 billion.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE F — REINSURANCE (Continued)

The effect of ceded reinsurance in the Statements of Operations is as follows:


	Three Months Ended			Three Months Ended
(Restated)	March 31, 2004			March 31, 2003
Revenues:
Direct policy revenue	$	18,023		$	16,400
Policy revenue ceded		(4,044	)		(3,311	)

Net policy revenue		13,979			13,089
Net investment income		18,755			18,584
Net realized gains on investments		2,848			2,162
Equity in earnings of limited partnerships		155			280
Other income		318			177

Total revenues	$	36,055		$	34,292

Benefits and expenses:
Death benefits	$	6,626		$	5,207
Reinsurance recoveries		(1,722	)		(1,366	)

Net death benefits		4,904			3,841
Interest on deposits and other policyholder benefits		12,966			11,987
Increases in future life policy benefits		3,698			3,126
Reinsurance reserve credits		(1,451	)		(1,338	)

Net increases in future life policy benefits		2,247			1,788
Amortization of deferred policy acquisition costs		228			2,184
Commissions		2,163			2,895
Reinsurance commission allowance		(1,621	)		(1,554	)

Net commissions		542			1,341
General expenses, taxes, licenses and fees		4,712			5,099

Total benefits and expenses	$	25,599		$	26,240

Income before income taxes	$	10,456		$	8,052

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE G — NOTES PAYABLE TO ERIE INDEMNITY COMPANY

The Company has a $15,000 surplus note payable to Erie Indemnity Company (EIC). This note bears an annual interest rate of 6.45%. Interest on the surplus note is scheduled to be paid semi-annually, subject to prior approval of the Pennsylvania Insurance Commissioner. The note is payable on demand on or after December 31, 2005, subject to prior approval by the Pennsylvania Insurance Commissioner. The Company accrued interest of $0.2 million on this note during the first quarter of 2004 and 2003.

During the third quarter of 2003, the Company issued a $25,000 surplus note to EIC in exchange for $25,000 in cash. This surplus note bears an annual interest rate of 6.70% and is scheduled to be paid semi-annually, subject to prior approval of the Pennsylvania Insurance Commissioner. The surplus note is payable on demand on or after December 31, 2018, subject to prior approval by the Pennsylvania Insurance Commissioner. The Company accrued interest of $0.4 million on this note during the first quarter of 2004.

NOTE H — SUPPLEMENTARY DATA ON CASH FLOWS (Restated)

A reconciliation of net income to net cash used in operating activities as presented in the Statements of Cash Flows is as follows:


	Three Months Ended			Three Months Ended
	March 31, 2004			March 31, 2003
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net income	$	6,516		$	5,258
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of deferred policy acquisition costs		228			2,184
Other amortization		246			120
Deferred federal income tax expense (benefit)		1,453			(931	)
Realized gains on investments		(2,848	)		(2,162	)
Equity in earnings of limited partnerships		(155	)		(280	)
Decrease in premium and other receivables		204			1,028
Increase in accrued investment income		(3,330	)		(4,654	)
Policy acquisition costs deferred		(3,476	)		(4,564	)
Increase in other assets		(95	)		0
Increase in reinsurance recoverables and reserve credits		(1,232	)		(958	)
Decrease in prepaid federal income taxes		2,506			3,711
Increase in future policy benefits and claims		3,338			3,323
Decrease in other policyholder funds		(2,296	)		(2,768	)
Decrease in reinsurance premium due		(1,089	)		(985	)
Decrease in accounts payable and due to affiliates		(1,373	)		(1,415	)

Net cash used in operating activities		($1,403	)		($3,093	)

NOTE I — COMMITMENTS

The Company has outstanding commitments to invest up to $1.5 million in real estate limited partnerships at March 31, 2004. These commitments will be funded as required through the end of the respective investment periods, which typically span 3 to 5 years.

ERIE FAMILY LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)

NOTE J — STATUTORY INFORMATION

The minimum statutory capital and surplus requirements under Pennsylvania law for stock life insurance companies (Section 386 of the Pennsylvania Insurance Company Law) amounts to $1,650. In addition, the Company is subject to certain risk based capital surplus requirements. The Company’s total statutory capital and surplus significantly exceed these minimum requirements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS

The following discussion and analysis should be read in conjunction with the historical financial information and related notes found on pages 3 through 17, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2003, as filed with the Securities and Exchange Commission on August 20, 2004. As further described in Note B, the Company has restated its financial statements.

