SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C.  20549

                                      FORM 10-K

          (Mark One)

          [X]  ANNUAL  REPORT PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE
               SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

               For the fiscal year ended December 31, 1996

                                          OR

          [ ]  TRANSITION  REPORT PURSUANT TO  SECTION 13  OR 15(d)  OF THE
                    SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

               For the transition period from     to 

          Commission File
          Number 0-7288

                            INTERCONTINENTAL LIFE CORPORATION              
             (Exact name of registrant as specified in its charter)      

               New Jersey                   22-1890938                     
          (State of Incorporation)  (I.R.S. Employer identification number)

          701 Brazos, Suite 1400, Austin, Texas                       78701
          (Address of Principal Executive Offices)               (Zip Code)

                                  (512)  404-5050                          
                           (Registrant's Telephone Number)

           Securities Registered pursuant to Section 12(b) of the Act: None

             Securities Registered pursuant to Section 12(g) of the Act:

                            Common Stock, $.22 par value                   
                                   (Title of Class)

          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
          and (2) has been subject to such filing requirements for the past
          90 days.

          YES   X    NO     

          The aggregate market value of the voting stock held by 
          non-affiliates  of the Registrant on March 14, 1997, based on the
          closing sales  price in The  Nasdaq Small-Cap Market  ($14.50 per
          share), was $31,302,753. 

          As  of March  14, 1997,  Registrant had  4,258,829 shares  of its
          Common Stock  outstanding (excluding shares held  in Treasury and
          not entitled to vote).

          Indicate  by  check  mark  if  disclosure  of  delinquent  filers
          pursuant  to Item 405 of Regulations S-K is not contained herein,
          and will not be contained, to the best of Registrant's knowledge,
          in  definitive proxy  or information  statements  incorporated by
          reference in Part III of this  Form 10-K or any amendment to this
          Form 10-K. [ ]

                                        PART I

          Item 1. Business

          General

          InterContinental Life  Corporation ("ILCO", the  "Company" or the
          "Registrant")  was incorporated  in 1969  under  the laws  of the
          State of New  Jersey. Its  executive offices are  located at  701
          Brazos, Suite 1400, Austin, Texas 78701.

          The Company is principally  engaged, through its subsidiaries, in
          administering  existing portfolios  of  life insurance  policies,
          credit  life  and  disability  insurance  policies  and   annuity
          products.  It  also  administers   an  in-force  book  of  health
          insurance business. The Company's insurance subsidiaries are also
          engaged in the business  of marketing and underwriting individual
          life insurance and annuity products in 49 states and the District
          of Columbia.  Such  products are  marketed  through  independent,
          non-exclusive general agents. 

          The  Company is  controlled by  Financial Industries  Corporation
          ("FIC"),  a  life   insurance  holding  company,   through  FIC's
          ownership  of  approximately  46%  of the  Company's  outstanding
          Common  Stock.  FIC  also  holds options  to  acquire  additional
          shares,  which,  if  exercised,  would  result  in  FIC's  owning
          approximately  61.5% of  the Company's  outstanding shares.  FIC,
          ILCO   and  their   insurance  subsidiaries   have  substantially
          identical  managements, and a  majority of the  directors of ILCO
          are  also  directors  of  FIC  and  ILCO's  and  FIC's  insurance
          subsidiaries.   Officers allocate their time between ILCO and FIC
          in accordance with the comparative requirements of both companies
          and their subsidiaries.   Roy F.  Mitte, Chairman, President  and
          Chief  Executive Officer of FIC, the  Company and their insurance
          subsidiaries, owns approximately 34% of the outstanding shares of
          FIC's common  stock. FIC  owns Family  Life Insurance Company,  a
          Washington  domiciled  underwriter  of mortgage  protection  life
          insurance.

          The  Company was  organized  in 1969  to  be the  publicly  owned
          holding  company  for  InterContinental  Life  Insurance  Company
          ("ILIC"). The  Company acquired  Standard Life  Insurance Company
          ("Standard Life")  in 1986,  Investors Life Insurance  Company of
          California ("Investors-CA") and  Investors Life Insurance Company
          of  North  America ("Investors-NA")  in  1988  and Meridian  Life
          Insurance  Company,  now  Investors  Life  Insurance  Company  of
          Indiana ("Investors-IN"), in February 1995.

          Acquisitions

          Strategy.  The Company's strategy has been and continues to be to
          grow internally  and through  acquisitions, while maintaining  an
          emphasis  on  cost  controls.  Management  believes  that,  under
          appropriate  circumstances, it  is more  advantageous to  acquire
          companies with  large books  of in-force  life insurance than  to
          produce  new business,  because initial  underwriting costs  have
          already  been  incurred and  mature  business  is generally  less
          likely  to  terminate, making  possible  more  predictable profit
          analysis.  However,  the   Company's  insurance  subsidiaries  do
          continue to market those products that are profitable, as well as
          develop new  products and  streamline distribution  channels. See
          "Agency  Operations". It  is  also management's  belief that  the
          continuing consolidation in the  life insurance industry presents
          attractive  opportunities  for   the  Company  to   acquire  life
          insurance companies  that complement or fit  within the Company's
          existing  marketing structure  and product  lines.  The Company's
          objective is to improve  the profitability of acquired businesses
          by consolidating and streamlining the administrative functions of
          these   businesses,   eliminating   unprofitable   products   and
          distribution channels,  applying its  marketing expertise  to the
          acquired company's  markets  and  agents,  and  benefitting  from
          economies  of  scale.  The   Company's  ability  to  make  future
          acquisitions  will be dependent on  its being able  to obtain the
          necessary  financing.  In  addition,   since  FIC  has  the  same
          acquisition strategy as ILCO, a conflict of  interest could arise
          in  the future between ILCO  and FIC with  respect to acquisition
          opportunities.

          Acquisition  of  Standard Life.  In  November  1986, the  Company
          acquired  Standard Life,  headquartered in  Jackson, Mississippi,
          for a gross purchase price of $54,500,000. A portion of the funds
          used by the new  life insurance company formed by the  Company to
          make  the acquisition ("New Standard") was the proceeds of a loan
          extended  to  the Company  by a  national  bank in  the principal
          amount of  $15,000,000 (the "Standard Term Loan").  This sum was,
          in turn, loaned by the Company  to New Standard, and the loan was
          evidenced by  a surplus debenture.  New Standard was  merged into
          Standard Life in June 1988.

          Acquisition of  Investors-NA and Investors-CA.  In December 1988,
          the Company,  through Standard  Life, purchased  Investors-CA and
          Investors-NA from CIGNA Corporation for  a purchase price of $140
          million.  The Company obtained the funds used for the acquisition
          from: (a) a senior  loan in the amount of  $125,000,000 (maturity
          date  December  31,  1996,  payable in  twenty  -seven  quarterly
          installments  of $4  million each,  commencing on  July 1,  1989,
          followed by  four quarterly  installments of $4.25  million each)
          provided  by  six  financial  institutions,   (b)  a  $10,000,000
          subordinated loan  (a nine-year  note, with an  interest rate  of
          13.25%)   provided  by  two   insurance  and   financial  service
          organizations and (c) the sale of $5,000,000 of Class A Preferred
          Stock (principal amount of $5  million; dividend rate of  13.25%)
          to CIGNA and  $15,000,000 of Class  B Preferred Stock  (principal
          amount  of  $15  million;   dividend  rate  of  13.25%)  to   the
          subordinated  lenders. Approximately  $15,000,000 of  these funds
          were used to  discharge the  Standard Term Loan.  The balance  of
          these  funds  were loaned  by the  Company  to Standard  Life. To
          evidence this  indebtedness, Standard Life issued  a $140,000,000
          surplus  debenture  to  the   Company.  In  connection  with  the
          subordinated  debt and  preferred  stock  financing, the  Company
          issued  detachable  warrants entitling  the  holders to  purchase
          1,107,480  shares  of the  Company's  Common Stock  at  $3.33 per
          share. 

          In  May 1990, the Company effected an exchange agreement with the
          holders of its Class A Preferred Stock and its Class B  Preferred
          Stock .  Under  the provisions  of  the exchange  agreement,  the
          holders of  the  Class  A Preferred  Stock  received  $5  million
          principal amount of a 13.25%  1998 Series Subordinated Notes, due
          November  1, 1998,  together with  a make  whole amount  equal to
          13.25% of the then  outstanding balance of the Note.  The holders
          of  the Class  B Preferred  Stock received $15  million principal
          amount of a  13.25% 1999 Series Subordinated  Notes, due November
          1, 1999. 

          The  Company  prepaid the  subordinated  debt  and purchased  the
          warrants in early 1993. See "Senior Loan".

          Acquisition of Investors-IN. On  February 14, 1995, ILCO, through
          Investors-NA,  purchased from  Meridian Mutual  Insurance Company
          the   stock    of   Meridian    Life   Insurance    Company,   an
          Indianapolis-based  life insurer,  for a  cash purchase  price of
          $17.1 million.  After the acquisition, Meridian  Life changed its
          name   to   Investors   Life   Insurance   Company   of   Indiana
          ("Investors-IN").

          Investors-IN is licensed in  ten states and markets a  variety of
          individual life and annuity products through independent agents.

          Pending Acquisition.   On March  25, 1997, ILCO  and Investors-IN
          entered into  an agreement to  acquire State Auto  Life Insurance
          Company, an  Ohio domiciled  life insurer, from  State Automobile
          Mutual  Insurance Company,  for  a cash  purchase price  of $11.8
          million, subject  to  certain post-closing  adjustments.       In
          connection with this transaction, the bank group participating in
          the  Senior  Loan has  agreed to  defer  payment of  $4.5 million
          otherwise payable on April 1, 1997 under  the terms of the Senior
          Loan, and to reduce  the amount of  the payment otherwise due  on
          July 1,  1997 by  $2.5 million.   This deferral  would result  in
          extending  the maturity  date of  the Senior  Loan to  October 1,
          1998.  Under the terms of  the transaction, State Auto Life would
          be merged  into Investors-IN.   The closing  of the  transaction,
          which is expected to occur during the second quarter of  1997, is
          subject to regulatory approvals.     

          Merger  of  Insurance  Subsidiaries. Investors-NA  redomesticated
          from Pennsylvania to Washington in December of 1992. Investors-CA
          merged into  Investors-NA on December 31, 1992, and Standard Life
          merged  into Investors-NA  on  June 29,  1993.  The mergers  have
          achieved cost savings, such as reduced auditing expenses involved
          in auditing  one combined company;  the savings  of expenses  and
          time  resulting from the  combined company being  examined by one
          state   insurance  department  (Washington),  rather  than  three
          (California, Pennsylvania and Mississippi);  the reduction in the
          number  of tax returns and  other annual filings  with 45 states;
          and smaller annual  fees to do  business and reduced  retaliatory
          premium  taxes in  most  states. Management  believes that  these
          reductions  in expenses have  further strengthened  the financial
          condition of the combined company.

