FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


(Mark One)
|X|     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                         September 30, 1998
                 ==============================================================

                                       OR

|_|     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

For the transaction period from                          to
                                     ==================       =================

Commission file number
                                    ============================================

                        FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
                        =======================================================
                        (Exact name of registrant as specified in its charter)

                   New York                                         93-1225432
===============================================     ===========================
(State or other jurisdiction of incorporation    (I.R.S. Employer Identification
               or organization)                           Number)       

                    125 Wolf Road, Albany, New York 12205
       =================================================================
                   (Address of principal executive offices)
                                  (Zip Code)

                                [518] 437-1816
       =================================================================
                (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes          X      No
          =========         =========

As of September  30, 1998,  2,500 shares of the  registrant's  common stock were
outstanding, all of which were owned by the registrant's parent company.

NOTE:This  Form 10-Q is filed by the  registrant  only as a  consequence  of the
     sale by the registrant of a market value adjusted annuity product.


<PAGE>


                                TABLE OF CONTENTS


<TABLE>

                                                                                         Page
                                                                                      -----------
Part I         FINANCIAL INFORMATION

<S>                 <C>                     
               Item 1   Financial Statements

                        Statements of Income                                                3

                        Balance Sheets                                                      4

                        Statements of Cash Flows                                            5

                        Notes to Financial Statements                                       6

               Item 2   Management's Discussion and Analysis of Financial                   7
                        Condition and Results of Operations

Part II        OTHER INFORMATION

               Item 1   Legal Proceeding                                                    9

               Item 6   Exhibits and Reports on Form 8-K                                    9

               Signatures                                                                  10
</TABLE>







                                            - 2 -


<PAGE>


PART I   FINANCIAL INFORMATION
ITEM 1   FINANCIAL STATEMENTS
<TABLE>

-----------------------------------------------------------------------------------------------

FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENTS OF INCOME
(Dollars in Thousands)
-----------------------------------------------------------------------------------------------
(Unaudited)
                                               Three Months         Nine Months    Period From
                                                  Ended                Ended        April 4,
                                                                                      1997
                                              September 30,          September     [Inception]
                                                                        30,            to
                                        ---------------------------
                                           1998           1997          1998        Sept. 30,
                                                                                      1997
                                        ------------  ------------- ---------------------------
REVENUES:
<S>                                   <C>           <C>            <C>           <C>         
  Premium and fee income              $         39  $          5   $        94   $          5
  Net investment income                      1,280            84         2,078            161
  Realized gains on investments                 90                          74
                                        ------------  ------------- -------------  ------------
                                             1,409            89         2,246            166
                                        ------------  ------------- -------------  ------------
BENEFITS AND EXPENSES:
  Life & other policy benefits                  30                          75
  Interest paid or credited to                 737                         829
contractholders
  General and administrative expenses          159            46           288             59
                                        ------------  ------------- -------------  ------------

                                               926            46         1,192             59
                                        ------------  ------------- -------------  ------------

INCOME BEFORE INCOME TAXES                     483            43         1,054            107

PROVISION FOR INCOME TAXES:
   Current                                     483            15         1,722             37
   Deferred                                   (283)                     (1,281)
                                        ------------  ------------- -------------  ------------

                                               200            15           441             37
                                        ------------  ------------- -------------  ------------

NET INCOME                            $        283  $         28   $       613   $         70
                                        ============  ============= =============  ============
</TABLE>






See notes to financial statements.

                                             -3-


<PAGE>


FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

BALANCE SHEETS
(Dollars in Thousands)
<TABLE>

-----------------------------------------------------------------------------------------------

                                                                September 30,    December 31,
ASSETS                                                              1998             1997
------
                                                                --------------   --------------
                                                                 (Unaudited)
INVESTMENTS:
    Fixed maturies:
<S>                                                          <C>              <C>
       Held-to-maturity at amortized cost                    $        14,500  $
       (fair value $15,237 and $0)
       Available-for-sale, at fair value                              60,430            4,995
       (amortized cost $58,390 and $4,987)
    Short-term investments, available-for-sale                                            386
       (cost approximates fair value)
                                                                --------------   --------------

      Total Investments                                               74,930            5,381

Cash                                                                   9,473            1,648
Deferred policy acquisition costs                                        267
Investment income due and accrued                                        610               24
Other assets                                                              13                6
Deferred income taxes                                                    904               50
Separate account assets                                               19,621            9,045
                                                                --------------   --------------