FINANCIAL OVERVIEW

Net income increased to $6.5 million, or $0.69 per share, in the first quarter of 2004, compared to $5.3 million, or $0.56 per share, for the first quarter of 2003. An increase in policy revenues was principally responsible for this growth.

REVENUES

Analysis of Policy Revenue

Total net policy revenue increased 6.8% to $14.0 million in the first quarter of 2004 from $13.1 million during the same period in 2003. Contributing to this growth was an increase in net premiums on traditional life insurance products. Net premiums on traditional life insurance policies increased $0.9 million, or 9.5%, to $10.3 million for the quarter ended March 31, 2004. Total policies in force on traditional life insurance products increased 6.6% to 203,840 at March 31, 2004, compared to 191,257 at March 31, 2003.

Although total net premiums are up in 2004, sales of new traditional policies declined in the first quarter of 2004 when compared to the same period in 2003. Direct new premiums on traditional life insurance policies were down 10.5% to $2.4 million for the quarter ended March 31, 2004, from $2.7 million for the quarter ended March 31, 2003. The decline in new premiums was offset by a significant increase in direct renewal premiums. Direct renewal premiums on traditional life insurance policies increased 19.7%, to $11.5 million for the quarter ended March 31, 2004 from $9.6 million during the same period in 2003

Analysis of Investment-related Income

Net investment income increased $0.2 million to $18.8 million in the first quarter of 2004 from $18.6 million for the same period in 2003. The slight increase in net investment income for the first quarter of 2004 compared to the same period in 2003 is due in part to lower yielding fixed income securities. Net realized capital gains on investments were $2.8 million in the first quarter of 2004, compared to net realized capital gains of $2.2 million in the first quarter of 2003. There were no impairment charges included in net realized gains in the first quarter of 2004. In the first quarter of 2003, the Company recognized impairment charges of $3.5 million for write-downs of fixed maturity investments deemed to have incurred other-than-temporary impairments in value.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS (Continued)

The Company’s performance of its fixed maturities and preferred stock compared to market indices is presented below:


	Two year period ended
	March 31, 2004
	(Pre-tax annualized returns) (1)
Erie Family Life Insurance Company indices:
Fixed maturities		11.59	%
Preferred stock		15.33
Other indices:
Lehman Brothers U.S. Aggregate		8.50	%

(1) Includes income, realized and unrealized gains and losses.

BENEFITS AND EXPENSES

Analysis of Policy-related Benefits and Expenses

Net death benefits on life insurance policies increased $1.1 million or 27.7% in the first quarter of 2004 to $4.9 million. Random fluctuations in death benefits incurred can be expected when mortality results are measured over a short time period due to the small number of claims involved. These short-term fluctuations can influence quarterly or annual results without impacting long-term profitability. Management believes its underwriting philosophy and practices are sound.

Interest expense incurred on deposits increased $0.9 million, or 8.0%, to $12.6 million in the first quarter of 2004 from $11.7 million in the first quarter of 2003. This increase can be attributed to the growth of annuities on deposit. At March 31, 2004, the balance of annuity deposits totaled $948.1 million, compared to $863.5 million at March 31, 2003, an increase of 9.8%. The Company has lowered its credited interest rates during the last two years to reflect the current market conditions. Interest was credited on annuity and universal life deposits in 2004 and 2003 at the following rates:


	Annuity			Universal Life
	Deposits			Deposits
January 1, 2003 – February 24, 2003		4.00% - 4.80	%		5.25% - 6.00	%
February 25, 2003 – March 10, 2003		3.75 - 4.70			5.25 - 6.00
March 11, 2003 – May 14, 2003		3.75 - 4.70			5.00 - 5.75
May 15, 2003 – June 1, 2003		3.50 - 4.70			5.00 - 5.75
June 2, 2003 – July 9, 2003		3.50 - 4.70			4.75 - 5.50
July 10, 2003 – March 31, 2004		3.00 - 4.70			4.25 - 5.00