          Operations

          The  Company  has  developed  management   techniques  to  reduce
          operating  expenses  by  centralizing,  standardizing   and  more
          efficiently  performing  many  functions  common  to   most  life
          insurance   companies,   such    as   underwriting   and   policy
          administration,  accounting  and financial  reporting, marketing,
          regulatory compliance, actuarial  services and asset  management.
          The   Company  has  selectively  recruited  personnel  in  sales,
          marketing and various administrative departments.

          The  Company's  centralized  management  techniques  resulted  in
          significant employee reductions and  expense savings in the three
          life insurance  companies acquired  by  the Company  in 1986  and
          1988.  During  1996,  the   general  insurance  expenses  of  the
          Company's insurance subsidiaries were $12,008,160, as compared to
          $13,737,883 in 1995  and $12,865,000  in 1994.   The increase  in
          1995,  as compared  to  1994, resulted  primarily from  increased
          marketing expenses  incurred by  Investors-NA in 1995  and ILCO's
          acquisition of  Investors-IN in  early 1995.   The attainment  of
          this level of cost reduction has contributed significantly to the
          achievement of the current  level of profitability. Management is
          committed to  maintaining the  general insurance expenses  of the
          Company's insurance  subsidiaries at a level  which will generate
          an  acceptable  level  of  profitability  while  maintaining  the
          competitive pricing of their insurance products.

          In  June  1991,  FIC  acquired  Family  Life  Insurance  Company.
          Following  the  acquisition of  Family  Life  by FIC,  management
          integrated  the  sales,   marketing,  underwriting,   accounting,
          contract and licensing, investments, personnel,  data processing,
          home  office support and other departments of Family Life and the
          life  insurance subsidiaries  of  ILCO. Management  believes this
          integration  has resulted  in cost  savings for  ILCO's insurance
          subsidiaries  and  Family   Life.  During  1992,   the  Company's
          insurance   operations   were   centralized  at   the   Company's
          headquarters  in Austin,  Texas,  with the  exception of  certain
          services  performed in  Seattle, Washington.  Management believes
          that relocating  administrative functions  to Austin  has reduced
          costs  and improved  the efficiency  of the  insurance companies'
          operations. The number  of employees within  the Company and  its
          subsidiaries (including employees who also perform administrative
          services for Family  Life) was approximately 332  at December 31,
          1996.

          Principal Products

          The  Company's insurance  subsidiaries are  engaged primarily  in
          administering  existing portfolios of life insurance and accident
          and health insurance policies and annuity products. Approximately
          74.5%  of the  total  collected premiums  for  1996 were  derived
          primarily from renewal premiums on insurance policies and annuity
          products  sold  by  the  insurance subsidiaries  prior  to  their
          acquisition by the Company.

          The  Company's  insurance   subsidiaries  are  also   engaged  in
          marketing and underwriting individual life  insurance and annuity
          products  in  49  states  and  the  District of  Columbia.  These
          products  are marketed through independent, non-exclusive general
          agents.

          The products currently being distributed include several versions
          of universal  life insurance  and  interest-sensitive whole  life
          insurance. Under a whole  life insurance policy, the policyholder
          pays  a  level premium  over his  or  her expected  lifetime. The
          policy  combines life  insurance protection  with a  savings plan
          that gradually  increases  in amount  over  a period  of  several
          years. The universal and interest-sensitive whole life  insurance
          policies   of  the   Company's  insurance   subsidiaries  provide
          permanent  life insurance  which credit  company-declared current
          interest  rates. The  universal life  insurance portfolio  of the
          Company's insurance  subsidiaries consists primarily  of flexible
          premium universal  life  insurance policies.  Under the  flexible
          premium  policies, policyholders  may vary  the amounts  of their
          coverage (subject to minimum  and maximum limits) as well  as the
          date of payment and frequency of payments.  

          Direct  premiums  received  from  all  types  of  universal  life
          products were $40.6 million in 1996, as compared to $42.3 million
          in  1995  and  $42.0  million  in 1994.    Investors-NA  received
          reinsurance premiums  from Family Life  of $1.6 million  in 1996,
          pursuant to the reinsurance agreement for universal life products
          written by Family  Life.  In 1996,  premium income from  all life
          insurance  products was  derived  from all  states  in which  the
          Company's  insurance subsidiaries are  licensed, with significant
          amounts derived  from Pennsylvania  (14%), California  (9.0%) New
          Jersey (9.0%).

          Until  they  discontinued sales  of  credit  life and  disability
          insurance in the  fourth quarter  of 1994, two  of the  Company's
          insurance subsidiaries generally sold that insurance to consumers
          through lending  and  credit organizations.  Such  insurance  was
          generally  written on an individual or group basis to (i) persons
          financing the purchase  of new  automobiles in the  State of  New
          Jersey and (ii)  persons obtaining loans  from banks and  finance
          companies in southeastern states. Most policies of this type were
          issued for a term of 48 months or less.

          Direct premiums received from credit life and accident insurance,
          prior  to reinsurance, were $4.2 million in 1994 and $6.5 million
          in 1993. 

          Two of  the  Company's  insurance  subsidiaries  receive  premium
          income from  health insurance  policies. In 1996,  premium income
          from all  health insurance policies was $0.9 million, as compared
          to $1.1      million in 1995  and $1.4  million in 1994.  Premium
          income from health insurance in 1996 was derived from  all of the
          states in  which those  two insurance subsidiaries  are licensed,
          with  significant amounts  derived from  Pennsylvania (23%),  New
          Jersey (23%), and California (10%).

          Investors-NA sponsors  a variable annuity separate account, which
          offers  single  premium  and  flexible  premium  policies.    The
          policies  provide  for the  contract  owner  to allocate  premium
          payments  among  four  different  portfolios  of  Putnam  Capital
          Manager Trust ("PCM  Fund"), a  series fund which  is managed  by
          Putnam  Investment Management, Inc.   As of January  1, 1997, the
          PCM Fund  changed its name  to Putnam Variable  Trust.   Prior to
          April, 1995,  the underlying investment vehicle  for the variable
          annuity  contracts  was  the  CIGNA   Annuity  Funds  Group.    A
          substitution of the PCM Fund for the CIGNA Funds was completed in
          April,  1995.   The  plan of  substitution  was approved  by  the
          Securities and Exchange Commission.  Following such approval, the
          plan  was submitted  to policyholders  for approval,  which   was
          obtained.  During 1996, the premium income realized in connection
          with  these variable  annuity  policies was  $256,294, which  was
          received from existing contract owners.

          Direct  deposits from  the sale  of fixed  annuity products  were
          $948,000  in  1996,  as  compared  to  $1,359,000   in  1995  and
          $1,296,000  in 1994.   Investors-NA received reinsurance premiums
          from  Family  Life  of $3.8  million  in  1996,  pursuant to  the
          reinsurance  agreement  for  annuity products  written  by Family
          Life.

          The following  table  sets  forth,  for  the  three  years  ended
          December  31,  1995,  the   combined  premium  income  and  other
          considerations received  by the Company's  insurance subsidiaries
          from sales of their various lines of insurance.

          Item 6. Selected Financial  Data (in thousands, except per  share
          data;   certain  restatements   and  adjustments   are  explained
          following this table.)


                                             Year Ended December 31,
          Type of Insurance            1996          1995         1994
                                                (in thousands)
          Individual:                               

          Life                           $15,031    $16,426    $15,721
          Accident & Health                1,035      1,218      1,435
            Total Individual Lines        16,066     17,644     17,156 

          Group:

          Life                             2,018      2,594      2,226

          Accident & Health                               6        105
            Total Group Lines              2,018      2,600      2,331

          Credit:

          Life                               (85)      (222)     3,282
          Accident & Health                  (57)       240      2,296
            Total Credit Lines              (142)        18      5,578

          Total Premiums                  17,942     20,262     25,065
          Reinsurance premiums ceded      (7,962)    (8,568)   (10,748)

               Total Net Premium           9,980     11,694     14,317

          Amount Received on
          Investment
          Type Contracts                  47,135     44,130     43,372
                                                                
               Total Premiums and
               Deposits Received         $57,115    $55,824    $57,689



          Investment of Assets

          The  assets held  by  the Company's  insurance subsidiaries  must
          comply with  applicable  state  insurance  laws  and  regulations
          pertaining to life insurance companies.  The investment portfolio
          of the  Company's insurance  subsidiaries is tailored  to reflect
          the   nature  of  the   insurance  obligations,  business  needs,
          regulatory requirements  and tax  considerations relating  to the
          underlying insurance  business with respect to  such assets. This
          is particularly the case  with respect to interest-sensitive life
          insurance and  deferred annuity  products,  where the  investment
          emphasis is to obtain  a targeted margin of profit over  the rate
          of  interest  credited  to policyholders,  while  endeavoring  to
          minimize the portfolio's exposure  to changing interest rates. To
          reduce the  exposure to such rate  changes, portfolio investments
          are selected  so that  diversity, maturity and  liquidity factors
          approximate the duration of associated policyholder liabilities.

          The investment objective of the Company's  insurance subsidiaries
          emphasizes the  selection of  short to  medium term  high quality
          fixed income securities, rated Baa-3 (investment grade) or better
          by  Moody's Investors  Service, Inc. At  December 31,  1996, only
          3.9% of  the Company's  total assets  were  invested in  mortgage
          loans or real  estate. Non-affiliated  corporate debt  securities
          that were non-investment grade  represented 1.1% of the Company's
          total assets at December 31, 1996. The Company had investments in
          debt   securities   of   affiliated    corporations   aggregating
          approximately $59.9 million as of December 31, 1996.