TOTAL ASSETS                                                 $       105,818  $        16,154
                                                                ==============   ==============


LIABILITIES AND STOCKHOLDER'S EQUITY

POLICY BENEFIT LIABILITIES:
    Policy reserves                                          $        63,428  $            84
    Policy and contract claims                                            75

GENERAL LIABILITIES:
    Due to Parent Corporation                                          2,092              155
    Other liabilities                                                  4,071              332
    Separate account liabilities                                      19,621            9,045
                                                                --------------   --------------

      Total Liabilities                                               89,287            9,616
                                                                --------------   --------------

STOCKHOLDER'S EQUITY:
    Common stock, $1,000 par value,
       2,500 shares authorized, issued and outstanding                 2,500            2,500
    Additional paid-in capital                                        12,600            4,000
    Accumulated other comprehensive income                               785                5
    Retained earnings                                                    646               33
                                                                --------------   --------------

      Total Stockholder's Equity                                      16,531            6,538
                                                                --------------   --------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                   $       105,818  $        16,154
                                                                ==============   ==============
</TABLE>

See notes to financial statements.



                                            - 4 -


<PAGE>


FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>

-----------------------------------------------------------------------------------------------
(Unaudited)
                                                                  Nine Months     Period From
                                                                     Ended          April 4,
                                                                                      1997
                                                                 September 30,    [Inception]
                                                                                       to
                                                                      1998         Sept. 30,
                                                                                      1997
                                                                  -------------   -------------

OPERATING ACTIVITIES:
<S>                                                            <C>             <C>          
    Net income                                                 $          613  $          70
    Adjustments to reconcile net income to
      net cash provided by operating activities:
       Amortization of investments                                        (15)           (12)
       Realized gains on disposal of investments                          (74)
       Deferred income taxes                                           (1,281)
    Changes in assets and liabilities:
        Accrued interest and other receivables                           (586)           (90)
        Life insurance and annuity reserves                               904
        Other, net                                                      2,672             (6)
                                                                  -------------   -------------
                 Net cash provided (used) by operating                  2,233            (38)
activities
                                                                  -------------   -------------

INVESTING ACTIVITIES:
Proceeds from maturities and redemptions of fixed maturity
   investments available-for-sale                                      73,261
Purchases of investments:
    Fixed maturities:
      Held-to-maturity                                                (14,500)
      Available-for-sale                                             (126,208)        (4,968)
                                                                  -------------   -------------

                 Net cash used in investing activities                (67,447)        (4,968)
                                                                  -------------   -------------


FINANCING ACTIVITIES:
   Contract deposits, net of withdrawals                               62,502              76
   Due to Parent Corporation                                            1,937              16
   Capital contributions                                                8,600           6,000
                                                                  -------------   -------------

              Net cash provided by financing activities                73,039           6,092
                                                                  -------------   -------------

NET INCREASE IN CASH                                                    7,825           1,086

CASH, BEGINNING OF YEAR                                                 1,648
                                                                  -------------   -------------

CASH, END OF PERIOD                                            $        9,473  $        1,086
                                                                  =============   =============
</TABLE>


See notes to financial statements.

                                            - 5 -


<PAGE>


FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
(Amounts in Thousands)
-------------------------------------------------------------------------------
(Unaudited)

1.      GENERAL

        First  Great-West  Life & Annuity  Insurance  Company (the Company) is a
        wholly-owned  subsidiary of Great-West Life & Annuity  Insurance Company
        (the Parent  Corporation).  The Company was incorporated as a stock life
        insurance  company in the State of New York and was capitalized on April
        4, 1997.  The Company was licensed as an insurance  company in the State
        of New York on May 28, 1997.

        The financial  statements and related notes of First  Great-West  Life &
        Annuity Insurance Company (the Company) have been prepared in accordance
        with  generally  accepted  accounting  principles  applicable to interim
        financial  reporting  and do not  include  all  of the  information  and
        footnotes required 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.  These
        financial  statements  should be read in  conjunction  with the  audited
        financial  statements  and notes thereto for the year ended December 31,
        1997.  The  results  of  operations  for  the  interim  periods  are not
        necessarily  indicative of the results that may be expected for the year
        ended December 31, 1998.

        On June 19, 1998 the  Company  received  an  additional  paid-in-capital
        contribution of $8,600.