The liability for future life policy benefits is computed considering various factors such as anticipated mortality, future investment yields, withdrawals and anticipated credit for reinsurance ceded. Increase in future life policy benefits net of reinsurance ceded totaled $2.2 million in the first quarter of 2004, compared to $1.8 million in the first quarter of 2003, an increase of 25.6%. The increase in reserves is a result of the success of the Company’s newest traditional life insurance products, ERIE Target Term and ERIE Flagship Term2. These products are largely responsible for the growth in life insurance in force which, at March 31, 2004, has grown to $27.7 billion, compared to approximately $24.3 billion at March 31, 2003.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS (Continued)

Amortization of deferred policy acquisition costs (DAC) decreased $2.0 million to $0.2 million in the first quarter of 2004 when compared to the same period in 2003. During the first quarter of 2004, the Company unlocked certain assumptions in accordance with Statement of Financial Accounting Standards No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments related to interest rate spreads on its interest sensitive products. As a result of unlocking these assumptions, DAC was increased and the amortization of DAC was decreased by $1.7 million during the first quarter of 2004.

Analysis of Other Expenses

Direct commissions to independent agents include new and renewal commissions, production bonuses and promotional incentives. These direct commission expenses are reported on the Statements of Operations net of commissions received from reinsurers. The reported expense is also affected by the amount of commission expenses capitalized as DAC. Commissions, which vary with and are related primarily to the production of new business, are deferrable as DAC. Most first-year and incentive commissions and some second-year commissions qualify for deferral as DAC. For the first quarter of 2004, net commission expense decreased $0.8 million to $0.5 million, compared to $1.3 million for the first quarter of 2003. This decrease is primarily attributable to the decline in annuity sales. Annuity premiums for the quarter ended March 31, 2004 were $14.3 million, compared to $55.7 million for the same period in 2003. Commissions and bonuses on these premiums, net of DAC, were $0.3 million and $0.7 million for the periods ended March 31, 2004 and 2003, respectively.

General expenses, net of DAC, decreased $0.5 million, to $3.9 million for the first quarter of 2004. The decrease is the result of a contribution made to the supplemental employee retirement plan for a recently retired executive of the Company in the first quarter of 2003. 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 related to the acquisition and underwriting of new policies are deferred as DAC. Such expenses include medical inspection and exam fees related to new business production and wages, salaries and employee benefits of underwriting personnel.

FINANCIAL CONDITION

Investments

The Company’s investment strategies provide that portfolios are structured to match the features of the life insurance and annuity products sold by the Company. 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 managed on a total return approach that focuses on current income and capital appreciation.

The Company’s invested assets are sufficiently liquid to meet commitments to its policyholders. At March 31, 2004, the Company’s investment portfolio consisting of cash, investment grade bonds and investment grade preferred stock, totaled more than $1.5 billion, or 86.6% of total assets. These resources provide the liquidity the Company requires to meet known and unforeseen demands on its funds.

The Company continually reviews the investment portfolio to evaluate positions that might incur other-than-temporary declines in value. For investment holdings, general economic conditions and/or conditions specifically affecting the underlying issuer or its industry, including downgrades by the major rating agencies, are considered in evaluating impairment in value. In addition to specific factors, other factors considered in the Company’s review of investment valuation are the length of time the market value is below cost and the amount the market value is below cost.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS (Continued)

For fixed maturity and preferred stock investments, the Company individually analyzes all positions with emphasis on those that, in management’s opinion, have declined significantly below cost. The Company considers market conditions, industry characteristics and the fundamental operating results of the issuer to determine if declines in value are due to changes in interest rates, changes relating to a decline in credit quality, or other issues affecting the investment. Positions that have incurred significant market price declines for extended periods, in which the creditworthiness of the issuer or other factors indicate a decline that is other-than-temporary, are recognized as impaired and reflected as a charge to the Company’s operations.

If the Company’s policy for determining the recognition of impaired positions were different, the Company’s Results of Operations could be significantly impacted. Management believes its investment valuation philosophy and accounting practices result in appropriate and timely measurement of value and recognition of impairment.