          Investments in mortgage-backed securities included collateralized
          mortgage   obligations   ("CMOs")    of   $260.1   million    and
          mortgage-backed  pass-through  securities  of  $53.7  million  at
          December  31,  1996.  Mortgage-backed   pass-through  securities,
          sequential  CMOs,  support  bonds,  and  z-accrual  bonds,  which
          comprised approximately 52.3% of the book value of  the Company's
          mortgage-backed securities at December 31, 1996, are sensitive to
          prepayment and extension  risks. The Company has reduced the risk
          of  prepayment  associated  with  mortgage-backed  securities  by
          investing  in   planned   amortization  class   ("PAC"),   target
          amortization  class ("TAC") instruments, accretion directed bonds
          and scheduled  bonds. These investments are  designed to amortize
          in a predictable manner by shifting the risk of prepayment of the
          underlying  collateral  to  other  investors  in  other  tranches
          ("support  classes") of  the  CMO. PAC  and  TAC instruments  and
          accretion directed and scheduled bonds  represented approximately
          47.7%    and   sequential   and   support   classes   represented
          approximately 35.2% of the book value of the Company's mortgage--
          backed securities at December 31, 1996. In  addition, the Company
          limits the risk of prepayment of CMOs by not paying a premium for
          any  CMOs.  The  Company   does  not  invest  in  mortgage-backed
          securities  with increased prepayment risk, such as interest-only
          stripped pass-through securities  and inverse floater bonds.  The
          Company does invest in z-accrual bonds, but they constituted only
          3.4%  of   the  book  value  of   the  Company's  mortgage-backed
          securities at December 31, 1996. The prepayment risk that certain
          mortgage-backed securities are subject to is prevalent in periods
          of  declining interest rates,  when mortgages may  be repaid more
          rapidly than  scheduled  as  individuals  refinance  higher  rate
          mortgages  to take  advantage of  the lower  current rates.  As a
          result, holders of mortgage-backed  securities may receive  large
          prepayments on their investments which cannot be reinvested at an
          interest rate comparable to the rate on the  prepaying mortgages.
          The  Company did not  make additional investments  in CMOs during
          1996, and the current investment objectives of the Company do not
          contemplate additions to the  portfolio of CMO investments during
          1997. 

          The  Company  does  not   invest  in  non-agency  mortgage-backed
          securities,  which have a greater credit risk than that of agency
          mortgage-backed securities.

          The Company  does  not  make  new mortgage  loans  on  commercial
          properties.  Substantially all  of the  Company's  mortgage loans
          were made by its  subsidiaries prior to their acquisition  by the
          Company. At December  31, 1996, 0.6% of  the total book  value of
          mortgage  loans held by the Company had defaulted as to principal
          or interest for  more than  90 days,  and none  of the  Company's
          mortgage loans  were in  foreclosure. During  1996,  none of  the
          Company's mortgage loans were converted to foreclosed real estate
          or were restructured while the Company owned them.

          Another  key element of  the Company's investment  strategy is to
          avoid  large exposure  in other  investment categories  which the
          Company  believes   carry  higher  credit  or   liquidity  risks,
          including    private    placements,    partnerships   and    bank
          participation.  These categories accounted for approximately 1.2%
          of the Company's invested assets at December 31, 1996.

          Investors-NA  is  the owner  and developer  of an  office complex
          known as Bridgepoint Square  Offices. Once completed, the project
          will  consist of  four office  buildings,  with a  total rentable
          space of 364,000 square feet, and two parking garages. Investors-
          NA  purchased the  20  acre tract  of land  for  this complex  in
          January,  1995.  At that  time, the tract  included one completed
          and fully leased office building, an adjacent parking garage, and
          sites  for  three  more office  buildings  and  a  second parking
          garage.   Since   the   purchase,   Investors-NA   has  completed
          construction  on  the  second  parking  garage  and  two  of  the
          remaining  building sites.  Construction  is in  progress on  the
          fourth  building, with a projected completion date in July, 1997.
          Three of the four buildings are fully occupied by tenants and the
          fourth is partially leased. Negotiations are in progress with two
          potential tenants  to  lease the  remaining space  in the  fourth
          building. See Item 2. Properties.  

          In May 1996, Family Life Insurance Company ("FLIC"), an indirect,
          100% owned subsidiary of FIC, purchased a 7.1 acre tract adjacent
          to  the  original Bridgepoint  Square  tract.  This second  tract
          contained  one building  site and  one  garage site.  In January,
          1997, FLIC  began construction  on a four-story  office building,
          with rentable space of approximately  71,500 square feet, and the
          parking garage, with 350 parking spaces. The projected completion
          date  is September,  1997. Once construction  on the  building is
          completed,  ILCO  and  its  related  companies  will  move  their
          headquarters from  the current location  in the Austin  Centre to
          the new office building.  The companies will occupy approximately
          50,000 square feet of the building, with the balance to be leased
          to a third party.

          The Company has established and staffed an investment department,
          which manages  portfolio  investments and  investment  accounting
          functions for ILCO's life insurance subsidiaries.


          Agency Operations

          ILCO's insurance  subsidiaries  collectively market  through  the
          "Investors"   distribution   system.  Independent   non-exclusive
          agents, general  agents and brokers are  recruited nation-wide to
          sell  the products. Such  agents and brokers  also sell insurance
          products  for  companies  in competition  with  ILCO's  insurance
          subsidiaries.  In order to attract agents and enhance the sale of
          its   products,   the   Company's   insurance   subsidiaries  pay
          competitive   commission   rates   and   provides   other   sales
          inducements. The Investors Sales distribution system is presently
          concentrating  its efforts on the promotion and sale of universal
          life,  interest-sensitive  life,  term  life  and  fixed  annuity
          products. 

          Marketing  and   sales  for   all  of  the   Company's  insurance
          subsidiaries  are directed  by  the Executive  Vice President  of
          Marketing  and Sales.   The  Vice President  for Investors  Sales
          directs  Regional Vice  Presidents  who are  responsible for  the
          recruitment and  maintenance of  the general agents  and managing
          general agents for individual insurance sales.

          Data Processing

          Pursuant to  a data  processing  agreement with  a major  service
          company, the  data processing needs of ILCO's and FIC's insurance
          subsidiaries were  provided at a central  location until November
          30,  1994.  Since December,  1994, all  of those  data processing
          needs  have been provided to  ILCO's and FIC's  Austin, Texas and
          Seattle, Washington facilities by  FIC Computer Services, Inc., a
          new subsidiary of  FIC. See Item  13.- Certain Relationships  and
          Related Transactions with Management.

          Competition

          There  are many life and health insurance companies in the United
          States. A  significant number  of casualty companies  also market
          health insurance. Agents placing  insurance business with  ILCO's
          life  insurance  subsidiaries  are  compensated  on a  commission
          basis. However, some companies  pay higher commissions and charge
          lower  premium rates  and  many companies  have more  substantial
          resources.

          The  principal  cost  and  competitive factors  that  affect  the
          Company's  ability to  sell  its life  and  health insurance  and
          annuity products on a profitable basis are: (1) the general level
          of  premium rates  for  comparable products;  (2)  the extent  of
          individual  policy  holder  services  required  to  service  each
          product  category;   (3)  general   interest  rate   levels;  (4)
          competitive commission  rates and  related  marketing costs;  (5)
          legislative and regulatory requirements and restrictions; (6) the
          impact of  competing insurance and other  financial products; and
          (7) the condition of the regional and national economies.

          Reinsurance and Reserves

          Reinsurance Ceded:

          In accordance  with general practices in  the insurance industry,
          the Company's insurance subsidiaries limit the maximum net losses
          that  may  arise  from  large  risks  by  reinsuring  with  other
          carriers.  Such  reinsurance  provides   for  a  portion  of  the
          mortality risk to  be retained (the "Retention")  with the excess
          being  ceded to a reinsurer at a  premium set forth in a schedule
          based  upon the age and  risk classification of  the insured. The
          reinsurance  treaties  provide  for   allowances  that  help  the
          Company's insurance  subsidiaries offset the  expense of  writing
          new business. ILIC generally retains the first $70,000 of risk on
          the life  of any  individual. Investors-NA generally  retains the
          first  $100,000  of   risk  on  the   life  of  any   individual.
          Investors-IN generally retains the  first $50,000 of risk on  the
          life of any individual.  

          In  1988, Investors-NA  entered  into a  bulk reinsurance  treaty
          under  which it reinsured all of its risks under accidental death
          benefit policies.  ILIC  had  previously  obtained  similar  bulk
          reinsurance for accidental death benefit policies. The treaty was
          renegotiated with another reinsurer, with a new effective date of
          January 1, 1996. Effective as of January 1, 1997, the  treaty was
          renegotiated with a different reinsurer.  

          In  1993  ILCO's life  subsidiaries  entered into  a  quota share
          reinsurance  treaty  under  which  all  credit  life  and  health
          business issued March 1, 1993 and later is 50% reinsured. 

          Although  reinsurance  does not  eliminate  the  exposure of  the
          Company's insurance  subsidiaries to  losses from  risks insured,
          the net liability  of such  subsidiaries will be  limited to  the
          portion of the risk  retained, provided that the reinsurers  meet
          their contractual obligations.

          The  Company's  insurance  subsidiaries carry  reserves  on their
          books   to  meet  future   obligations  under  their  outstanding
          insurance policies.  Such reserves are believed  to be sufficient
          to  meet policy  obligations as  they mature  and are  calculated
          using  assumptions   for   interest,  mortality,   expenses   and
          withdrawals in effect at the time the policies were issued.

          Reinsurance Assumed:

          In 1995,  Investors-NA entered into a  reinsurance agreement with
          Family  Life pertaining  to universal  life insurance  written by
          Family  Life.   The reinsurance  agreement is  on  a co-insurance
          basis and applies to all covered business with effective dates on
          and after January  1, 1995.  The  agreement applies to only  that
          portion  of the  face amount  of  the policy  which is  less than
          $200,000;  face amounts  of  $200,000 or  more  are reinsured  by
          Family  Life with a third party reinsurer.  In 1996, Investors-NA
          entered into a reinsurance agreement with Family Life, pertaining
          to  annuity  contracts  written  by Family  Life.  The  agreement
          applies to contracts written  on or after January 1,  1996. These
          reinsurance  arrangements  reflect management's  plan  to develop
          universal life and annuity  business at Investors-NA, with Family
          Life  concentrating  on  the   writing  of  term  life  insurance
          products. 


          FIC's Acquisition of Control of the Company

          In  January 1985, FIC acquired 26.53% of ILCO's common stock. FIC
          and Family Life subsequently acquired additional shares of ILCO's
          common stock and  as of March  14, 1997, FIC owned,  directly and
          indirectly  through  Family   Life,  approximately  46%   of  the
          outstanding shares  of ILCO's common stock. FIC  holds options to
          acquire up to 1,702,155  additional shares of ILCO Common  Stock.
          Giving  effect to the exercise  of those options,  FIC would own,
          directly and indirectly through  Family Life, approximately 61.5%
          of  the outstanding  shares  of ILCO  Common Stock.  The exercise
          price of  the options is equal to the average quoted market price
          of  ILCO's common  stock over  the six  month  period immediately
          prior to exercise. In addition, in the event that any other party
          were to seek  to acquire,  without the prior  approval of  ILCO's
          Board of  Directors, securities aggregating five  percent or more
          of ILCO's outstanding common  stock, FIC would have the  right to
          acquire, under the same  price formula, that number of  shares of
          ILCO's common stock  which, when  added to the  number of  shares
          then  owned by  FIC, would  amount to  51% of  ILCO's outstanding
          common stock.