2.      NEW ACCOUNTING PRONOUNCEMENTS

        Effective  January 1, 1998, the Company  adopted  Statement of Financial
        Accounting Standards (SFAS) No. 130, "Reporting  Comprehensive  Income".
        This  Statement  establishes  new rules for  reporting  and  display  of
        comprehensive  income and its components;  however, the adoption of this
        Statement  had no impact on the  Company's  net income or  shareholders'
        equity.  This  Statement  requires  unrealized  gains or  losses  on the
        Company's  available-for-sale  securities,  which prior to adoption were
        reported  separately in  shareholders'  equity,  to be included in other
        comprehensive   income.   Prior  year  financial  statements  have  been
        reclassified to conform to the  requirements of SFAS No. 130. During the
        three  months   ended   September   30,  1998  and  1997,   total  other
        comprehensive income amounted to $547 and $(3), respectively. During the
        nine months ended  September 30, 1998, and the period from April 4, 1997
        (inception)  to September  30, 1997,  total other  comprehensive  income
        amounted to $780 and $9, respectively.

        In June 1998,  the Financial  Accounting  Standards  Board (FASB) issued
        Statement of Financial  Accounting  Standards (SFAS) No. 133 "Accounting
        for Derivative  Instruments and for Hedging Activities".  This Statement
        provides a comprehensive and consistent standard for the recognition and
        measurement  of  derivatives  and  hedging  activities.  This  Statement
        requires that all  derivative  financial  instruments be recorded on the
        balance sheet at fair value.  If the  derivative is not  designated as a
        hedging  instrument  changes  in  fair  value  are to be  recognized  in
        earnings  in the period of  change.  If  certain  conditions  are met, a
        derivative  may be designated as a hedge,  in which case the  accounting
        for a change in fair value will depend on the  specific  exposure  being
        hedged.  This  Statement is effective for all fiscal  quarters of fiscal
        years beginning after June 15, 1999, and earlier adoption is encouraged.
        The Company has not adopted this  Statement  as of  September  30, 1998.
        Management  estimates  the effect of the change will not have a material
        affect on the Company's financial statements.




                                            - 6 -


<PAGE>


ITEM 2 MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
OF OPERATIONS
<TABLE>

                                                              Nine Months     Period From
                                       Three Months Ended        Ended       April 4, 1997
                                         September 30,         Sept. 30,      [Inception]
                                                                                  to
                                     -----------------------
     Operating Summary                  1998        1997          1998         Sept. 30,
                                                                                 1997
                                     -----------  ----------  -------------  --------------
     (Thousands)
<S>                                <C>          <C>         <C>            <C>        
     Premiums and fee income       $      39    $       5   $        94    $         5
     Net investment income             1,280           84         2,078            161
     Realized (losses) on                 90                         74
     investments
                                     -----------  ----------  -------------  --------------
          Total Revenues               1,409           89         2,246            166

     Total benefits and expenses         926           46         1,192             59
     Income tax expense                  200           15           441             37
                                     ===========  ==========  =============  ==============
          Net income               $     283    $      28   $       613    $        70
                                     ===========  ==========  =============  ==============


                                                               Sept. 30,     December 31,
     Balance Sheet (Thousands)                                    1998           1997
                                                              -------------  --------------

     Investment assets                                      $    74,930    $     5,381
     Separate account assets                                     19,621          9,045
     Total assets                                               105,818         16,154
     Total policyholder                                          63,503             84
     liabilities
     Total shareholder's equity                                  16,531          6,538
</TABLE>


        The  following  discussion  addresses  the  financial  condition  of the
        Company as of September 30, 1998,  compared with December 31, 1997,  and
        its  results  of  operations  for the  quarter  and  nine  months  ended
        September  30,  1998,  compared  with the same  periods  last year.  The
        discussion   should  be  read  in  conjunction   with  the  Management's
        Discussion and Analysis section included in the Company's report on Form
        10-K for the  year-ended  December  31,  1997 to  which  the  reader  is
        directed for additional information.

        During the nine months ended  September  30, 1998 the Company sold $62.5
        million in single premium Bank-owned Life Insurance (BOLI) policies. The
        remainder of the sales is  individual  variable  annuites sold through a
        marketing agreement with Charles Schwab & Co. The contributions received
        for the variable  annuities  included in the  Separate  Account are over
        $11.4 million compared to $6.2 million in 1997.

        In the months  ahead,  the Company will continue to focus its efforts on
        new sales while  continuing to develop other  products for submission to
        the New York Department of Insurance for approval.

