FORM 10-Q

                    SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549

             QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                 THE SECURITIES EXCHANGE ACT OF 1934

For quarter ended June 30, 1999

Commission file number 0-24000

                         ERIE INDEMNITY COMPANY
         (Exact name of registrant as specified in its charter)

             PENNSYLVANIA                                  25-0466020
  (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)

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


                                             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 periods
         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  issuer's
         classes of common stock, as of the latest practical date.

                  Class    A Common Stock, no par value,  with a stated value of
                           $.0292 per share--  66,098,605  shares as of July 19,
                           1999.

                  Class    B Common Stock, no par value,  with a stated value of
                           $70.00 per share-- 3,070 shares as of July 19, 1999.

         The common stock is the only class of stock the Registrant is presently
authorized to issue.

                                       1



                                      INDEX

                            ERIE INDEMNITY COMPANY


PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

         Consolidated Statements of Financial Position--June 30, 1999 and
         December 31, 1998

         Consolidated Statements of Operations--Three and six months ended
         June 30, 1999 and 1998

         Consolidated Statements of Comprehensive Income--Three and six months
         ended June 30, 1999 and 1998

         Consolidated Statements of Cash Flows--Six months ended June 30, 1999
         and 1998

         Notes to Consolidated Financial Statements--June 30, 1999

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


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES
                                       2



PART I.  FINANCIAL INFORMATION

                             ERIE INDEMNITY COMPANY

                  CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



                                                                          June 30,                December 31,
                                  ASSETS                                    1999                       1998
                                                                       ---------------           ---------------
                                                                        (Unaudited)
                                                                                           
INVESTMENTS
   Fixed Maturities Available-for-Sale at fair value
    (amortized cost of $458,150,530 and
     $421,101,561, respectively)                                       $   464,663,878           $   441,353,427
   Equity Securities (cost of $178,874,790 and
     $169,976,774, respectively)                                           218,564,698               202,804,068
   Real Estate Mortgage Loans                                                8,298,469                 8,287,129
   Other Invested Assets                                                    20,507,914                17,493,496
                                                                       ---------------           ---------------
       Total Investments                                               $   712,034,959           $   669,938,120

   Cash and Cash Equivalents                                                16,700,819                53,580,043
   Accrued Investment Income                                                 7,889,028                 7,252,439
   Note Receivable from Erie Family
     Life Insurance Company                                                 15,000,000                15,000,000
   Premiums Receivable from Policyholders                                  116,790,157               114,695,231
   Prepaid Federal Income Tax                                                        0                 2,508,908
   Reinsurance Recoverables from Erie Insurance
     Exchange                                                              396,496,310               381,301,722
   Other Receivables from Erie Insurance
     Exchange and Affiliates                                               130,631,954               108,612,264
   Reinsurance Recoverable Non-affiliates                                      893,898                   938,894
   Deferred Policy Acquisition Costs                                        11,434,482                10,863,107
   Property and Equipment                                                   14,140,351                12,388,650
   Equity in Erie Family Life Insurance Company                             37,308,329                39,478,746
   Other Assets                                                             40,199,239                36,873,922
                                                                       ---------------           ---------------
       Total Assets                                                    $ 1,499,519,526           $ 1,453,432,046
                                                                       ===============           ===============
                                                                                                      (Continued)
<FN>
See Notes to Consolidated Financial Statements.
</FN>


                                       3



                             ERIE INDEMNITY COMPANY

                  CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



                                                                            June 30,              December 31,
                      LIABILITIES AND SHAREHOLDERS' EQUITY                    1999                     1998
                                                                       ----------------          ---------------
                                                                             (Unaudited)
                                                                                           
LIABILITIES
   Unpaid Losses and Loss Adjustment Expenses                          $    437,588,428          $   426,164,578
   Unearned Premiums                                                        236,142,915              229,056,597
   Accrued Commissions                                                       85,824,971               85,005,699
   Accounts Payable and Accrued Expenses                                     24,577,785               20,252,904
   Deferred Income Taxes                                                     15,178,671               17,121,777
   Federal Income Tax Payable                                                   782,685                        0
   Dividends Payable                                                          7,998,891                8,099,100
   Employee Benefit Obligations                                              13,595,027               12,508,130
                                                                       ----------------          ---------------
       Total Liabilities                                               $    821,689,373          $   798,208,785
                                                                       ----------------          ---------------
SHAREHOLDERS' EQUITY
   Capital Stock
     Class A Common,  stated  value  $.0292  per  share;
       authorized  74,996,930 shares; issued 67,032,000 shares;
       outstanding 66,098,605 shares                                   $      1,955,100          $     1,955,100
     Class B Common, stated value $70.00
       per share; authorized 3,070 shares;
       issued and outstanding 3,070 shares                                      214,900                  214,900
   Additional Paid-In Capital                                                 7,830,000                7,830,000
   Accumulated Other Comprehensive Income                                    31,622,358               40,178,626
   Retained Earnings                                                        661,635,110              605,044,635
                                                                       ----------------          ---------------
       Total Contributed Capital and Retained Earnings                 $    703,257,468          $   655,223,261

   Treasury Stock (933,395 shares repurchased in 1999)                       25,427,315                        0
                                                                       ----------------          ---------------
       Total Shareholders' Equity                                      $    677,830,153          $   655,223,261
                                                                       ----------------          ---------------
       Total Liabilities and
         Shareholders' Equity                                          $  1,499,519,526          $ 1,453,432,046
                                                                       ================          ===============
<FN>
See Notes to Consolidated Financial Statements.
</FN>


                                       4



                             ERIE INDEMNITY COMPANY

                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



                                                                     Three Months Ended                   Six Months Ended
                                                                            June 30                           June 30
                                                          ---------------------------------    ----------------------------------
MANAGEMENT OPERATIONS:                                           1999               1998               1999              1998
                                                                                                      

  Management Fee Revenue                                  $  137,502,858    $   130,184,972    $   259,337,064    $   247,508,627
  Service Agreement Revenue                                    3,704,565          2,942,924          7,433,674          5,942,245
  Other Operating Revenue                                        311,125            373,829            647,908            747,790
                                                          --------------    ---------------    ---------------    ---------------
    Total Revenue from Management Operations                 141,518,548        133,501,725        267,418,646        254,198,662

  Cost of Management Operations                              100,931,839         94,437,016        192,465,363        181,373,102
                                                          --------------    ---------------    ---------------    ---------------
    Net Revenue From
      Management Operations                               $   40,586,709    $    39,064,709    $    74,953,283    $    72,825,560
                                                          --------------    ---------------    ---------------    ---------------
INSURANCE UNDERWRITING OPERATIONS:

  Premiums Earned                                         $   29,517,142    $    28,146,565    $    58,124,065    $    55,607,627
  Losses and Loss Adjustment Expenses Incurred                20,130,338         20,453,563         41,521,508         38,950,953
  Policy Acquisition and Other Underwriting
    Expenses                                                   8,273,850          7,999,725         16,096,949         15,535,916
                                                          --------------    ---------------    ---------------    ---------------
    Total Losses and Expenses                                 28,404,188         28,453,288         57,618,457         54,486,869
                                                          --------------    ---------------    ---------------    ---------------
    Underwriting Gain (Loss)                              $    1,112,954    $      (306,723)   $       505,608    $     1,120,758
                                                          --------------    ---------------    ---------------    ---------------
INVESTMENT OPERATIONS:

  Equity in Earnings of Erie Family
    Life Insurance Company                                $    1,271,560    $     1,203,568    $     2,327,467    $     2,609,044
  Net Investment Income                                       10,933,553          9,160,614         21,399,140         18,075,277
  Net Realized Gain on Investments                             3,972,170          3,189,588          7,221,022          4,186,366
                                                          --------------    ---------------    ---------------    ---------------
    Total Revenue from Investment Operations                  16,177,283         13,553,770         30,947,629         24,870,687
                                                          --------------    ---------------    ---------------    ---------------
    Income Before Income Taxes                                57,876,946         52,311,756        106,406,520         98,817,005

  Provision for Income Taxes                                  18,651,964         16,841,275         33,773,980         31,647,465
                                                          --------------    ---------------    ---------------    ---------------
    Net Income                                            $   39,224,982    $    35,470,481    $    72,632,540    $    67,169,540
                                                          ==============    ===============    ===============    ===============
    Net Income per Share                                  $         0.53    $          0.48    $          0.98    $          0.90
                                                          ==============    ===============    ===============    ===============
  Weighted Average Shares Outstanding                         73,678,486         74,400,000         74,013,951         74,400,000
                                                          ==============    ===============    ===============    ===============
  Dividends Declared per Share:
    Class A non-voting Common                             $         0.12    $        0.1075    $          0.24    $         0.215
                                                          --------------    ---------------    ---------------    ---------------
    Class B Common                                        $        18.00    $        16.125    $         36.00    $         32.25
                                                          --------------    ---------------    ---------------    ---------------
<FN>
See Notes to Consolidated Financial Statements.
</FN>


                                       5



                             ERIE INDEMNITY COMPANY

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)



                                                                    Three Months Ended                     Six Months Ended
                                                                           June 30                             June 30
                                                          ---------------------------------    ---------------------------------
                                                                 1999               1998              1999               1998
                                                                                                      
Net Income                                                $   39,224,982    $    35,470,481    $   72,632,540     $   67,169,540
                                                          --------------    ---------------    --------------     --------------
  Unrealized (Losses) Gains on Securities:
    Unrealized Holding (Losses) Gains Arising
      During Period                                           (6,866,848)         2,719,010        (5,942,467)        17,473,855
    Less:  Reclassification Adjustment for
      Gains Included in Net Income                             3,972,170          3,189,589         7,221,022          4,186,366
                                                          --------------    ---------------    --------------     --------------
      Net Unrealized Holding (Losses) Gains
        Arising During Period                             $  (10,839,018)   $      (470,579)   $  (13,163,489)    $   13,287,489
  Income Tax Benefit (Expense) Related to
    Unrealized Gains or Losses                                 3,793,657            164,703         4,607,221         (4,650,621)
                                                          --------------    ---------------    --------------     --------------
  Other Comprehensive (Loss) Income, Net of Tax           $   (7,045,361)   $      (305,876)   $   (8,556,268)    $    8,636,868
                                                          --------------    ---------------    --------------     --------------
  Comprehensive Income                                    $   32,179,621    $    35,164,605    $   64,076,272     $   75,806,408
                                                          ==============    ===============    ==============     ==============

<FN>
See Notes to Consolidated Financial Statements.
</FN>


                                       6



                             ERIE INDEMNITY COMPANY

                  CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



                                                                              Six Months Ended              Six Months Ended
                                                                                June 30, 1999                 June 30, 1998
                                                                               --------------                --------------
                                                                                                       
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                  $   72,632,540                $   67,169,540
   Adjustment to reconcile net income
     to net cash provided by (used in)
     operating activities:
       Depreciation and amortization                                                1,021,138                       992,036
       Deferred income tax expense                                                    610,164                       974,895
       Amortization of deferred policy acquisition costs                           11,080,179                    10,504,487
       Realized gain on investments                                                (7,221,022)                   (4,186,366)
       Net amortization of bond discount                                               75,686                       (88,703)
       Undistributed earnings of Erie Family Life                                  (1,652,981)                   (1,995,874)
       Deferred compensation                                                          398,015                       721,957
   Increase in accrued investment income                                             (636,589)                     (447,892)
   Increase in receivables                                                        (39,264,207)                  (28,562,521)
   Policy acquisition costs deferred                                              (11,651,556)                  (11,085,056)
   Increase in prepaid expenses and other assets                                   (3,891,789)                   (5,740,002)
Increase in accounts payable and accrued expenses                                   5,013,765                     4,142,361
   Increase in accrued commissions                                                    819,272                     2,450,461
   Increase in income taxes payable                                                 3,291,593                     2,751,373
   Increase in loss reserves                                                       11,423,849                    19,875,401
   Increase in unearned premiums                                                    7,086,319                     9,687,984
                                                                               --------------                --------------
       Net cash provided by operating activities                               $   49,134,376                $   67,164,081

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of investments:
     Fixed maturities                                                             (86,580,523)                  (52,491,656)
     Equity securities                                                            (32,419,130)                  (35,906,487)
     Mortgage loans                                                                   (66,286)                            0
     Other invested assets                                                         (3,644,781)                   (9,768,461)
   Sales/maturities of investments:
     Fixed maturities                                                              49,854,609                    21,264,251
     Equity securities                                                             29,963,355                    24,734,685
     Mortgage loans                                                                    55,076                        61,335
     Other invested assets                                                            600,011                       632,882
   Purchase of property and equipment                                                (337,762)                     (346,947)
   Purchase of computer software                                                   (2,435,077)                   (1,714,556)
   Loans to Agents                                                                 (1,177,218)                     (983,013)
   Collections on Agent loans                                                       1,743,711                       744,557
                                                                               --------------                --------------
       Net cash used in investing activities                                   $  (44,444,015)               $  (53,773,410)

CASH FLOWS FROM FINANCING ACTIVITIES
   Dividends paid to shareholders                                              $  (16,142,270)               $  (14,510,889)
   Treasury stock                                                                 (25,427,315)                            0
                                                                               --------------                --------------
       Net cash used in financing activities                                   $  (41,569,585)               $  (14,510,889)
                                                                               --------------                --------------
   Net decrease in cash and cash equivalents                                      (36,879,224)                   (1,120,218)
   Cash and cash equivalents at beginning of period                                53,580,043                    53,148,495
                                                                               --------------                --------------
   Cash and cash equivalents at end of period                                  $   16,700,819                $   52,028,277
                                                                               ==============                ==============

Supplemental disclosures of cash flow information:
Cash paid during the six months  ended June 30,  1999 and 1998 for income  taxes
was $29,864,633 and $28,221,547 respectively.