          The stock  options were  granted in  1986 to FIC  by the  Company
          principally in consideration for a $1,200,000 unsecured loan from
          FIC,   FIC's  agreement   to  guarantee   up  to   $4,000,000  of
          Registrant's  financial   obligations  and  FIC's   agreement  to
          guarantee, upon demand, ILCO's performance under its lease on its
          headquarters building. In addition, FIC  guaranteed a $15,000,000
          term loan of ILCO.


          FIC's Acquisition of Family Life

          After FIC acquired control of ILCO, FIC's primary involvement  in
          the insurance industry was its indirect investment, through ILCO,
          in  ILCO's insurance  subsidiaries.  In June  1991, FIC  acquired
          Family Life Insurance Company, ("Family Life"), based in Seattle,
          Washington, from Merrill Lynch Insurance Group, Inc.

          Family  Life  underwrites  and  sells  mortgage  protection  life
          insurance to customers who  are mortgage borrowers from financial
          institutions  where  Family  Life  has  marketing  relationships.
          Family Life distributes its  insurance products primarily through
          a national  career sales force in  49 states and  the District of
          Columbia.

          The $114 million purchase price for Family Life and an additional
          $5  million  for transaction  costs,  working  capital and  other
          related  purposes were financed by: (a) a $50 million senior loan
          provided  by a group of banks, (b) $44 million subordinated notes
          issued  to  the seller  and its  affiliates  and (c)  $25 million
          senior    subordinated   notes   issued   to   Investors-CA   and
          Investors-NA.  In  addition,  FIC  granted  to  Investors-CA  and
          Investors-NA nontransferable options to purchase up to a total of
          9.9% of  FIC's common  stock  at a  price  of $10.50  per  share,
          equivalent  to   the  then  current  market   price,  subject  to
          adjustment to prevent  dilution. As a result of  the five-for-one
          stock split implemented  by FIC, effective in November, 1996, the
          exercise price of the options was changed to $2.10 per share. The
          initial terms of the option provided for their expiration on June
          12,  1998, if  not previously exercised.  In connection  with the
          1996 amendments  to the subordinated loans  held by Investors-NA,
          the  expiration date of the options was extended to September 12,
          2006.   For a discussion  of the  1996 amendments,  see Item  13,
          Certain Relationships  and Related Transactions  with Management,
          above.   In July 1993 the  subordinated notes held  by the seller
          and  its affiliates were prepaid. The primary source of the funds
          used  to prepay the subordinated debt was a new subordinated loan
          of $34.5 million obtained from Investors-NA. See Item 13, above. 

          Senior  Loan . In January,  1993, the Company  prepaid all of its
          subordinated indebtedness and purchased  and cancelled all of the
          warrants  held by  certain  of its  subordinated noteholders.  In
          addition to paying the $30 million aggregate principal  amount of
          the  subordinated notes due in  1997, 1998 and  1999 plus accrued
          interest, the Company paid approximately $7 million of prepayment
          penalty,  the after-tax  effect  of which  was  a charge  against
          earnings in 1993, and approximately $8 million  for the warrants,
          which  was  a  charge  directly against  retained  earnings.  The
          warrants had entitled the holders to purchase 1,107,480 shares of
          the Company's Common Stock  (approximately 24% of the outstanding
          shares)  at an exercise price  of $3.33 per  share. The currently
          estimated price that the warrant holders could have  required the
          Company to pay for the warrants upon exercise of their put option
          was approximately $29.9 million. The earliest that the put option
          could have  been exercised  was December  1993, if  such exercise
          would  not have resulted  in a default  under the Senior  Loan at
          that time. The purchase and cancellation of the warrants  reduced
          the number  of the Company's  outstanding shares of  common stock
          and  common stock  equivalents  used in  the  computation of  its
          earnings  per  share  from  approximately  7,147,000   shares  to
          approximately 6,040,000  shares. This adjustment in  common stock
          equivalents affected earnings per share for periods after January
          29, 1993.

          The primary source of  the funds used to prepay  the subordinated
          debt  and to  purchase  the  warrants  was  an  increase  in  the
          outstanding  balance  of  the  Company's  existing  senior   loan
          obligation  from  $60 million  to  $110  million pursuant  to  an
          amended and  restated credit  agreement that the  Company entered
          into on January 29,  1993 with certain banks, including  the same
          agent bank as  in the bank  group which provided the  senior loan
          used in connection  with the 1988 acquisition of Investors-NA and
          Investors-CA (the  "Senior Loan").   The Company's  prepayment of
          subordinated debt,  purchase of  warrants and increase  in senior
          bank indebtedness  are referred  to herein as  the "Refinancing".
          The terms  of the amended  and restated credit  facility ("Senior
          Loan")  are substantially the same as the terms and provisions of
          the original senior  loan which  was provided to  the Company  in
          1988. The interest rate on the $30 million subordinated debt that
          was  replaced  by the  New Senior  Loan  was 13.25%.  The average
          interest  rate paid  by  the  Company  on  its  Senior  Loan  was
          approximately  7.04% during  1994,  8.63% during  1995 and  7.76%
          during 1996. The maturity date, which had been December 31, 1996,
          was extended to July 1, 1998 for the Senior Loan. On February 14,
          1995, the  Company borrowed an  additional $15 million  under the
          Senior Loan to help finance  the acquisition of Investors-IN, and
          the maturity date of the Senior Loan was further extended to July
          1, 1999.

          As of December 31, 1995, the outstanding principal balance of the
          ILCO's senior  loan obligations was  $59.4 million.   In January,
          1996,  the Company made a scheduled payment of $4.5 million under
          its Senior Loan.  In March, 1996, the Company made  the scheduled
          payments for  April 1st and  July 1st, totaling  $9 million.   At
          that  same time,  the  Company made  a  payment of  $941,000,  an
          additional payment under  the terms  of the loan  applied to  the
          principal  balance.   On  April 1,  1996,  an optional  principal
          payment in the amount of $15 million was made,  which resulted in
          advancing the scheduled payoff  date of the Senior Loan  to April
          1, 1998.  In July,  1996, the Company made the  principal payment
          for  October  1st  ($4.5  million), plus  an  optional  principal
          payment of $0.5 million.  

          The Senior Loan is a secured and guaranteed six and one-half year
          term loan. A required  $26 million principal payment was  made on
          April 1, 1993. Thereafter, the principal is payable in twenty two
          quarterly installments of $4.5  million each, commencing on April
          1, 1994  and ending on July  1, 1999. The Company  is required to
          make mandatory payments on  the Senior Loan equal to (a)  100% of
          the net proceeds from the issuance of the Company's capital stock
          or debt  securities  and (b)  the  applicable percentage  of  the
          Company's  annual  Excess Cash  Flow:  100%,  if the  outstanding
          principal  balance of  the New  Senior Loan exceeds  $75 million;
          75%,  if the outstanding balance exceeds $50 million but is equal
          to or less than $75  million; or 50%, if the outstanding  balance
          is equal  to or less  than $50 million.  Excess Cash Flow  is the
          excess of (i) the sum of the Company's cash and cash equivalents,
          principal  and  interest received  by  the  Company from  surplus
          debentures, cash  dividends received by the  Company and interest
          income on the  Company's cash  equivalents over (ii)  the sum  of
          principal  and  interest  paid  on  the  Company's  indebtedness,
          operating expenses, taxes actually paid and $5 million.

          The Senior Loan bears interest, at  the option of the Company, at
          a rate per annum equal to (i) the Alternate Base Rate (as defined
          below) plus  the Applicable  Margin (as defined  below), or  (ii)
          LIBOR  (adjusted for reserves) for interest periods of 1, 2, 3 or
          6 months plus  the Applicable Margin. LIBOR  is London Inter-Bank
          Offered Rates. The Alternate Base Rate  for any day is the higher
          of (a) the  agent bank's  corporate base rate  as announced  from
          time to time  and (b) the federal funds rate  as published by the
          Federal  Reserve  Bank of  New  York  plus 0.5%.  The  Applicable
          Margin,  depending on  the outstanding  principal balance  of the
          Senior  Loan, ranges  from  0.5% to  1.25%  for loans  that  bear
          interest based upon  the Alternate  Base Rate and  from 1.75%  to
          2.5% for loans that  bear interest based upon LIBOR.  The initial
          Applicable  Margin for Alternate Base Rate loans is 1.25% and the
          initial Applicable Margin for LIBOR loans is 2.5%.

          The  obligations of the Company under the Senior Loan are secured
          by: (1) all of  the outstanding shares of stock  of Investors-NA,
          (2) a  $15,000,000 surplus  debenture of Investors-NA  payable to
          the  Company,  which  had  an outstanding  principal  balance  of
          $5,706,000   as  of  December 31,  1996  and (3)  a  $140,000,000
          surplus debenture  of Investors-NA payable to  the Company, which
          had  an  outstanding  principal  balance  of  $32,840,000  as  of
          December 31,  1996.  The obligations  of  the Company  under  the
          Senior Loan are guaranteed by FIC.

          The  Senior Loan  prohibits the  payment by  the Company  of cash
          dividends on  the Common Stock and  contains covenants, including
          restrictive  covenants that  impose limitations on  the Company's
          and  its subsidiaries' ability  to, among other  things: (i) make
          investments; (ii)  create or incur additional  debt; (iii) engage
          in businesses  other than  their present and  related businesses;
          (iv)  create  or incur  additional  liens;  (v) incur  contingent
          obligations;   (vi)  dispose   of   assets,  (vii)   enter   into
          transactions with  affiliated companies; and (viii)  make capital
          expenditures;   and    various   financial  covenants,  including
          covenants  requiring  the  maintenance  of a  minimum  cash  flow
          coverage  ratio,  minimum  consolidated  net  worth  and  minimum
          statutory  surplus of subsidiaries, and a minimum ratio (360%) of
          (i) the sum  of the   statutory  capital and  surplus, the  asset
          valuation  reserve  and    one-half  of  the  dividend  liability
          pertaining to  participating policies  of each  insurance company
          subsidiary to  (ii) its  respective Authorized Control  Level RBC
          (see "Regulation").

          The Senior Loan specifies  events of default, including,  but not
          limited  to,  failure  to  pay  amounts  under  the  Senior  Loan
          documents  when due;  defaults  or violation  of covenants  under
          other indebtedness; defaults under the loans made by Investors-NA
          to subsidiaries of  FIC; the loss of any license  of an insurance
          subsidiary  of the Company  which would  have a  material adverse
          effect on the Company; defaults under the FIC guaranty agreement;
          changes in  ownership or  control of  FIC or the  Company by  its
          controlling  person, Roy F. Mitte, or in  the Company by FIC; and
          the  occurrence  of certain  events of  bankruptcy. If  Mr. Mitte
          ceases  to control the management of the Company solely by reason
          of (i)  his death or (ii) his  permanent inability to perform his
          usual  and customary duties on a full-time basis on behalf of the
          Company and FIC  as the result of physical or mental infirmity, a
          default will occur,  and the  banks holding in  the aggregate  at
          least 66 2/3% of the outstanding balance  of the Senior Loan may,
          on or after 180 days after the date on which such default occurs,
          declare the Senior Loan immediately  due and payable. Mr. Mitte's
          ability  to communicate and his mobility are impaired as a result
          of a stroke he suffered in May 1991. However, Mr. Mitte continues
          to control  the  management  of  the  Company,  and  Mr.  Mitte's
          impairments  did not constitute a  default under the Senior Loan.
          See Item 10(b)-Executive Officers of the Registrant.