The Company’s investments are subject to certain risks, including interest rate price risk and credit risk. The Company monitors exposure to interest rate risk through periodic reviews of asset and liability positions. Estimates of cash flows and the impact of interest rate fluctuations relating to the investment portfolio are monitored regularly. The Company’s objective is to earn competitive relative returns by investing in a diverse portfolio of high-quality, liquid securities. Portfolio characteristics are analyzed regularly and market risk is actively managed through a variety of techniques. Portfolio holdings are diversified across industries, and concentrations in any one company or industry are limited by parameters established by Company management and the Board of Directors.

Reserve Liabilities

The Company’s primary commitment is its obligation to meet the payment of future policy 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 insurance and expense charges) plus interest earned on those deposits. Life insurance and annuity reserves are supported primarily by the Company’s long-term, fixed-income investments as the underlying policy reserves are generally also of a long-term nature.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of the Company’s ability to secure enough cash to meet its contractual obligations and operating needs. Generally, insurance premiums 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 and investment income. Major cash outflows from operations are for benefits to policyholders and commissions to agents. The Company’s liquidity position remains strong as investments and cash and cash equivalents increased by $82.4 million during the first three months of 2004 to $1.5 billion.

Annuity and universal life deposits, which do not appear as revenue on the Statement of Operations, are a source of funds. 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 revenue. Annuity and universal life deposits were $25.8 million in the first quarter of 2004 and $65.5 million in the first quarter of 2003. The Company’s ability to attract deposits depends in large part on the relative attractiveness of its products compared to other investment alternatives. Annuity deposits began to slow during the second half of 2003 as the Company lowered its credited interest rates and the equity market improved.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS (Continued)

The Company’s current commitments for expenditures as of March 31, 2004 are primarily for policy death benefits, policy surrenders and withdrawals, general operating expenses, federal income taxes, and dividends to shareholders. In addition, the Company has outstanding commitments to invest up to $1.5 million in real estate limited partnerships at March 31, 2004. All Company commitments are met by cash flows from policy revenue, annuity and universal life deposits and investment income. Management believes its cash flow from operations and its liquid assets and marketable securities will also enable the Company to meet any foreseeable cash requirements. Also available as a source of funds to the Company is a $10.0 million committed line of credit and letter agreement with PNC Bank, N.A. The Company may use extensions of credit from the bank to fund working capital needs of the Company and for other general corporate purposes. At March 31, 2004 and December 31, 2003, securities held as collateral on the committed line of credit totaled $15.2 million and $15.1 million, respectively. At March 31, 2004 and December 31, 2003, there were no borrowings on this line of credit.

For a complete discussion of the fixed contractual obligations see Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s amended Annual Report on Form 10-K/A for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on August 20, 2004.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Agent Compensation

In 2003, management of the Erie Insurance Group made a commitment to focus on property/casualty underwriting profitability. One of the changes made to accomplish this goal was to revamp the agency compensation program, including making several changes to the Company’s commission and bonus structure. Effective December 16, 2003, the Company implemented a reduction in the commissions paid on annuities and restructured the bonus program, including life insurance bonuses.

These bonuses, which had been in place for nearly 20 years, were designed to incent agents to sell the Company’s products when the life insurance product portfolio was limited and less competitive with industry leaders. Today, with the introduction of new products, the Company’s portfolio is more competitive and flexible. The Company believes the new commission structure provides competitive levels of compensation and will recognize and reward superior life insurance production. While the level of paid commissions may vary in the short-term, management does not expect the commission expense levels to vary materially since the majority of these expenses are capitalized as deferred policy acquisition costs. Changes in the life commission and bonus structures could affect the growth in sales of life and annuity products by ERIE agencies.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS (Continued)

Products with Interest Rate Guarantees

Several of the Company’s annuity and universal life products offer guaranteed interest rates to policyholders. In response to the current interest rate environment, the Company has reduced the credited interest rates to historically low levels. Certain products are now at the minimum interest rates guaranteed under these policy forms.

If the interest rates on fixed income securities continue to decline, the interest rates available in the marketplace may be insufficient to produce target profit margins or, in extreme situations, could produce negative profit margins on annuity and universal life deposits.