<FN>
See Notes to Consolidated Financial Statements.
</FN>


                                       7




                             ERIE INDEMNITY COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A -- BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements,  which include the
accounts of the Erie Indemnity  Company and its' wholly owned  subsidiaries Erie
Insurance  Company,  Erie  Insurance  Company  of New York  and  Erie  Insurance
Property & Casualty  Company,  have been prepared in accordance  with  generally
accepted  accounting  principles for interim financial  information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating results for the
six-month  period  ended June 30,  1999 are not  necessarily  indicative  of the
results that may be expected for the year ending  December 31, 1999. For further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto  included in the  Company's  Form 10-K for the year ended  December  31,
1998.


NOTE B -- EARNINGS PER SHARE

Earnings  per share is based on the  weighted  average  number of Class A shares
outstanding  giving effect to the  conversion of the weighted  average number of
Class B shares  outstanding  at a rate of 2,400  Class A shares  for one Class B
share as set out in the Company's Articles of Incorporation.  Weighted average
equivalent shares  outstanding  totaled 73,678,486 for the three months ended
June 30, 1999 and  74,013,951  for the six months ended June 30,  1999.  For the
three and six month  periods  ended  June 30,  1998 the  weighted  average
equivalent  shares outstanding totaled 74,400,000.


NOTE C -- INVESTMENTS

Management  considers all fixed  maturities  and  marketable  equity  securities
available-for-sale. Marketable equity securities consist primarily of common and
nonredeemable  preferred  stocks  while  fixed  maturities  consist of bonds and
notes.  Available-for-sale  securities  are  stated  at  fair  value,  with  the
unrealized  gains and losses,  net of tax,  reported as a separate  component of
shareholders' equity.  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.

                                       8



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

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



                                                                        Gross                Gross           Estimated
                                                  Amortized           Unrealized           Unrealized           Fair
(In Thousands)                                       Cost               Gains               Losses             Value
                                                -------------        ------------         -------------     -------------
                                                                                                

June 30, 1999
Fixed Maturities:
U.S. Treasuries & Government
  Agencies                                      $      11,817        $        316         $          29     $      12,104
States & Political Subdivisions                        49,607               2,162                   210            51,559
Special Revenue                                       125,022               4,429                   359           129,092
Public Utilities                                       18,213                  70                   505            17,778
U. S. Industrial & Miscellaneous                      222,927               2,825                 2,183           223,569
Foreign Industrial & Miscellaneous                     11,654                  75                   454            11,275
Foreign Governments-Agency                              1,991                   0                    91             1,900
                                                -------------        ------------         -------------     -------------
   Total Bonds                                  $     441,231        $      9,877         $       3,831     $     447,277
Redeemable Preferred Stock                             16,920               1,009                   542            17,387
                                                -------------        ------------         -------------     -------------
   Total Fixed Maturities                       $     458,151        $     10,886         $       4,373     $     464,664
                                                -------------        ------------         -------------     -------------
Equity Securities:
Common Stock                                    $      64,719        $     43,709         $       6,351     $     102,077
Non-Redeemable Preferred Stock                        114,156               4,214                 1,882           116,488
                                                -------------        ------------         -------------     -------------
   Total Equity Securities                      $     178,875        $     47,923         $       8,233     $     218,565
                                                -------------        ------------         -------------     -------------
     Total Available-for-Sale Securities        $     637,026        $     58,809         $      12,606     $     683,229
                                                =============        ============         =============     =============

                                                                          Gross                Gross           Estimated
                                                    Amortized           Unrealized           Unrealized           Fair
(In Thousands)                                         Cost                Gains               Losses             Value
                                                -------------        ------------         -------------     -------------
December 31, 1998
Fixed Maturities:
U.S. Treasuries & Government
  Agencies                                      $      13,018        $        689         $           0     $      13,707
States & Political Subdivisions                        48,307               3,293                     0            51,600
Special Revenue                                       132,025               7,215                     5           139,235
Public Utilities                                       13,116                 300                     0            13,416
U.S. Industrial & Miscellaneous                       195,296               9,028                   629           203,695
Foreign Industrial & Miscellaneous                      5,159                 165                    86             5,238
Foreign Governments-Agency                              1,990                   0                   181             1,809
                                                -------------        ------------         -------------     -------------
   Total Bonds                                  $     408,911        $     20,690         $         901     $     428,700
Redeemable Preferred Stock                             12,191                 577                   115            12,653
                                                -------------        ------------         -------------     -------------
   Total Fixed Maturities                       $     421,102        $     21,267         $       1,016     $     441,353
                                                -------------        ------------         -------------     -------------
Equity Securities:
Common Stock                                    $      60,622        $     37,626         $       8,018     $      90,230
Non-Redeemable Preferred Stock                        109,355               4,813                 1,594           112,574
                                                -------------        ------------         -------------     -------------
   Total Equity Securities                      $     169,977        $     42,439         $       9,612     $     202,804
                                                -------------        ------------         -------------     -------------
     Total Available-for-Sale Securities        $     591,079        $     63,706         $      10,628     $     644,157
                                                =============        ============         =============     =============

                                       9



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Deferred  income taxes  decreased by  $2,553,275  at June 30, 1999 compared to a
$5,342,948  increase at December  31, 1998  related to the change in  unrealized
gains (losses) on available-for-sale securities.

Mortgage  loans on real estate are  recorded at unpaid  balances,  adjusted  for
amortization  of premium or  discount.  A valuation  allowance  is provided  for
impairment in net realizable value based on periodic  valuations.  The change in
the  allowance is reflected on the income  statement in realized  gain (loss) on
investments.

Other invested assets (primarily investments in real estate and private equity
limited partnerships) are recorded under the equity method of accounting.


NOTE D -- SUMMARIZED FINANCIAL STATEMENT INFORMATION OF AFFILIATE

The Company has a 21.63%  investment in Erie Family Life Insurance Company (EFL)
and  accounts  for this  investment  using  the  equity  method.  The  following
represents summarized financial statement information for EFL:



                                                                          Six Months Ended      Six Months Ended
                                                                            June 30, 1999         June 30, 1998
                                                                         -----------------      -----------------
                                                                                          
Revenues                                                                 $      51,144,570      $      47,691,941
Benefits and expenses                                                           34,372,686             29,057,962
                                                                         -----------------      -----------------
Income before income taxes                                                      16,771,884             18,633,979
Income taxes                                                                     6,011,516              6,571,824
                                                                         -----------------      -----------------
Net income                                                               $      10,760,368      $      12,062,155
                                                                         =================      =================
Dividends paid to shareholders                                           $       2,976,752      $       2,693,252
                                                                         =================      =================
Net unrealized appreciation on investment
  securities at June 30, net of deferred
  taxes                                                                  $       8,494,788      $      25,004,334
                                                                         =================      =================


NOTE E -- NOTE RECEIVABLE FROM ERIE FAMILY LIFE INSURANCE COMPANY

On December  29,  1995,  EFL issued a surplus  note to the Company in return for
cash of $15  million.  The note bears an annual  interest  rate of 6.45% and all
payments  of  interest  and  principal  of the  note may be  repaid  only out of
unassigned  surplus of EFL and are subject to prior approval of the Pennsylvania
Insurance  Commissioner.  Interest on the surplus  note is  scheduled to be paid
semi-annually. The note will be payable on demand on or after December 31, 2005.
EFL paid the Company  $483,750 for interest in the second  quarter of 1999.