          The outstanding  principal balance of the Senior  Loan was $24.94
          million as of December 31, 1996.

          Regulation

          General.  The Company's  insurance  subsidiaries  are subject  to
          regulation and  supervision  by  the states  in  which  they  are
          licensed to do business. Such regulation is designed primarily to
          protect policy  owners. Although the extent  of regulation varies
          by state,  the respective state insurance  departments have broad
          administrative powers relating to  the granting and revocation of
          licenses  to   transact  business,  licensing   of  agents,   the
          regulation of trade practices and premium  rates, the approval of
          form  and  content  of  financial  statements  and  the type  and
          character of investments.

          These  laws  and  regulations  require  the  Company's  insurance
          subsidiaries to  maintain certain  minimum surplus levels  and to
          file detailed  periodic reports with the  supervisory agencies in
          each of the states in  which they do business and their  business
          and accounts are subject  to examination by such agencies  at any
          time.  The  insurance laws  and  regulations  of the  domiciliary
          states of the Company's  insurance subsidiaries require that such
          subsidiaries be examined at specified intervals.

          Investors-NA and ILIC  are domiciled in the  states of Washington
          and  New Jersey,  respectively.  In  December 1992,  Investors-NA
          redomesticated  from Pennsylvania to Washington, and Investors-CA
          merged into Investors-NA. In June, 1993 Standard Life merged into
          Investors-NA. Investors-IN is domiciled in the State of Indiana.

          A  number of  states  regulate the  manner  and extent  to  which
          insurance  companies  may  test  for  acquired  immune deficiency
          syndrome (AIDS) antibodies in connection with the underwriting of
          life  insurance policies.  To the  extent permitted  by law,  the
          Company's insurance  subsidiaries  consider AIDS  information  in
          underwriting   coverage  and   establishing  premium   rates.  An
          evaluation  of the  financial  impact of  future  AIDS claims  is
          extremely difficult, due in  part to insufficient and conflicting
          data  regarding  the  incidence of  the  disease  in the  general
          population and  the prognosis for  the probable future  course of
          the disease.

          Risk-Based Capital Requirements. Effective  for the 1993 calendar
          year,   the  National  Association   of  Insurance  Commissioners
          ("NAIC") has  adopted Risk-Based Capital ("RBC")  requirements to
          evaluate  the  adequacy  of  statutory  capital  and  surplus  in
          relation to  investment and insurance risks  associated with; (i)
          asset  quality; (ii)  mortality  and morbidity;  (iii) asset  and
          liability matching;  and (iv) other business  factors. The states
          will use  the RBC formula  as an  early warning tool  to discover
          potential  weakly  capitalized  companies  for  the  purpose   of
          initiating  regulatory  action.  The  RBC  requirements  are  not
          intended  to  be  a  basis  for  ranking the  relative  financial
          strength of insurance companies. In addition, the formula defines
          a  new  minimum  capital   standard  which  will  supplement  the
          prevailing  system  of  low  fixed minimum  capital  and  surplus
          requirements on a state-by-state basis.

          The  RBC  requirements  provide  for  four  different  levels  of
          regulatory  attention  in  those   states  that  adopt  the  NAIC
          regulations,  depending  on  the  ratio of  the  company's  Total
          Adjusted  Capital  (which  generally  consist  of  its  statutory
          capital, surplus  and asset valuation reserve)  to its Authorized
          Control Level RBC. A   "Company Action Level Event"  is triggered
          if  a  company's Total  Adjusted Capital  is  less than  200% but
          greater than or  equal to  150% of its  Authorized Control  Level
          RBC,  or  if a  negative trend  has occurred  (as defined  by the
          regulations) and  Total Adjusted  Capital is less  than 250%  but
          more  than 200%  of  its Authorized  Control  Level RBC.  When  a
          Company  Action Level  Event occurs,  the company  must submit  a
          comprehensive plan  to the  regulatory authority  which discusses
          proposed corrective  actions to  improve its capital  position. A
          "Regulatory Action Level Event" is triggered if a company's Total
          Adjusted Capital  is less than 150% but  greater than or equal to
          100%  of  its Authorized  Control  Level RBC.  When  a Regulatory
          Action Level Event occurs,  the regulatory authority will perform
          a   special  examination  of  the  company  and  issue  an  order
          specifying  corrective   actions  that   must  be   followed.  An
          "Authorized  Control Level  Event"  is triggered  if a  company's
          Total  Adjusted Capital  is less  than 100%  but greater  than or
          equal  to  70%  of its  Authorized  Control  Level  RBC, and  the
          regulatory  authority may  take  any action  it deems  necessary,
          including  placing   the  company  under  regulatory  control.  A
          "Mandatory Control Level Event" is triggered if a company's total
          adjusted capital is less than 70% of its Authorized Control Level
          RBC,  and  the regulatory  authority  is  mandated  to place  the
          company under its control.

          Calculations using  the NAIC formula and  the statutory financial
          statements of the Company's insurance subsidiaries as of December
          31, 1996  indicate that the Total Adjusted Capital of each of the
          Company's insurance subsidiaries is  above 480% of its respective
          Authorized Control Level RBC.

          Solvency  Laws Assessments. The solvency or guaranty laws of most
          states in which the  Company's insurance subsidiaries do business
          may  require   the  Company's   insurance  subsidiaries   to  pay
          assessments   (up  to   certain   prescribed  limits)   to   fund
          policyholder losses  or liabilities  of insurance  companies that
          become  insolvent.  Recent  insolvencies of  insurance  companies
          increase the  possibility that such assessments  may be required.
          These assessments may be deferred or forgiven under most guaranty
          laws if they would threaten an insurer's financial  strength and,
          in certain instances, may be offset against future premium taxes.
          The  insurance companies  record  the expense  for guaranty  fund
          assessments in the period assessed.  The occurrence and amount of
          such  assessments have increased in recent years.  The net amount
          of such  assessment for the Company's  insurance subsidiaries was
          approximately  $100,165 in the year ended December 31, 1996  That
          amount is net  of the amounts that  can be offset against  future
          premium taxes.   The likelihood  and amount of  any other  future
          assessments cannot be estimated and are beyond the control of the
          Company.

          Surplus Debentures  and Dividends. The principal  sources of cash
          for the Company to make payments of principal and interest on the
          Senior  Loan  are  payments   under  the  surplus  debentures  of
          Investors-NA (a Washington-domiciled corporation).

          The surplus  debentures were originally issued  by Standard Life.
          Upon  the   merger  of  Standard  Life   into  Investors-NA,  the
          obligations   of   the  surplus   debentures   were   assumed  by
          Investors-NA.  Since Investors-NA  is domiciled  in the  State of
          Washington, the  provisions of Washington insurance  law apply to
          the  surplus  debentures. Under  the  provisions  of the  surplus
          debentures  and current  law, Investors-NA  can pay  interest and
          principal on  the surplus debentures without having to obtain the
          prior approval of the Washington Insurance Commissioner; provided
          that, after giving effect to such payments, the statutory surplus
          of Investors-NA is in excess of  $10 million. As of December  31,
          1996,  the statutory  surplus of  Investors-NA was  $53,773,628. 
          Investors-NA  does  give  five-days  prior  notification  to  the
          Washington Insurance  Department of each proposed  payment on the
          surplus  debentures  in  accordance  with  an  agreement  between
          Investors-NA and  the Department.  ILCO does  not anticipate that
          Investors-NA  will have  any difficulty  in making  principal and
          interest  payments  on  the  surplus debentures  in  the  amounts
          necessary  to  enable ILCO  to service  the  Senior Loan  for the
          foreseeable future.

          Pursuant  to  the surplus  debentures  Investors-NA  paid to  the
          Company  principal  and interest  on  the  surplus debentures  of
          $26,224,640 in 1994, $22,749,576 in 1995 and $36,288,469 in 1996.

          In  addition to  the  payments under  the  terms of  the  Surplus
          Debentures, ILCO has received  dividends from Standard Life (now,
          from  Investors-NA).   Washington's insurance  code includes  the
          "greater of"  standard for payment of  dividends to shareholders,
          but  has  requirements  that  prior notification  of  a  proposed
          dividend be  given to  the Washington Insurance  Commissioner and
          that cash dividends may be paid only from earned surplus.   As of
          December 31, 1996, Investors-NA had earned surplus of $5,205,100.
          Since the law applies  only to dividend payments, the  ability of
          Investors-NA to  make principal  and interest payments  under the
          Surplus  Debentures is  not affected.   ILCO does  not anticipate
          that Investors-NA  will have  any difficulty in  making principal
          and interest payments  on the Surplus  Debentures in the  amounts
          necessary  to  enable ILCO  to service  the  Senior Loan  for the
          foreseeable future.

          ILIC is  domiciled in  the  State of  New Jersey.  Under the  New
          Jersey  insurance  code, a  domestic  insurer  may make  dividend
          distributions upon proper notice  to the Department of Insurance,
          as long as the distribution is reasonable in relation to adequate
          levels  of  policyholder surplus  and  quality  of earnings.  Any
          dividend  must be paid from earned surplus. A proposed payment of
          a  dividend or  distribution  which, together  with dividends  or
          distributions paid  during the  preceding twelve  months, exceeds
          the  greater of (i) 10% of statutory  surplus as of the preceding
          December  31 or (ii) statutory  net gain from  operations for the
          preceding calendar year is treated as an "extraordinary dividend"
          and  may not  be paid  until either  it has  been approved,  or a
          waiting period shall  have passed  during which it  has not  been
          disapproved,  by  the  insurance  commissioner.  ILIC  had earned
          surplus of $4,566,338 at December 31, 1996.
           
          Investors-IN  is domiciled  in the  State  of Indiana.  Under the
          Indiana  insurance code,  a  domestic insurer  may make  dividend
          distributions upon proper notice  to the Department of Insurance,
          as long as the distribution is reasonable in relation to adequate
          levels  of policyholder  surplus and  quality of  earnings. Under
          Indiana  law  the  dividend must  be  paid  from  earned surplus.
          Extraordinary   dividend  approval  would  be  required  where  a
          dividend  exceeds the greater of  10% of surplus  or the net gain
          from  operations  for the  prior  fiscal  year. Investors-IN  had
          earned surplus of $11,525,153 at December 31, 1996.