Effective July 10, 2003, the Company revised its current deferred annuity products to lower interest rate guarantees on newly issued policies to 1.5% in all policy years. This change has been approved in all states in which the Company operates.

Annuity contracts issued between February 25, 2003 and July 9, 2003 have a guaranteed interest rate of 3.0%. Contract forms issued before February 2003 have a stepped-down guaranteed interest rate structure. The guaranteed interest rates and approximate current deposit liabilities for deferred annuity products with credited interest rates subject to change by the Company are as follows:


	Initial			Current
Policy	Guaranteed			Guaranteed			Deposit
Years	Interest Rate			Interest Rate			Liabilities
							(in thousands)
1-5		4.5	%		4.5	%	$	312,285
6-10		4.5			4.0			111,840
Over 10		4.5			3.5			119,931
All Years		3.0			3.0			31,740
All Years		1.5			1.5			13,852

The Company has some ability to restrict new deposits on its universal life and annuity policy contracts. New deposits can be limited under the terms of the Company’s universal life and annuity contracts as follows:

	•		Universal life products provide for planned premium amounts. Additional unplanned premium payments may be made at any time during the insured’s lifetime and before the end of the payment period. The amounts of such payments must be acceptable to the Company and be within IRS guidelines. Policies in force at March 31, 2004 have an annualized planned premium of $30.2 million.

	•		Flexible premium deferred annuity (FPDA) contracts allow the Company to limit deposits to a maximum of $25,000 per year. The Company began limiting deposits to the contractual maximum effective July 10, 2003 on products with interest rate guarantees exceeding 3.0% to insure that overall product interest spreads are maintained. Currently, there are 23,263 FPDA contracts in force, of which 20,433 have guarantees in excess of 3.0%. No additional payments are permitted on single premium deferred annuity contracts.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF FINANCIAL OPERATIONS (Continued)

During the first quarter of 2004, the average rate credited on flexible premium deferred annuity and universal life account values was 4.18% and 4.58%, respectively. The current coupon yield on fixed maturities matched against universal life and annuity products at March 31, 2004, is 6.0%.

Market Conditions for Competing Products

The Company’s deposit-type products compete with a wide variety of investment options. Among other factors affecting the investment decisions of policyholders and potential policyholders are general investment market conditions, particularly the market interest rate environment and the performance of the equity markets. Changes in interest rates affect pricing and the relative attractiveness of interest-sensitive investment options, which bears directly on the ability of the Company to attract new policyholders and retain existing holders of annuity, universal life and certain permanent life insurance products.

Financial Ratings

The combination of Company growth and declines in investment returns exposes the Company to reduced statutory surplus levels. Surplus levels are an important element of the rating process used by such agencies as A.M. Best and Standard & Poor’s, which are industry-accepted measures of an insurance company’s financial health and ability to meet ongoing obligations to policyholders. These ratings are a factor in establishing the competitive position of insurance companies.

If the Company were to incur reductions in statutory surplus for an extended period of time, the ratings of the Company may be downgraded. Future downgrades in these or other ratings would reduce the competitive position of the Company by making it more difficult to attract business in the highly competitive life insurance industry. In such circumstances, the Company may need to take measures to increase surplus levels in order to maintain adequate ratings. The Company may increase surplus through a variety of means, including the issuance of additional surplus notes.

Introduction of ERIEConnection®

In 2001, the Erie Insurance Group, including the Company, began the development of several eCommerce initiatives in support of the Group’s business model of distributing insurance products exclusively through independent agents. These initiatives include customer interaction systems that are intended to improve service and efficiency, as well as result in increased sales.

The implementation of the new system will require a significant investment in training and orientation for the independent agency force. During implementation, as agency resources are dedicated to learning the new system, sales of new business could be adversely affected over the short term. The amount of lost sales will correlate to the timing and duration of the systems rollout effort as well as the number and types of system issues encountered. Precise measurement of the impact on sales is not estimable.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s exposure to market risk is primarily related to fluctuations in prices and interest rates. Quantitative and qualitative disclosures about market risk resulting from changes in prices and interest rates are included in Item 7A in the Company’s 2003 Annual Report on Form 10-K/A. The risks associated with interest rate guarantees on the Company’s universal life and annuity products are discussed in the Company’s Annual Report on Form 10-K/A for 2003 in Factors That May Affect Future Results. The information contained in the Investments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2003 Annual Report on Form 10-K/A is incorporated herein by reference.