NOTE F -- TREASURY STOCK

In  December  1998,  the  Board  of  Directors  of the  Company  authorized  the
repurchase of up to $70 million of its Class A common stock from January 1, 1999
through  December 31, 2001.  The Company's  repurchase of shares of common stock
are  recorded as "Treasury  Stock" and result in a reduction  of  "Shareholders'
Equity."  Treasury  shares  are  recorded  on  the  Consolidated  Statements  of
Financial Position at cost.  In the second quarter of 1999, 465,300 shares were
repurchased at a total cost of $12,654,449 or an average price of $27.18.
During the first six months of 1999, 933,395 shares were repurchased at a total
cost of $25,427,315 or an average price of $27.24.

                                       10



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

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.


RESULTS OF OPERATIONS

Overview

Consolidated  net income  increased  by 10.6% for the second  quarter of 1999 to
$39,224,982,  or $.53 per share,  from  $35,470,481  or $.48 per share,  for the
second quarter of 1998. The increase in net income for the quarter was driven by
improved results in all three of the Company's operating  segments.  For the six
months ended June 30, 1999, net income increased 8.1% to $72,632,540 or $.98 per
share, from $67,169,540 or $.90 per share reported for the same period in 1998.

Operating income increased 9.3% to $36,386,730,  or $.49 per share for the three
months  ended June 30,  1999 from  $33,275,647,  or $.45 per share for the three
months  ended June 30, 1998.  For the six months ended June 30, 1999,  operating
income increased 5.5% to $67,566,725,  or $.91 per share, from  $64,069,002,  or
$.86 per share, for the same period in 1998.

Analysis of Management Operations

Net  revenue  from  the  Company's  management   operations  increased  3.9%  to
$40,586,709  for the three months ended June 30, 1999 from  $39,064,709  for the
same period in 1998. The gross margin from  management  operations  (net revenue
divided by total revenue),  of 28.7% in the second quarter of 1999, was slightly
less than the gross margin of 29.3%  reported in the second quarter of 1998. For
the six months  ended  June 30,  1999 net  revenue  from  management  operations
totaled  $74,953,283,  an increase of 2.9% when compared to the first six months
of 1998.

Management fee revenue  derived from the  management  operations of the Company,
which serves as attorney-in-fact for the Erie Insurance Exchange (the Exchange),
increased  5.6% to  $137,502,858  for the three  months ended June 30, 1999 from
$130,184,972  for the three months ended June 30, 1998.  Management  fee revenue
increased  4.8% to  $259,337,064  in the first six  months of 1999  compared  to
$247,508,627 for the same period in 1998.

The  direct  and  affiliated  assumed  premiums  of  the  Exchange,  upon  which
management  fee is  based,  increased  by 2.5 % to  $550,011,427  in the  second
quarter of 1999 compared to $536,825,827 in the second quarter of 1998. The rate
of growth in  management  fee  revenue  was  greater  than the rate of growth in
direct and affiliated assumed premium of the Exchange because the management fee
rate charged the Exchange  beginning  January 1, 1999 was 25% compared to a rate
of  24.25%  charged  in the  second  quarter  of 1998.  The  Company's  Board of
Directors has the authority to change the management fee rate at its discretion,
but cannot exceed a rate of 25%. For the year,  premiums written  increased 1.6%
to $1,037,348,253 compared to $1,020,634,719 written for the first six months of
1998.  Premium growth was adversely  influenced by previously  announced pricing
actions in the Private Passenger Auto line of insurance.  However, policy growth
for the first six months of 1999 when  compared  to the same  period in 1998 was
strong as policy  retention  rates and new policy growth  improved.  Policies in
force  increased  4.4% to  2,622,735  for the period  ended  June 30,  1999 from
2,512,172  policies in force at June 30, 1998.  Policy retention (the percentage
of current policyholders that have renewed their policy) was 91.0% and 90.7% for
the period ended June 30, 1999 and 1998, respectively for private passenger auto
and  89.8%  and  89.4%  for the  six  months  ended  June  30,  1999  and  1998,
respectively overall for all lines combined.

                                       11



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

Service  agreement  revenue  totaled  $3,704,565  and $2,942,924 for the quarter
ended June 30, 1999 and 1998, respectively. Service agreement revenue is derived
from two sources. First, the Company is reimbursed by the Exchange for a portion
of service charges collected by the property/casualty insurers of the Group from
Policyholders  for the costs  incurred  by the  Company  in  providing  extended
payment  terms  on  policies  written  by the  Group.  Service  charges  totaled
$1,746,219  for the three  months  ended June 30, 1999  compared  to  $1,508,081
during the same period in 1998.  Second,  service  income is  received  from the
Exchange as  compensation  for the  management and  administration  of voluntary
assumed  reinsurance from non-affiliated  insurers.  The Company receives a 7.0%
service fee on the premiums from this  business.  These fees totaled  $1,958,346
and $1,434,843  for the three months ended June 30, 1999 and 1998,  respectively
on net voluntary assumed reinsurance  premiums of $27,976,382 and $20,497,760 in
the second quarter of 1999 and 1998, respectively.

For the six months ended June 30, 1999 service agreement revenue increased 25.1%
to $7,433,674 from  $5,942,245.  Service  charges  increased 14.2% to $3,445,390
from $3,016,162, while service agreement income rose by 36.3% to $3,988,284. Net
voluntary assumed  reinsurance  premiums totaled $56,975,494 and $41,801,183 for
the first six months of 1999 and 1998, respectively.

The cost of management  operations increased 6.9% for the second quarter of 1999
to $100,931,839 from $94,437,016  during the second quarter of 1998. For the six
months  ended June 30, 1999 the cost of  management  operations  grew by 6.1% to
$192,465,363 compared to $181,373,102 for the same period in 1998.

Commissions are the largest component of the cost of management operations.  The
Company is responsible for the payment of commissions to the independent  Agents
who sell insurance products for the Company's subsidiaries and the Exchange, and
its subsidiary,  Flagship City Insurance Company. The Agents receive commissions
based on fixed  percentage  fee schedules  with  different  commission  rates by
product line of insurance.  Also included in commission expense are the costs of
promotional   incentives  for  Agents  and  Agent  contingency   awards.   Agent
contingency  awards  are  based  upon  the  underwriting  profitability  of  the
insurance  written and serviced by the Agent within the Erie Insurance  Group of
companies.