          Valuation Reserves. Commencing in  1992, the Mandatory Securities
          Valuation  Reserve  ("MSVR")  required   by  the  NAIC  for  life
          insurance companies  was replaced by a  mandatory Asset Valuation
          Reserve ("AVR") which  is expanded to cover  mortgage loans, real
          estate  and   other   investments.  A   new  mandatory   Interest
          Maintenance Reserve  ("IMR"), designed to defer  realized capital
          gains and losses  due to  interest rate changes  on fixed  income
          investments and to  amortize those gains  and losses into  future
          income, is also effective  for 1992. Previously, realized capital
          gains attributable to interest rate changes were  credited to the
          MSVR  and  had   the  effect  of   reducing  the  required   MSVR
          contributions  of  ILCO's  insurance subsidiaries.  Effective  in
          1992,  such realized capital gains are credited  to the IMR. As a
          result of  these changes, management believes  that the Company's
          insurance subsidiaries are  required to accrue greater  aggregate
          asset valuation reserves. The combination of the AVR and IMR will
          affect  statutory capital and surplus  and may reduce the ability
          of the Company's insurance subsidiaries to pay dividends and make
          payments on the surplus debentures.

          Insurance  Holding  Company  Regulation. Investors-NA,  ILIC  and
          Investors-IN are  subject to  regulation under the  insurance and
          insurance holding company statutes  of Washington, New Jersey and
          Indiana. The insurance holding  company laws and regulations vary
          from   jurisdiction  to   jurisdiction,  but   generally  require
          insurance  and  reinsurance  subsidiaries  of  insurance  holding
          companies  to  register  with  the  applicable  state  regulatory
          authorities and  to file  with those authorities  certain reports
          describing,  among  other information,  their  capital structure,
          ownership, financial condition, certain intercompany transactions
          and  general business operations.  The insurance  holding company
          statutes  also require  prior regulatory  agency approval  or, in
          certain   circumstances,  prior   notice   of  certain   material
          intercompany transfers of assets  as well as certain transactions
          between   insurance   companies,  their   parent   companies  and
          affiliates.

          Under the  Washington, New  Jersey and Indiana  insurance holding
          company  laws,  unless  (i) certain  filings  are  made  with the
          respective department of insurance, (ii) certain requirements are
          met, including a public  hearing and (iii) approval  or exemption
          is granted  by the  respective insurance commissioner,  no person
          may  acquire any voting  security or security  convertible into a
          voting  security of  an insurance  holding company,  such  as the
          Company, which  controls an  insurance company domiciled  in that
          state, or  merge with such a  holding company, if as  a result of
          such  transaction  such  person  would  "control"  the  insurance
          holding  company. "Control"  is  presumed to  exist  if a  person
          directly or indirectly owns or controls 10% or more or the voting
          securities of another person.

          Potential Federal  Regulation.  Although the  federal  government
          generally  does not  directly  regulate  the insurance  industry,
          federal  initiatives  often  have  an  impact  on  the  business.
          Congress  and  certain  federal agencies  are  investigating  the
          current  condition of  the insurance industry  (encompassing both
          life  and health  and  property and  casualty  insurance) in  the
          United States in  order to  decide whether some  form of  federal
          role  in   the  regulation   of  insurance  companies   would  be
          appropriate.  Congress  is  currently  conducting  a  variety  of
          hearings relating in general  to the solvency of insurers.  It is
          not possible  to predict  the outcome  of any such  congressional
          activity  nor  the potential  effects  thereof  on the  Company's
          insurance subsidiaries.

          Congressional  initiatives directed  at repeal  of the  McCarran-
          Ferguson Act (which exempts the "business of insurance" from most
          federal laws, including the  antitrust laws, to the extent  it is
          subject to state regulation) and judicial decisions narrowing the
          definition of "business  of insurance" for McCarran-Ferguson  Act
          purposes  may limit the ability of insurance companies in general
          to  share information with  respect to rate-setting, underwriting
          and  claims management  practices. Current  and proposed  federal
          measures  which  may  also  significantly  affect  the  insurance
          industry  include minimum  solvency requirements  and removal  of
          barriers  preventing  banks   from  engaging  in   the  insurance
          business.

          Federal Income Taxation

          The  Revenue  Reconciliation Act  of  1990  amended the  Internal
          Revenue  Code  of  1986 to  require  a  portion  of the  expenses
          incurred in  selling  insurance products  to be  deducted over  a
          period of years, as opposed to an immediate deduction in the year
          incurred.  Since  this  change only  affects  the  timing  of the
          deductions,  it does  not  affect tax  expense  as shown  on  the
          Company's financial statements prepared  in accordance with GAAP.
          However,  the   change  will  increase  the   tax  for  statutory
          accounting purposes  in the  first few years,  which will  reduce
          statutory surplus  and, accordingly,  may decrease the  amount of
          cash dividends that Investors Life-NA can pay to the Company. For
          the years ended December  31, 1994, 1995 and 1996,  the increases
          (decreases) in the current income tax provisions of the Company's
          insurance  subsidiaries   due  to   this  change   were  $88,505,
          ($118,480) and ($90,413), respectively. The change has a negative
          tax  effect for  statutory accounting  purposes when  the premium
          income of the Company's insurance subsidiaries increases, but has
          a positive tax effect when their premium income decreases.

                                 Segment Information

          The principal operations of the Company's insurance  subsidiaries
          are   the  underwriting   of   life   insurance  and   annuities.
          Accordingly, no  separate segment  information is required  to be
          provided  by  the Registrant  for  the  three-year period  ending
          December 31, 1996.

          Item 2. Properties

          The  Registrant's headquarters  are currently  located at  Austin
          Centre, 701  Brazos,  Suite  1400,  Austin,  Texas.  Investors-NA
          purchased  Austin  Centre, an  office-hotel property  in downtown
          Austin in August 1991 for a purchase price of $31,275,000 from an
          unrelated  seller  that  had  previously  acquired  the  property
          through  foreclosure. Austin Centre covers a  full city block and
          is  a sixteen story  mixed use development  consisting of 343,664
          square feet of office/retail  space (predominately office space),
          a 314  room hotel and 61  luxury apartments, all united  by a 200
          foot high  glass  atrium. The  project was  completed in  October
          1986. 

          In September 1995,  Investors-NA entered into a  contract to sell
          Austin Centre to an Austin-based real  estate investment firm for
          a purchase price of $62.675  million, less $1 million to be  paid
          to a  capital reserve account for  the purchaser.  The  sale  was
          consummated   on March 29, 1996.   A portion of the sale proceeds
          equal to the  amount that Investors-NA presently  had invested in
          Austin Centre were retained and reinvested by  Investors-NA.  The
          balance  of  the net  proceeds of  the sale  were used  to reduce
          ILCO's bank indebtedness by approximately $15 million.

          On January 31, 1995, ILCO, through Investors-NA, purchased, as an
          investment   property,  an  office   building  project  known  as
          Bridgepoint  Office Square in  Austin, Texas for  a cash purchase
          price of $9.75 million. The property consists of 20 acres of land
          with four office building sites  and two parking structure sites.
          The first phase of  development of the property was  completed in
          1986  and consists  of a five-story  office building  with 83,474
          square feet of rentable  space and a 550-car parking  garage. The
          office space is fully rented. 

          In the fourth quarter  of 1995, construction began on  the second
          office building, containing approximately 109,000 rentable square
          feet, and  the other parking garage  containing approximately 871
          spaces.  That  phase of  the project was  completed in  September
          1996,  and is 100%  leased to  a major  tenant in  the technology
          business.
             
          In  March  1996,  construction  commenced  on  the  third  office
          building,  with  approximately  81,000 rentable  square  feet  of
          office space  and was  completed in December,  1996. Investors-NA
          leased  approximately   43,000 square  feet  of the  third office
          building to the same tenant which leased all of the  space in the
          second building.  The remaining space was leased in October, 1996
          to a major tenant also in the technology business. 

          Construction  began on the fourth  building in July  1996, with a
          projected  completion date  of  July, 1997.  The fourth  building
          contains approximately 92,459 rentable square  feet. In September
          of 1996, approximately 23,619 rentable square feet were leased to
          an oil and gas company.  Another 10,000 square feet was leased in
          March,  1997,  to a  company  involved in  the  technology field.
          Investors-NA is  currently negotiating with  two other  potential
          tenants to lease the remainder of the rentable square feet in the
          fourth building.

          On  May 3, 1996, Family Life Insurance Company, an indirect, 100%
          owned  subsidiary of FIC, purchased a tract of land adjoining the
          Bridgepoint Office Square tract for a cash purchase price of $1.3
          million.  The property  consists of  7.1 acres  of land  with one
          office  building site and one  parking structure site. FLIC began
          construction of the fifth  building (known as "Bridgepoint Five")
          on the new  site in January 1997.  The building, which will  have
          approximately 71,500 square feet  of rentable space, is currently
          projected  to   be  completed  in   September,  1997.   Following
          completion of the  building, ILCO and its  related companies will
          vacate their current headquarters  in the Austin Centre  and move
          them to  Bridgepoint Five. ILCO  and its  related companies  will
          occupy  approximately   50,000  rentable  square  feet.  FLIC  is
          currently seeking tenants to occupy the remainder of the rentable
          square feet in the fifth building.

          ILCO  leases a building located at 40 Parker Road, Elizabeth, New
          Jersey.   This  building,   which  was  formerly   the  Company's
          headquarters building, contains approximately 41,000  square feet
          of office space. The remaining term of the lease is 11 years, and
          the lease calls for  a minimum base rental of $450,000 per annum.
          The  lease provides that all costs including, but not limited to,
          those  for maintenance, repairs, insurance  and taxes be borne by
          ILCO. The Registrant and ILIC  currently occupy a nominal portion
          of the space in  the 40 Parker Road property  and have sub-leased
          the remaining portion.

          ILIC owns three  buildings which  are adjacent to  the 40  Parker
          Road  building.  One building,  which  leased  to third  parties,
          contains  approximately 3,500  square feet  of space.  The second
          building contains approximately 2,500 square feet of space and is
          leased to persons who perform maintenance services for ILIC's and
          ILCO's properties in Elizabeth, New  Jersey.  The third building,
          purchased during 1985, contains  approximately 3,500 square  feet
          of space,  and is    partially leased  to third  parties and  the
          remainder is used to provide accommodations for employees working
          at the New Jersey office.

          Investors-NA  owns an office building, located  at 206 West Pearl
          Street, Jackson, Mississippi.  This building is 67 years  old and
          contains  approximately  85,000  square  feet  of  office  space.
          Investors-NA currently occupies a nominal portion of the space in
          this property and leases space to various commercial tenants.