        General Account Investments - The Company's primary investment objective
        is to  acquire  assets  whose  durations  and  cash  flows  reflect  the
        characteristics  of the Company's  liabilities,  while meeting industry,
        size, issuer, and geographic diversification standards and maintaining a
        competitive  rate  of  return.   Formal  liquidity  and  credit  quality
        parameters  have also been  established.  The  fixed  maturities  in the
        Company's portfolio are generally rated by external rating agencies, and
        if not externally rated, are rated by the Company on a basis believed to
        be similar  to that used by rating  agencies.  The credit  rating on the
        fixed maturity portfolio at September 30, 1998 is AAA.

                                            - 7 -


<PAGE>


        The Company follows  rigorous  procedures to control  interest rate risk
        and  observes  strict asset and  liability  matching  guidelines.  These
        guidelines  are designed to ensure that even in changing  interest  rate
        environments,  the Company's assets will always be able to meet the cash
        flow  and  income  requirements  of  its  liabilities.  Through  dynamic
        modeling,  using  state-of-the-art  software to analyze the effects of a
        wide range of possible market changes upon  investments and policyholder
        benefits,  the Company seeks to ensure that its investment  portfolio is
        appropriately   structured  to  fulfill  financial  obligations  to  its
        policyholders.

        During the nine months ended September 30, 1998, net unrealized gains on
        fixed  maturities  included  in  stockholders'  equity,  which is net of
        policyholder-related   amounts  and  deferred  income  taxes,  increased
        surplus by $780 resulting in accumulated other  comprehensive  income of
        $785.

        Liquidity  and  Capital  Resources  -  The  Company's   operations  have
        liquidity requirements that vary among the principal product lines. Life
        insurance and pension plan reserves are primarily long-term liabilities.
        Life  insurance  and  pension  plan  reserves  are  usually  stable  and
        predictable,  and are  supported  primarily by  long-term,  fixed income
        investments.

        Generally, the Company has met its operating requirements by maintaining
        appropriate levels of liquidity in its investment  portfolio and through
        utilization of overall  positive cash flows from  operations.  Liquidity
        for the Company has remained strong, as evidenced by significant amounts
        of short-term  investments  and cash,  which totaled  $9,473 million and
        $2,034  million  as  of  September  30,  1998  and  December  31,  1997,
        respectively.

        Funds provided from premiums and fees,  investment income and maturities
        of investment  assets are  reasonably  predictable  and normally  exceed
        liquidity  requirements for payment of claims,  benefits,  and expenses.
        However,  since the timing of available  funds cannot  always be matched
        precisely to  commitments,  imbalances  may arise when demands for funds
        exceed those on hand.  Also, a demand for funds may arise as a result of
        the Company taking advantage of current  investment  opportunities.  The
        Company's  capital  resources  represent  funds  available for long-term
        business  commitments  and primarily  consist of  stockholder's  equity.
        Capital resources provide protection for policyholders and the financial
        strength to support the  underwriting of insurance  risks, and allow for
        continued  business growth.  The amount of capital resources that may be
        needed is  determined by the Company's  senior  management  and Board of
        Directors,  as well as by  regulatory  requirements.  The  allocation of
        resources to new long-term  business  commitments is designed to achieve
        an attractive return, tempered by considerations of risk and the need to
        support the Company's existing business.


        Year 2000 Issue - The Year 2000 ("Y2K")  problem  arises when a computer
        performing  date-based  computations  or operations  produces  erroneous
        results due to the  historical  practice of using two digit years within
        computer hardware and software. This causes errors or misinterpretations
        of the century in date calculations. Virtually all businesses, including
        the Company, are required to determine the extent of their Y2K problems.
        Systems  that have a Y2K problem  must then be  converted or replaced by
        systems  that will operate  correctly  with respect to the year 2000 and
        beyond.

     The Company obtains all of its Information Systems Services from the Parent
        Corporation.

        The Parent  Corporation has a written plan that encompasses all computer
        hardware,   software,   networks,   facilities  (embedded  systems)  and
        telephone systems. The plan also includes provisions for identifying and
        verifying  that major vendors and business  partners are Y2K  compliant.
        The Parent  Corporation is developing  contingency  plans to address the
        possibility  of both  internal and external  failures as well.  The plan
        calls for full Y2K  compliance  for core  systems by March 31,  1999 and
        full Y2K compliance for all Company systems by October 31, 1999.