Commission  costs  totaled  $69,432,411  for the second  quarter of 1999, a 6.8%
increase  over  the  $65,015,264   reported  in  the  second  quarter  of  1998.
Commissions  grew by 5.7% to  $130,067,383  from  $123,057,643  recorded for the
first six months of 1998.  Commission  costs grew faster than the rate of growth
in written  premiums  due to  increased  provisions  for agent  contingency  and
incentive awards and an increase in the average commission rate.

The cost of management operations excluding commission costs, increased 7.1% for
the three months ended June 30, 1999 to $31,499,428 from $29,421,752 recorded in
the second  quarter  of 1998.  Personnel  costs,  including  salaries,  employee
benefits,  and  payroll  taxes,  are the  second  largest  component  in cost of
operations, after commissions. The Company's personnel costs totaled $18,073,887
for the three month period ended June 30, 1999,  compared to $17,406,012 for the
same period in 1998, an increase of 3.8%.

The cost of management operations was also affected by information technology
consulting and corporate litigation costs incurred during the second quarter of
1999. Such costs amounted to about $1,250,837 during the quarter.

                                       12




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

Analysis of Insurance Underwriting Operations

Insurance  underwriting  results are produced  from the  Company's  property and
casualty  insurance  subsidiaries,  Erie  Insurance  Company and Erie  Insurance
Company of New York,  which  together  assume a 5.5%  share of the  underwriting
results of the Erie Insurance  Group under an intercompany  reinsurance  pooling
arrangement.  These  operations  generated  a gain of  $1,112,954  in the second
quarter of 1999 compared to a loss of $306,723 in the second quarter of 1998. In
the second  quarter  of 1999,  premiums  earned  increased  4.9% to  $29,517,142
compared to $28,146,565  for the same period in 1998.  Losses,  loss  adjustment
expenses and other underwriting  expenses incurred decreased 0.2% for the second
quarter of 1999 to  $28,404,188  compared to  $28,453,288  for the prior  year's
second quarter.  Catastrophe  losses in the second quarter of 1999 were $960,483
compared to the 1998 second quarter total of $2,262,739.

The GAAP  combined  ratio for the  Company's  property  and  casualty  insurance
operations  increased  slightly to 99.1% for the six months  ended June 30, 1999
compared  to a ratio of 98.0%  for the same  period in 1998.  The GAAP  combined
ratio  represents the ratio of loss,  loss  adjustment,  acquisition,  and other
underwriting expenses incurred to premiums earned.

Analysis of Investment Operations

Total  revenue  from  investment  operations  for  the  second  quarter  of 1999
increased to $16,177,283  from  $13,553,770 in the second quarter of 1998.  This
increase was driven by a $782,582  increase in  non-recurring  realized gains on
investments  combined with a $1,772,939  increase in net investment income. Also
contributing to the increase was an increase in the earnings recognized from the
Company's 21.63%  ownership of Erie Family Life Insurance  Company to $1,271,560
in the second quarter of 1999 from $1,203,568  recorded in the second quarter of
1998. Total revenue from investment operations for the six months ended June 30,
1999 increased  24.4% to  $30,947,629  from  $24,870,687  for the same period in
1998. This increase resulted from a $3,323,863 increase in net investment income
and a $3,034,656 increase in net realized gains on investments.


FINANCIAL CONDITION

Investments

The Company's  investment  strategy  takes a long-term  perspective  emphasizing
investment quality, diversification and superior investment returns. Investments
are  managed on a total  return  approach  that  focuses  on current  income and
capital  appreciation.  The  Company's  investment  strategy  also  provides for
liquidity to meet the short and long-term  commitments  of the Company.  At June
30, 1999, the Company's investment  portfolio of investment-grade  bonds, common
stock and preferred  stock,  all of which are readily  marketable,  and cash and
short-term  investments,  totaled $700 million,  or 47%, of total assets.  These
resources  provide the  liquidity  the Company  requires to meet  demands on its
funds.

At June 30, 1999,  96.0% of total  investments  consist of fixed  maturities and
equity  securities.  Mortgage loans and other invested assets  represented  only
4.0%  of  total  investments  at that  date.  Mortgage  loans  and  real  estate
investments  have the  potential for higher  returns,  but also carry more risk,
including less liquidity and greater uncertainty in the rate of return.

The Company's investments are subject to certain risks,  including interest rate
and  reinvestment  risk.  Fixed  maturity and preferred  stock  security  values
generally  fluctuate  inversely with movements in interest rates.  The Company's
corporate  and  municipal  bond  investments  may contain  call and sinking fund
features which

                                       13



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

may result in early  redemptions.  Declines in interest  rates could cause early
redemptions or prepayments  which could require the Company to reinvest at lower
rates.


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.  Operating  cash flows are
generated from management  operations as the  attorney-in-fact for the Exchange,
the net cash flow from the Erie  Insurance  Company's 5% and the Erie  Insurance
Company of New  York's  .5%  participation  in the  underwriting  results of the
reinsurance  pool with the Exchange,  and the Company's  investment  income from
affiliated and non-affiliated  investments.  With respect to the management fee,
funds are generally  received from the Exchange on a premiums  collected  basis.
The Company pays commissions on premiums collected rather than written premiums.

The Company  generates  sufficient net positive cash flow from its operations to
fund its  commitments,  repurchase  its common stock,  and build its  investment
portfolio,  thereby  increasing  future  investment  returns.  The Company  also
maintains a high degree of liquidity in its investment  portfolio in the form of
readily marketable fixed maturities,  common stocks and short-term  investments.
Net cash flows  provided by operating  activities  for the six months ended June
30, 1999 and 1998, were $49,134,376 and $67,164,081, respectively.

Dividends  declared and paid to  shareholders in the three months ended June 30,
1999 and 1998,  totaled  $8,043,169 and $7,255,444,  respectively.  There are no
regulatory   restrictions   on  the  payment  of  dividends  to  the   Company's
shareholders,  although  there are  state law  restrictions  on the  payment  of
dividends from the Company's  insurance  subsidiaries to the Company.  Dividends
from subsidiaries are not material to the Company's cash flow.

Temporary  differences  between the financial statement carrying amounts and tax
bases of assets  and  liabilities  that give rise to  deferred  tax  assets  and
liabilities  resulted  in net  deferred  tax  liabilities  at June  30,  1999 of
$15,178,671 and at December 31, 1998 of $17,121,777.