          The  Company believes  that its  properties and leased  space are
          adequate to meet its foreseeable requirements.

          Item 3. Legal Proceedings

          The Company and  Investors-NA are defendants  in a lawsuit  which
          was  filed  in October,  1996, in  Travis  County, Texas.   CIGNA
          Corporation, an unrelated company, is  also a named defendant  in
          the  lawsuit. The  named plaintiffs  in the  suit (a  husband and
          wife), allege  that the universal life insurance policies sold to
          them  by INA Life Insurance  Company (a company  which was merged
          into Investors-NA  in 1992) utilized unfair  sales practices. The
          named plaintiffs seek reformation of the life insurance contracts
          and  an unspecified amount of damages.  The named plaintiffs also
          seek a class  action as  to similarly situated  individuals.   No
          certification of a class has been  granted as of the date hereof.
          The Company believes that  the suit is without merit  and intends
          to vigorously defend this matter.  

          Item 4. Submission of Matters to a Vote of Security Holders

          No matter was submitted  during the fourth quarter of  the fiscal
          year ended December 31, 1996 to a vote of security holders.

                                       PART II

          Item 5.   Market for the Registrant's Common Stock and Related
                    Stockholder Matters

          A. Market Information

          The following table sets  forth the quarterly high and  low sales
          prices  for the  Company's Common Stock  in The  Nasdaq Small-Cap
          Market for 1996 and 1995.

                                                       Prices
                                             High                Low  

          1996:

          1st Quarter. . . . . . .           $15.50              $12.50
          2nd Quarter. . . . . . .            16.25               13.375
          3rd Quarter. . . . . . .            15.25               11.50
          4th Quarter. . . . . . .            14.25               12.00

          1995:

          1st Quarter. . . . . . .           $13.50              $10.00
          2nd Quarter. . . . . . .            13.00               10.75
          3rd Quarter. . . . . . .            12.00               10.25
          4th Quarter. . . . . . .            13.25               10.25

          The Common Stock of the Company is traded in The Nasdaq Small-Cap
          Market  (NASDAQ Symbol:  ILC0). Quotations  are furnished  by the
          National  Association of  Securities Dealers  Automated Quotation
          System (NASDAQ).

          B. Holders

          The approximate number of  record holders of the Common  Stock of
          the Registrant as of March 14, 1997 was 1,537.

          C. Dividends

          No dividend was declared or paid by the Company during 1994, 1995
          or 1996.  Under the terms of  its Senior Loan the  Company is not
          permitted to declare  or pay  any dividends on  its Common  Stock
          during  the loan term. A  more detailed discussion  of the Senior
          Loan is set forth in Item 1 hereof.

          The ability of an insurance holding company, such as ILCO, to pay
          dividends to its  shareholders may  be limited  by the  company's
          ability to obtain  revenue, in  the form of  dividends and  other
          payments, from its operating insurance subsidiaries. The right of
          such subsidiaries to pay dividends is generally restricted by the
          insurance laws of their domiciliary  states. See Item 1. Business
          Regulation - Surplus Debentures and Dividends.

          Item 6. Selected  Financial Data (in thousands,  except per share
          data;   certain  restatements   and  adjustments   are  explained
          following this table.)

                                   Years Ended December 31,

                          1996        1995        1994      1993        1992  

       Revenues        $  138,244  $  122,390 $  114,842 $  117,843 $  139,009

       Benefits &
       Expenses            96,801     105,907     99,142    100,525    117,568

       Income from
       operations          41,443      16,483     15,700     17,318     21,441

       Provision for
       federal income
       taxes               14,505       5,769      5,783      5,118      7,540
                            
       Net Income
       before extra-
       ordinary item
       and cumulative
       effect of
       change in
       accounting
       principle           26,938      10,714      9,917     12,200     13,901
                             
       Extraordinary
       Item                   -0-         -0-        -0-    (6 253)        -0-
                           
       Net Income
       before
       cumulative
       effect of
       change in
       accounting
       principle           26,938      10,714      9,917      5,947     13,901
                              
       Cumulative
       effect of
       change in
       accounting                   
       principle              -0-         -0-        -0-    (2,600)        -0-
                           
       Net Income      $   26,938  $   10,714 $    9,917 $    3,347 $   13,901
           
       Common
       Stock and
       Common  Stock
       Equivalents          5,380       5,389      5,378      5,858     7,052   

       Net Income per       
       share before
       extraordinary
       item and
       cumulative
       effect of
       change in
       accounting
       principle       $     5.12  $     2.11  $    1.93 $     2.20 $     2.06
      
       Extraordinary   
       Item                   -0-         -0-        -0-      (1.07)       -0-

       Net  income per 
       share before
       cumulative
       effect of
       change in
       accounting
       principle             5.12        2.11      1.93        1.13      2.06
                                                
       Cumulative          
       effect of
       change in
       accounting
       principle             -0-         -0-        -0-        (.44)      -0-

       Net income per       
       share           $     5.12  $     2.11 $    1.93  $      .69 $     2.06

       Cash Dividend         -0-         -0-        -0-         -0-       -0- 

       Long Term Debt  $   24,944  $   59,385 $  66,585  $   84,000 $   90,325

       Total Assets    $1,263,942  $1,315,293 $1,148,994 $1,266.941 $1,286,733

               1    Net  income per share for the  years ended December 31,
               1996, 1995, 1994, 1993 and 1992 included the dilutive effect
               resulting  from  the increase  in  the market  price  of the
               Company's   common  stock.   Such  increase   requires  that
               outstanding common  share equivalents be taken  into account
               in  determining   net  income  per  share.   See  "Notes  to
               Consolidated Financial Statements" for a  description of the
               manner of calculation of common share equivalents.


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

          For  the year  ended December  31, 1996,  ILCO's net  income from
          operations was  $26,938,000 ($5.12 per common  share) as compared
          to $10,714,000 ($2.11 per  common share) in 1995 and   $9,917,000
          ($1.93 per common share) in 1994.  

          Net income  for 1996 includes  $15.3 million  resulting from  the
          sale of  the Austin  Centre, a hotel/office  complex, located  in
          Austin,  Texas.  The selling  price was $62.675  million, less $1
          million paid to a capital reserve account for the purchaser.  The
          property  was purchased in 1991 for $31.275 million. A portion of
          the sale proceeds, equal  to the book value of the  property, net
          of  improvements and  amortization ($36.8 million),  was retained
          and  reinvested  by Investors  Life  Insurance  Company of  North
          America ("Investors-NA").   The balance of  the proceeds, net  of
          federal income tax, of  the sale was used to reduce the Company's
          senior loan obligations by $15 million.  The sale closed on March
          29, 1996.  

          The results for 1996,  and for that portion of  1995 beginning on
          February 14th, include the operations of Investors Life Insurance
          Company  of Indiana  (formerly known  as Meridian  Life Insurance
          Company).   Investors   Life   Insurance   Company   of   Indiana
          ("Investors-IN")  was  purchased  by   ILCO  and  Investors  Life
          Insurance  Company  of  North  America  ("Investors-NA")  for  an
          adjusted  purchase price  of $17.1  million; the  transaction was
          completed on February 14, 1995.  The name change was completed in
          May, 1995.

          The  statutory earnings of  the Company's insurance subsidiaries,
          as required  to be reported to  insurance regulatory authorities,
          before interest  expense, capital  gains and losses,  and federal
          income taxes were $21,624,112  at December 31, 1996,  as compared
          to  $24,511,342 at December 31, 1995  and $21,119,689 at December
          31, 1994.  These statutory earnings are the source to provide for
          the repayment of ILCO's indebtedness.

          The  operating strategy  of the  Company's management  emphasizes
          several   key  objectives:   expense  management;   marketing  of
          competitively  priced insurance  products which  are designed  to
          generate an  acceptable level of profitability;  maintenance of a
          high quality  portfolio of  investment grade securities;  and the
          provision of quality customer service.

          Premium  income,  net of  reinsurance,  for the  year  1996 $9.98
          million, as compared to $11.69 million in 1995 and $14.31 million
          in  1994.     Reinsurance premiums  ceded  were $8.0  million, as
          compared to $8.5 million in 1995 and $10.9 million in 1994.  

          Earned insurance charges  for the  year ended  December 31,  1996
          were $42.24 million, as  compared to $42.32 million for  1995 and
          $39.37 million for 1994.   This source of revenues  is related to
          the  universal life  insurance and  annuity book  of  business of
          Investors-NA.  

          In 1995,  Investors-NA entered into a  reinsurance agreement with
          Family Life Insurance Company (an insurance company subsidiary of
          Financial Industries  Corporation and  an affiliated   company of
          Investors-NA),  pertaining to universal life insurance written by
          Family  Life.   The  reinsurance agreement  is on  a co-insurance
          basis and applies to all covered business with effective dates on
          and  after January 1, 1995.   The agreement  applies to only that
          portion of  the face  amount of  the policy  which  is less  than
          $200,000; face  amounts  of $200,000  or  more are  reinsured  by
          Family  Life with a third party reinsurer.  In 1996, Investors-NA
          entered into a reinsurance agreement with Family Life, pertaining
          to  annuity  contracts  written  by Family  Life.  The  agreement
          applies to contracts written  on or after January 1,  1996. These
          reinsurance  arrangements reflect  management's  plan to  develop
          universal life and annuity  business at Investors-NA, with Family
          Life  concentrating  on  the   writing  of  term  life  insurance
          products.

          Interest  expense was $2.8 million for the year 1996, as compared
          to $5.7 million  for the year 1995 and $5.2  million in 1994. The
          decrease is attributable to a  reduction in the average principal
          balance of the senior loan from $64.4 million for the year ending
          December 31, 1995 to  $33.7 million for the year  ending December
          31, 1996, as well as  a decrease in the average rate  of interest
          paid on the senior loan - 7.76% for the year 1996, as compared to
          8.63% for the year 1995.

          The decline in  long-term interest rates  during 1996, which  was
          related  to general  economic conditions,  had a  positive effect
          upon  the market value of the fixed maturities available for sale
          segment of  the portfolio.  As  of December 31, 1996,  the market
          value  of the  fixed  maturities available  for sale  segment was
          $453.9 million  as  compared  to  an  amortized  cost  of  $451.6
          million, or  an unrealized  gain $2.3 million.   The  net of  tax
          effect  of  this increase  has been  recorded  as an  increase in
          shareholders' equity.  There is no assurance that this unrealized
          gain will be realized in the future.