                                            - 8 -


<PAGE>



        The Parent  Corporation's  plan establishes five phases for becoming Y2K
        compliant. Phase 1 is "impact analysis" which includes initial inventory
        and preliminary assessment of Y2K impact. Phase 2 is "solution planning"
        which  includes  system by system  planning to outline the  approach and
        timing for reaching compliance. Phase 3 is "conversion/renovation" which
        means the  actual  process  of  replacing  ore  repairing  non-compliant
        systems.  Phase 4 is  "testing"  to  ensure  that the  systems  function
        correctly under a variety of different date scenarios  including current
        dates, year 2000 and leap year dates. Phase 5 is "implementation"  which
        means putting Y2K compliant systems back into production.

        As of September 30, 1998, the Parent  Corporation  had completed  impact
        analysis  (phase 1) and solution  planning (phase 2) for all of its core
        systems and was more than 95% complete for phase 1 and 2 with respect to
        its systems as a whole. In addition,  the Company was  approximately 71%
        complete  with  respect  to  conversion  and  renovation  (phase 3), 55%
        complete  with  respect to testing  (phase  4),  and 40%  complete  with
        respect to implementation (phase 5).

        In  addition  to  ensuring  that  the  Company's  own  systems  are  Y2K
        compliant,  the  Company has  identified  third  parties  with which the
        Company has significant  business  relationships  in order to assess the
        potential  impact on the  Company of the third  parties'  Y2K issues and
        plans.  The company  expects to complete  this  process  during he first
        quarter of 1999 and will  conduct  system  testing  with  third  parties
        throughout  1999.  The Company  does not have  control  over these third
        parties  and  cannot  make any  representations  as to what  extent  the
        Company's  future  operating  results may be  adversely  affected by the
        failure of any third party to address successfully its own Y2K issues.

        On the basis of currently available information, the expense incurred by
        the Company,  including anticipated future expenses,  related to the Y2K
        issue  has not  and is not  expected  to be  material  to the  Company's
        financial condition or results of operations. The Parent Corporation has
        spent  approximately  $7.5 million on its Y2K project through the end of
        September 1998 and expects to spend up to approximately $15.3 million on
        its Y2K  project by the end of 2000.  All of these  funds will come from
        the  Parent   Corporation's  cash  flow  from  operations.   The  Parent
        Corporation has continued other scheduled  non-Y2K  information  systems
        changes and  upgrades.  Although work on Y2K issues may have resulted in
        minor delays on the other projects,  the delays are not expected to have
        a  material  adverse  effect  on the  Company's  consolidated  financial
        condition or results of operations.

        The most  reasonably  likely worst case Y2K scenario is that the Company
        will experience  isolated  internal or third party computer failures and
        will be  temporarily  unable to process  insurance  and annuity  benefit
        transactions.  All of the Parent  Corporation's  Y2K  efforts  have been
        designed  to  prevent  such  an  occurrence.  However,  if  the  Company
        identifies  internal  or third party Y2K issues  which  cannot be timely
        corrected,  there can be no  assurance  that the  Company  can avoid Y2K
        problems or that the cost of curing the problem will not be material.

        In an effort to mitigate risks associated with Y2K failures,  the Parent
        Corporation is in the process of developing contingency plans to address
        core  functions,  including  relations  with  third  parties.  It is the
        Company's  expectation  that  contingency  plans will  address  possible
        failures generated internally,  by vendors or business partners,  and by
        customers.   Possible  general  approaches  include  manual  processing,
        payments on an estimated basis and use of disaster recovery facilities.








                                            - 9 -


<PAGE>


Part II OTHER INFORMATION

        Item 1 Legal Proceedings

               There are no  material  pending  legal  proceedings  to which the
               Company  is a party or of  which  any of  their  property  is the
               subject.

        Item 6 Exhibits and Reports on Form 8-K

               (a)    Index to Exhibits

                      Exhibit Number       Title                    Page
                      ----------------     ---------------------    -----------

                      27                   Financial Data           11
                                    Schedule

               (b)    Reports on Form 8-K

                      No reports  on Form 8-K have been  filed  during the third
quarter of 1998.



                                            - 10 -


<PAGE>


SIGNATURES

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


                           FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY



DATE:                                  BY:
November 13, 1998                                  /s/
---------------------------         ----------------------------------------
                                     Glen R. Derback, Vice President & Treasurer
                                     (Duly authorized officer & chief accounting
                                     Officer)




                                            - 11 -