The  National  Association  of  Insurance   Commissioners  (NAIC)  standard  for
measuring the solvency of insurance companies, referred to as Risk Based Capital
(RBC), is a method of measuring the minimum amount of capital appropriate for an
insurance company to support its overall business operations in consideration of
its size and risk profile. The RBC formula is used by state insurance regulators
as an early warning tool to identify,  for the purpose of initiating  regulatory
action,  insurance companies that potentially are inadequately  capitalized.  In
addition, the formula defines minimum capital standards that will supplement the
current  system of low fixed  minimum  capital  and  surplus  requirements  on a
state-by-state  basis.  At December  31,  1998,  the  Exchange,  its  subsidiary
Flagship City Insurance  Company and the Company's  property/casualty  insurance
subsidiaries' financial statements prepared under Statutory Accounting Practices
are all substantially in excess of levels that would require regulatory action.

At June 30, 1999 and December  31,  1998,  the  Company's  receivables  from its
affiliates   totaled   $527,128,264  and   $489,913,986,   respectively.   These
receivables, primarily due from the Exchange, as a result of the management fee,
expense  reimbursements  and the  intercompany  reinsurance  pool,  represent  a
concentration of credit risk.

                                       14



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

STOCK REDEMPTION PLAN

The Erie Indemnity  Company Stock  Redemption Plan entitles estates of qualified
shareholders  to cause the Company to redeem shares of stock of the Company at a
price equal to the fair  market  value of the stock at time of  redemption.  The
redemption  amount is limited to an aggregation of: (1) an initial amount of $10
million  as of  December  31,  1995  and  (2)  beginning  in 1996  and  annually
thereafter,  an additional  annual amount as determined by the Board is its sole
discretion,  not to exceed  20% of the  Company's  net  income  from  management
operations  during the prior fiscal year.  This  aggregate  amount is reduced by
redemption  amounts paid.  However,  at no time shall the  aggregate  redemption
limitation exceed 20% of the Company's  retained  earnings  determined as of the
close of the prior year. In addition,  the plan limits the  repurchase  from any
single  shareholder's estate to 33% of total share holdings of such shareholder.
On April 27, 1999 the Board  approved an  increase in the  redemption  amount of
$19,190,347  to  $77,987,383.  As of June 30, 1999, no shares have been redeemed
under the Stock Redemption Plan.


STOCK REPURCHASE PLAN

At the December  16, 1998 regular  meeting of the Board of Directors of the Erie
Indemnity Company,  the board approved a stock repurchase plan beginning January
1, 1999,  under which the Company may  repurchase  as much as $70 million of its
outstanding  Class A common stock  through  December  31, 2001.  The Company may
purchase  the shares from time to time in the open  market or through  privately
negotiated   transactions,   depending  on  prevailing   market  conditions  and
alternative  uses of the  Company's  capital.  In the  second  quarter  of 1999,
465,300  shares were  repurchased  at a total cost of  $12,645,449 or an average
price of  $27.18.  During  the first six  months of 1999,  933,395  shares  were
repurchased at a total cost of $25,427,315 or an average price of $27.24.


YEAR 2000 READINESS DISCLOSURE

Erie Indemnity Company and the property/casualty  insurance companies it manages
are  dependent  on  electronic  processing  and  information  systems to conduct
business. Like all companies with such dependencies,  the Company is continually
faced  with  significant  decisions  and  technology  challenges.   Among  these
challenges  is the  so-called  "Year 2000 Issue," the inability of many computer
systems to recognize  dates  beginning  with the year 2000 and beyond.  The Year
2000 Issue is perhaps more  pervasive  than any previous risk  management  issue
faced by businesses of all types.  To  effectively  manage the risks  associated
with the Year 2000 Issue,  management has taken measures over the past six years
designed to reduce the Company's potential for business interruption. References
to the Company in the description below, including cost information,  pertain to
the Company and the property/casualty insurance companies under its management.

The effect of the Year 2000 Issue cannot be measured exactly with certainty; any
forecasts  about the effect of the Year 2000 Issue and  remediation  projections
are  necessarily  forward-looking  statements  and are  subject to the risks and
uncertainties noted on page 18.

                                       15




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

Company's State of Readiness

Exposure  to systems  failure is a risk faced by the Company  every day.  Unlike
these every day risks, the date change to the Year 2000 is predictable.  Efforts
to mitigate The ERIE's exposure through effective  identification,  remediation,
testing and contingency  planning are organized and being conducted on all major
business processes to minimize the risks.

To assure that the Company  effectively  addresses this risk,  management has in
place a structure that provides oversight of Year 2000 project activities, which
are being conducted within the major business units of the Company. Oversight by
Executive and Senior Management is being facilitated through a dedicated project
office.  This  office,  (the Y2K  Office) is working in  consultation  with each
business unit to assure  consistency and adequacy of risk management  activities
and to collect companywide project status and cost information.

Within each  business  unit,  each key  business  process has been  evaluated to
assure that  underlying  systems and  components  exposed to potential Year 2000
failure are appropriately identified and addressed. Underlying system components
include  internal  operating  systems  (hardware and  software),  infrastructure
elements   including   non-information   technology   components   and  systems,
communications systems and devices, internally developed mainframe applications,
personal  computer  hardware and  software,  external  parties and providers and
peripheral devices.

Each underlying  component  supporting key business processes was identified and
mission critical business processes were prioritized  during 1998.  Priority was
assigned  based on the  relative  importance  of the  component  to the business
process and based on the  importance of the business  process  relative to other
business processes.

Efforts to remediate  non-compliant  internal components  (principally mainframe
applications)  began in the mid-1990's as a routine part of systems  development
and  maintenance.  Remediation  of  the  Company's  mainframe  applications  was
completed and component testing was conducted during the first quarter of 1999.

To  supplement  component  testing and to provide a greater  degree of assurance
that business  functions will be uninterrupted,  Year 2000 simulation testing on
the full  insurance  operations  system was performed  during March and April of
1999  and  was  completed  April  30,  1999.   Full  systems  testing   included
simultaneous  testing of underlying  components  necessary to the support of key
insurance  operations  business  processes.  Testing  environments  that closely
approximate  operating  environments for mainframe and LAN-based PC applications
were  developed  for use during  this  testing.  The  results of testing did not
indicate that key business  processing  applications will encounter any material
problems in the year 2000 due to the  inability to  recognize  dates in the year
2000.

Certain administrative  systems (non-insurance  operations) which operate in LAN
based PC environments  are also  undergoing  Year 2000 simulation  testing which
began in May,  1999 and is scheduled for  completion  by the end of July,  1999.
While these systems are vendor certified as compliant,  management  believes the
presence of certain  customizations makes testing prudent.  Test results through
June 30, 1999 indicate no material problems.

The Y2K Office conducts  ongoing  monitoring of key external  parties  including
utility  suppliers,  voice  and  data  communications  providers  and  financial
institutions.   Where  possible  and  practicable,   focused  testing  has  been
accomplished with these parties. No matter has come to our attention  concerning
the state of readiness  of these key third  parties  that causes  management  to
believe any of these parties will be unable to provide continuous service to the
Company.