The Company also has exposure to credit risk through its portfolios of fixed maturity securities, preferred stock, mortgage loans, and to a lesser extent, short-term investments. This risk is defined as the potential loss in market value resulting from adverse changes in the borrower’s ability to repay the debt. The Company’s objective is to earn competitive returns by investing in a diversified portfolio of securities. The Company manages this risk by performing up front underwriting analysis and regular reviews by its investment staff. The fixed maturity investments are also maintained between minimum and maximum percentages of invested assets.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: Certain forward-looking statements contained herein involve risks and uncertainties. These statements include certain discussions relating to underwriting, premium and investment income volume, business strategies, profitability and business relationships and the Company’s other business activities during 2004 and beyond. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions. These forward-looking statements reflect the Company’s current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that may cause results to differ materially from those anticipated in those statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

In its Form 10-K Annual Report for 2003, the Company reported a weakness in internal control over the processes used to determine the recorded amount of deferred acquisition costs (“DAC”) and related DAC amortization. The Company’s independent auditors, Ernst & Young, LLP, in conjunction with their audit of the Company’s 2003 financial statements, characterized this weakness as a material weakness, as defined in Statement on Auditing Standards No. 60. The material weakness was communicated to the Company’s management and the Audit Committee of the Board of Directors.

As of March 31, 2004, the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)]. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of May 14, 2004, the date the Company filed its original Form 10-Q (the “Original Filing”) for the quarter ended March 31, 2004, except for the previously disclosed material weakness relating to the Company’s accounting for DAC, the Company’s disclosure controls and procedures as of March 31, 2004 were effective for gathering, analyzing and disclosing the information the Company is required to disclose in reports it files under the Exchange Act within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms.

As reported in its Original Filing, management developed a plan in collaboration with the Audit Committee of the Board to correct this weakness in internal control during 2004. The plan entails implementation of improved procedures and controls over periodic DAC computations and balances, ongoing evaluation of underlying assumptions, monitoring of DAC trends and ratios and the installation of improved valuation systems. The plan was reviewed with, and progress is being monitored by, the Audit Committee of the Board and Company management, including its Chief Executive Officer and its Chief Financial Officer. The Original Filing also disclosed that, depending on the outcome of the evaluation when it was completed, a reinstatement of previously issued financial statements may be warranted.

The Company made substantive progress in correcting the weakness in control during the first quarter of 2004. Under the plan, an independent consulting actuary was engaged to provide oversight over the team of internal actuarial and accounting personnel performing the evaluation. This independent consulting actuary provided direction and guidance in evaluating past practices and in implementing procedures and controls regarding actuarial functions.

As of May 14, 2004, the Company had effected certain improvements to its DAC accounting procedures as described in Item 4 of the Original Filing.

Subsequent to the Original Filing the Company completed its evaluation of DAC accounting issues and has identified adjustments to its previously issued financial statements that require restatement. As described further in the footnotes to its financial statements, the Company has recorded these adjustments and is hereby amending the Original Filing by filing this Form 10-Q/A.

Based on management’s evaluation and improvements in DAC and other processes made through the date of filing of this Form 10-Q/A, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Exchange Act within the time periods specified in the SEC’s rules and forms. Other than the improvements made to the Company’s processes and controls over accounting for DAC, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of management’s evaluation.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits


Exhibit
Number		Description of Exhibit
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Statements 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

Reports on Form 8-K

On February 25, 2004, the Company filed a report on Form 8-K, reporting under Item 12, that a press release had been issued reporting the Company’s earnings for the quarter and year ended December 31, 2003.

On March 5, 2004, the Company filed a report on Form 8-K, reporting under Item 5, that a dividend had been declared at its March 2, 2004 board meeting.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Erie Family Life Insurance Company
	(Registrant)

Date: August 20, 2004	/s/ Jeffrey A. Ludrof
	(Jeffrey A. Ludrof, President & CEO)



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

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ERIE FAMILY LIFE INSURANCE CO 10-Q/A