                                       16



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

During the second  quarter of 1999,  each  business unit  developed  contingency
plans designed to respond to potential  component or total systems failure.  The
plans  incorporate a variety of back up processes  some of which are  automated,
some manual. The plans provide that several operating areas accelerate work into
1999 or postpone work into later January 2000,  where  possible.  Provisions for
back up capabilities on services provided by key third parties are also included
in the plans where feasible.

With the  approval  of the plans by  Executive  Management  in July,  1999,  the
Company is  beginning  to execute the steps  necessary  to carry out the back up
plans which are planned for  completion  during the third  quarter.  These steps
include the orientation  and training of employees  integral to the plan as well
as the  procurement of supplies and equipment  necessary to conduct  business in
the back up environment, should that become necessary.

Cost to Address Year 2000 Issues

Prior to 1998,  the Company did not  establish a specific  budget to address the
Year 2000  Issue.  By  including  Year 2000  changes in the scope of each system
development and maintenance  project, the Year 2000 Issue became an extension of
all system  projects.  It is estimated that through June 30, 1999 costs incurred
for specific Y2K activities  including  programming,  testing,  integrated  test
planning,  and administrative  efforts  approximate $2.3 million.  This estimate
includes the cost of our internal  efforts based on rates for personnel  engaged
in these  activities.  Future costs will be incurred as contingency plan testing
continues  during 1999. In addition,  the cost of consulting  resources  engaged
during the first six months of 1999 amounted to $122,000.

Management  believes  that the cost of testing and  administrative  support will
approximate  $175,000  during  the  remaining  six  months of 1999  based on the
project plans for these activities. This estimate includes the cost of personnel
involved in testing and the cost to maintain  the  technical  test  environment.
Costs incurred to replace  non-compliant  software and hardware during 1999 have
not been and are not expected to be significant.

In addition to these costs, the Company will incur internal  personnel costs and
certain  other  planned  expenditures  for  items  which  will  enable  business
continuity  plans to be  executed.  Costs for the  development  and  testing  of
contingency  plans during 1999 approximate  $125,000 with $50,000 being incurred
through June 30, 1999 and  approximately  $75,000 estimated for the remainder of
1999.

Risk of the Company's Year 2000 Issues

The proper  functioning of the Company's  computer  systems and  applications is
critical to the continued operations of the Company. By addressing the Year 2000
Issue over  several  years in the  ordinary  course of  business,  the costs and
uncertainty associated with it have been reduced significantly.  Management does
not believe that critical  business  operations of the Company will be adversely
affected to any significant degree by the Year 2000 Issue.

It is possible  that certain key external  parties will certify their systems as
year 2000  compliant  when in fact they are not. The inability of the Company to
respond to  uncontrollable  circumstances  remains a concern.  For  example,  if
numerous key third parties are unable to support the  operations of the Company,
operations  could be adversely  affected.  The Company,  as part of overall risk
management,  has prepared contingency plans to respond,  where feasible,  to the
possibility  of key third party  failure(s).  Management  does not believe  that
these scenarios have a greater than remote possibility of occurrence.

                                       17




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

Company's Contingency Plans if a Vendor or the Company Fail to Address Year 2000
Issues

This risk described above has been addressed through contingency  planning.  The
level of contingency  planning is commensurate  with the relative  importance of
the external  party to the  operations of the Company and the relative risk that
the party will be unable to operate  satisfactorily  in 2000.  Such  contingency
plans  have been  developed  and will be tested  during  the final six months of
1999.

The statements containing the beliefs of management about the Company's state of
readiness for Year 2000 Issues are necessarily  forward-looking  statements that
involve risks and uncertainties.  These risks and uncertainties  include but are
not limited to:  human or  mechanical  errors in  correcting  Year 2000  Issues;
incorrect  or  improper  (intentional  or  otherwise)  representations  by third
parties as to their  compliance  or  remediation  efforts;  the failure of third
parties to follow  through on their  remediation  efforts;  and the inability to
identify and/or locate processing chips that are subject to Year 2000 problems.



"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 the "Financial  Condition - Investments",  and the "Liquidity
and Capital  Resources"  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, weather and weather-related  events,  other types of catastrophic  events,
securities   markets   fluctuations,    and   technological   difficulties   and
advancements.

                                       18



PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

The H.O.  Hirt Trusts  collectively  own 2,340 shares of the  Company's  Class B
Common Stock, which has the exclusive right to vote in the election of directors
of the Company.  Since such shares represent 76.22% of the outstanding  share of
the Company Class B Common Stock, the vote of the H.O. Hirt Trusts is sufficient
to determine the outcome of any election of directors.  The trustees of the H.O.
Hirt  Trusts  are F.  William  Hirt,  Chairman  of the Board of the  Company,  a
director of the Company,  a beneficial  owner of more that 10% of the  Company's
outstanding  Class A Common Stock and a beneficiary  of one of the two H.O. Hirt
Trusts;  his sister,  Susan Hirt Hagen, a director of the Company,  a beneficial
owner of more than 10% of the Company's  outstanding  Class A Common Stock and a
beneficiary  of the other  H.O.  Hirt  Trust and  Mellon  Bank,  N.A.  Under the
provisions of the H.O. Hirt Trusts,  the shares of the company's  Class B Common
Stock held by the H.O.  Hirt Trusts are to be voted as directed by a majority of
the three trustees.

Under the  Pennsylvania  Insurance  Company Law and the Company's  By-laws,  the
candidates for the election as directors of the Company are to be nominated by a
committee  consisting solely of persons who are not officers or employees of the
Company or of any entity controlling, controlled by or under common control with
the Company and who are not beneficial  owners of a controlling  interest in the
voting securities of the Company. On March 11, 1998, the Nominating Committee of
the Company's Board of Directors nominated 12 persons as candidates for election
as directors of the Company at the  Company's  April 28, 1998 annual  meeting of
shareholders.  The 12 persons  nominated  did not include  Thomas B. Hagen,  the
husband of Susan Hirt Hagen,  as a candidate  for  election as a director of the
Company at such annual meeting.  Thomas B. Hagen had served as a director of the
Company since 1979.

On April 2, 1998, Susan Hirt Hagen, a director, filed duplicate petitions in the
Orphans'   Court  Division  of  the  Court  of  Common  Pleas  of  Erie  County,
Pennsylvania (the "Court") seeking the removal of Mellon Bank N.A. ("Mellon") as
a co-trustee of the H.O. Hirt Trusts. The principal basis for the alleged relief
was the  allegation  that  Mellon,  as the owner of an insurance  agency,  was a
competitor of the Company. Among the relief requested by Susan Hirt Hagen in the
petitions was the grant of a preliminary  injunction  against Mellon from voting
the Class B Common  Stock held by the H.O.  Hirt  Trusts for the  purpose of the
election  of  directors  at the  Company's  April 28,  1998  Annual  Meeting  of
Shareholders.  Because of the potential  substantial  harm to the Company if the
preliminary injunction was granted, the Company filed a petition to intervene in
the preliminary injunction proceedings which the Court granted on April 21, 1998
and an order denying Susan Hirt Hagen's request for a preliminary injunction. On
April 28, 1998, the Company's 1998 Annual  Meeting of  Shareholders  was held as
scheduled and each of the  candidates  for election as a director of the Company
named in the Company's  April 1, 1998 proxy  statement was elected as a director
of the Company with the affirmative votes of Mellon and F.
William Hirt as a majority of the trustees of the H.O. Hirt Trusts.

On June 3, 1998, the Company, because of its substantial interest in the outcome
of any matter  involving a change in Mellon's status as a co-trustee of the H.O.
Hirt  Trusts,  petitioned  the Court to  intervene  in the  trial of the  issues
remaining  under Susan Hirt Hagen's  petitions to remove Mellon as a co-trustee.
On June 24, 1998,  the Court  denied the  Company's  petition,  and, on July 13,
1998,  the  Company  appealed  the  Court's  denial  to the  Superior  Court  of
Pennsylvania.  On August 5, 1998,  Susan Hirt Hagen,  a director of the Company,
filed a motion with the Superior  Court of  Pennsylvania  to quash the Company's
appeal. On August 17, 1998, the Company filed its response to Susan Hirt Hagen's
motion to quash the Company's appeal. On October 19, 1998, the Superior Court of
Pennsylvania  denied  without  prejudice  Susan Hirt Hagen's motion to quash the
Company's appeal, and the Superior Court of Pennsylvania  established a schedule
for the submission of briefs on the merits of the Company's appeal.

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Item 1.   Legal Proceedings (Continued)

During June and July 1998, substantial discovery took place involving Susan Hirt
Hagen's petitions to remove Mellon as co-trustee.  Preceding the scheduled trial
date of July 30, 1998,  discussions  took place  between  counsel for Mellon and
counsel for Susan Hirt Hagen  concerning a possible  basis for settlement of the
pending  litigation.  These discussions  involved the circumstances  under which
Mellon might resign as co-trustee of the H.O. Hirt Trusts and the  establishment
of  procedures  pursuant to which a successor  trustee would be appointed by the
Court or by agreement of Susan Hirt Hagen and F. William  Hirt.  After a hearing
conducted on July 30, 1998, the Court by letter advised  counsel for all parties
that the Court would not approve the settlement proposal that had been presented
during the July 30, 1998 hearing,  and that Mellon was to advise the Court on or
before August 21, 1998 whether a revised settlement  proposal would be submitted
or whether the petitions to remove Mellon as co-trustee  should be scheduled for
trial by the Court for some later unspecified date.

On August 4, 1998,  the Company filed a further  petition with the Court seeking
the right to  intervene  in the  proceedings  insofar as the  proceedings  would
entail the possible approval of any settlement of the petitions to remove Mellon
as co-trustee or the  appointment of a successor  trustee to Mellon.  On October
21, 1998,  Mellon  submitted  to the Court a Petition to Resign  Pursuant to and
upon the Fulfillment of Certain Conditions Precedent (the "Mellon Petition"). On
October 29,  1998,  the Court  conducted  a hearing at which  time,  among other
things,  the  Court  heard  testimony  from two  potential  successor  corporate
trustees to Mellon, each of which potential  successors (either Bankers Trust or
Bank  Boston),  the Court was advised,  had the  approval of Mellon,  Susan Hirt
Hagen and F. William Hirt. During that same hearing, the Court indicated that it
would  accept  the  Mellon  Petition  and  would  in the  future  enter an order
providing for the granting of the Mellon Petition, in conjunction with a further
hearing on the matter of the appointment of a successor corporate co-trustee and
the final Court approval thereof.  On November 2, 1998, the Court scheduled such
a further hearing for January 6, 1999.

On January 6, 1999, with the concurrence of all parties,  the Court accepted the
resignation of Mellon as co-trustee of the H.O.  Trusts and released Mellon from
all further  obligations with respect to the H.O. Hirt Trusts. On the same date,
the Court appointed  Bankers Trust as the successor  co-trustee of the H.O. Hirt
Trusts.  On January 26, 1999, the Court  assessed  $637,500 in costs incurred by
Mellon in connection with the removal litigation against Susan Hirt Hagen.

On March 3,  1999  Bankers  Trust  filed  with the  Court a  Petition  to Accept
Resignation  of Trustee (the  "Bankers  Trust  Petition") in which Bankers Trust
requested the Court that its  resignation  as corporate  Co-Trustee of the H. O.
Hirt Trusts be accepted and a successor corporate Trustee be appointed. On March
4, 1999 the Court appointed Judge William R. Cunningham to serve in the Orphans'
Court to preside over the matter of the Bankers  Trust  Petition,  and a hearing
was  fixed  for May 7,  1999.  On or about May 6,  1999  Bankers  Trust  filed a
petition for Citation to Show Cause why Declaratory Relief Should not be Granted
("Bankers Trust  Declaratory  Action  Petition").  The Bankers Trust Declaratory
Action  Petition seeks a  determination  by the Court whether a provision of the
Pennsylvania Insurance Company Law, Section 40 P.S.  ss.991.1405(c)(4)  provides
the exclusive  means by which persons may be nominated and elected to the Board,
or  whether  the  Trustees  have the  power to  nominate  and elect to the Board
persons other than those designated by the Nominating Committee.

On May 7, 1999 the Court issued an Order  approving the  resignation  of Bankers
Trust  Company as the  corporate  Trustee  effective  upon the entry of an Order
appointing a successor  corporate Trustee.  Also on May 7, 1999 the Court issued
an Order  setting a schedule for the filing and  determination  of objections to
the Bankers Trust Declaratory Action Petition, indicating that any objections to
the  Petition  must be  filed  on or  before  May  25,  1999;  responses  to the
objections  must be filed on or  before  June 15,  1999;  and the Court set Oral
Argument on any  objections  and  responses  on June 29,  1999.  Thereafter,  if
necessary,  a Hearing on the merits of the Declaratory  Action Petition would be
held on July 28, 1999.

On June 16,  1999,  Susan Hirt Hagen  filed with the Court a motion for leave to
amend  the  response  she had  filed to the  Petition,  so as to  assert a claim
against  the  Company  in the  nature of a request  for a  permanent  injunction
against certain Bylaw amendments adopted by the Company effective June 15, 1999.

On June 29,  1999,  the Court heard oral  argument on the  objections  which the
Company and F. William Hirt filed to the Petition.  On July 15, 1999,  the Court
entered its Order and Opinion which sustained the objections to the Petition and
dismissed without  prejudice the Petition,  and also dismissed without prejudice
Susan Hirt Hagen's Motion to Amend.

                                       20


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 applicable, and therefore, have been omitted.

The Company did not file any reports on Form 8-K during the  three-month  period
ended June 30, 1999.


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 Indemnity Company
                                                       (Registrant)

Date:  July 19, 1999
                                                   \s\   Stephen A. Milne
                                             (Stephen A. Milne, President & CEO)


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


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