          Investors-NA  is the  owner and  developer of  an office  complex
          known as Bridgepoint Square Offices.  Once completed, the project
          will  consist of  four  office buildings,  with a  total rentable
          space of 364,000 square feet, and two parking garages. Investors-
          NA  purchased  the 20  acre  tract of  land for  this  complex in
          January, 1995,  for a cash  purchase price of $9.75  million.  At
          that time,  the  tract included  one completed  and fully  leased
          office building, an adjacent parking garage, and sites for  three
          more office  buildings and  a second  parking  garage. Since  the
          purchase, Investors-NA has completed  construction on the  second
          parking  garage   and  two  of  the   remaining  building  sites.
          Construction is  in  progress  on  the fourth  building,  with  a
          projected  completion  date in  July,  1997.  Three  of the  four
          buildings  are  fully occupied  by  tenants  and  the  fourth  is
          partially leased. Negotiations are in progress with two potential
          tenants to lease the remaining space in the fourth building. Upon
          completion of the project, the investment of Investors-NA will be
          approximately $46 million. 


                                Results of Operations

          For the year ended  December 31, 1996, the Company's  income from
          operations  before  Federal  income   taxes  was  $41,443,000  on
          revenues of $138,244,000, as  compared to $16,483,000 on revenues
          of  $122,390,000 for the year 1995 and $15,700,000 on revenues of
          $114,842,000 in 1994.    

          During  1996,  the  lapse rate  with  respect  to universal  life
          insurance  policies  increased  slightly  from  the   lapse  rate
          experienced in 1995.  The  rate in 1996 was 9.0%, as  compared to
          8.8%  in 1995. The lapse  rate with respect  to traditional (non-
          universal)  life insurance  policies  decreased  from the  levels
          experienced in 1995.  The  rate in 1996 was 8.0%. as  compared to
          8.8% in 1995.  The lapse rates experienced during the 1996 period
          were within the ranges anticipated by management.


                           Liquidity and Capital Resources:

          ILCO is a holding  company whose principal assets consist  of the
          common stock of Investors Life Insurance Company of North America
          and  its  subsidiaries  -  Investors Life  Insurance  Company  of
          Indiana (formerly  known as Meridian Life  Insurance Company) and
          InterContinental Life Insurance Company ("ILIC").  ILCO's primary
          source of funds consists of payments under two Surplus Debentures
          from Investors-NA.   

          As of December 31, 1995, the outstanding principal balance of the
          ILCO's senior loan  obligations was $59.4  million.  In  January,
          1996,  the Company made a scheduled payment of $4.5 million under
          its Senior Loan.   In March, 1996, the Company made the scheduled
          payments for  April 1st and  July 1st,  totaling $9 million.   At
          that  same time,  the  Company made  a  payment of  $941,000,  an
          additional payment under  the terms  of the loan  applied to  the
          principal  balance.   On  April  1, 1996,  an  optional principal
          payment in  the amount of $15  million was made.   In July, 1996,
          the  Company made  the principal  payment  for October  1st ($4.5
          million),  plus an  optional principal  payment of  $0.5 million,
          thereby reducing the total amount  of the outstanding Senior Loan
          to $24.94 million.

          ILCO's  principal source  of liquidity  consists of  the periodic
          payment of  principal and  interest by Investors-NA,  pursuant to
          the terms of the Surplus Debentures.  The Surplus Debentures were
          originally issued  by Standard  Life Insurance Company  and their
          terms  were  previously  approved  by  the  Mississippi Insurance
          Commissioner.   Upon the merger  of Standard Life into Investors-
          NA, the  obligations of  the Surplus  Debentures were  assumed by
          Investors-NA.  As of December 31, 1996, the outstanding principal
          balance of  the Surplus  Debentures  was $5.7  million and  $32.8
          million, respectively.   Since  Investors-NA is domiciled  in the
          State of  Washington, the provisions of  Washington insurance law
          apply to the  Surplus Debentures.   Under the  provisions of  the
          Surplus  Debentures and  current  law, no  prior approval  of the
          Washington Insurance Commissioner is required for Investors-NA to
          pay  interest or  principal on  the Surplus  Debentures; provided
          that, after giving effect to such payments, the statutory surplus
          of  Investors-NA  is  in  excess  of  $10 million  (the  "surplus
          floor").   However, Investors-NA has voluntarily  agreed with the
          Washington Insurance  Commissioner that it will  provide at least
          five days advance notice of payments which it will make under the
          surplus  debenture.     As of  December  31, 1996,  the statutory
          surplus of Investors-NA was $53,773,628, an  amount substantially
          in excess of the surplus floor.  The funds required by Investors-
          NA to meet its obligations to the Company under the  terms of the
          Surplus Debentures are generated  from operating income generated
          from insurance and investment operations.

          In  addition to  the  payments under  the  terms of  the  Surplus
          Debentures, ILCO has received  dividends from Standard Life (now,
          from Investors-NA).     Washington's insurance code  includes the
          "greater of"  standard for payment of  dividends to shareholders,
          but has  a  requirement that  prior  notification of  a  proposed
          dividend be  given to  the Washington Insurance  Commissioner and
          that cash dividends  may be paid only from earned  surplus. As of
          December 31, 1996, Investors-NA had earned surplus of $5,205,148.
          Since the law applies  only to dividend payments, the  ability of
          Investors-NA to  make principal  and interest payments  under the
          Surplus Debentures  is not  affected.   ILCO does  not anticipate
          that Investors-NA  will have  any difficulty in  making principal
          and interest  payments on the  Surplus Debentures in  the amounts
          necessary  to  enable ILCO  to service  the  Senior Loan  for the
          foreseeable future.

          ILIC  is domiciled  in the  State of  New Jersey.  Under  the New
          Jersey  insurance  code, a  domestic  insurer  may make  dividend
          distributions upon proper notice  to the Department of Insurance,
          as long as the distribution is reasonable in relation to adequate
          levels  of  policyholder surplus  and  quality  of earnings.  Any
          dividend  must be paid from earned surplus. A proposed payment of
          a  dividend or  distribution  which, together  with dividends  or
          distributions paid  during the  preceding twelve  months, exceeds
          the  greater of (i) 10% of  statutory surplus as of the preceding
          December  31 or (ii) statutory  net gain from  operations for the
          preceding calendar year is treated as an "extraordinary dividend"
          and  may not  be paid  until either  it has  been approved,  or a
          waiting period shall  have passed  during which it  has not  been
          disapproved,  by  the  insurance  commissioner.  ILIC had  earned
          surplus of $4,566,338 at December 31, 1996.
           
          Investors-IN  is domiciled  in the  State of  Indiana.  Under the
          Indiana  insurance code,  a  domestic insurer  may make  dividend
          distributions upon proper notice  to the Department of Insurance,
          as long as the distribution is reasonable in relation to adequate
          levels  of policyholder  surplus and  quality of  earnings. Under
          Indiana  law  the dividend  must  be  paid from  earned  surplus.
          Extraordinary   dividend  approval  would  be  required  where  a
          dividend  exceeds the greater  of 10% of surplus  or the net gain
          from  operations  for the  prior  fiscal  year. Investors-IN  had
          earned surplus of $11,525,153 at December 31, 1996.

          ILCO's net cash flow provided  by (used in) operating  activities
          was  ($23.46) million, as compared to  $10.3 million for the year
          ended December 31, 1995 and ($15.3) million  for  the same period
          in  1994.  This  change is primarily  due to fluctuations  in the
          amount of deferred federal income tax related to the market value
          of investment assets that are fixed maturities available for sale
          and the  net gain  realized in  connection with  the sale  of the
          Austin Centre.

          Management  believes that  its cash,  cash equivalents  and short
          term investments are sufficient to meet the needs of its business
          and to satisfy debt service.

                                     Investments

          As  of December  31,  1996,  the  book  value  of  the  Company's
          investment assets  totaled $661.1 million, as  compared to $669.5
          million as of December 31, 1995.  Total assets as of December 31,
          1996 ($1.26  billion) decreased from the level as of December 31,
          1995 ($1.32   billion). 

          The level of short-term investments at the end of 1996 was $91.6 
          million, as compared to $86.0 million at the end of 1995.   
           
          The  fixed  maturities available  for  sale  portion of  invested
          assets  at December 31, 1996  was $453.9 million.   The amortized
          cost of the  fixed maturities  available for sale  segment as  of
          December  31,  1996  was   $451.6  million,  representing  a  net
          unrealized  gain of  $2.3      million.    This  unrealized  gain
          principally reflects  changes in interest rates from the date the
          respective investments were purchased.  To reduce the exposure to
          interest rate changes, portfolio investments are selected so that
          diversity,  maturity   and  liquidity  factors   approximate  the
          duration of associated policyholder liabilities.

          The assets held by ILCO's life insurance subsidiaries must comply
          with  applicable  state  insurance  laws  and  regulations.    In
          selecting investments  for the  portfolios of its  life insurance
          subsidiaries, the Company's emphasis is to obtain targeted profit
          margins,  while minimizing  the  exposure  to  changing  interest
          rates.  This objectiveis implemented by selectingprimarily short-
           to medium-term,  investment grade  fixed income securities.   In
          making such portfolio selections,  the Company generally does not
          select new investments  which are commonly  referred to as  "high
          yield" or "non-investment grade."  

          The  Company's fixed  maturities portfolio  (including short-term
          investments), as  of December  31, 1996, included  a non-material
          amount   (1.1%  of   total   fixed   maturities  and   short-term
          investments) of  debt securities which, in  the annual statements
          of the companies as filed with state insurance  departments, were
          designated   under   the   National   Association   of  Insurance
          Commissioners ("NAIC")  rating system as "3"  (medium quality) or
          below.   For  the year  ended December  31, 1995,  the comparable
          percentage was 1.1%.  The majority of  these non-investment grade
          investments  are  concentrated in  the  medium  quality (or  "3")
          category, with only  0.7% receiving  an NAIC rating  of "4"  (low
          quality) or below as of December 31, 1996, as compared to 1.5% as
          of December 31, 1995.  

          The consolidated balance sheets of the Company as of December 31,
          1996 include $59.9 million of "Notes receivable from affiliates",
          represented by (i) a  loan of $22.5 million from  Investors-NA to
          Family Life Corporation and a $2.5 million loan from Investors-CA
          to  Financial  Industries  Corporation  (which is  now  owned  by
          Investors-NA  as a  result  of the  merger  of Investors-CA  into
          Investors-NA) and $1.9  million of additions to  the $2.5 million
          note made in accordance with the terms of such  note; these loans
          were granted  in connection with  the 1991 acquisition  of Family
          Life Insurance Company by a wholly-owned subsidiary of FIC (ii) a
          loan of $30  million by Investors-NA  to Family Life  Corporation
          made in July, 1993, in connection  with the prepayment by the FIC
          subsidiaries of indebtedness which  had been previously issued to
          Merrill Lynch as part of the 1991 acquisition and (iv)  a loan of
          $4.5 million by Investors-NA  to Family Life Insurance Investment
          Company  made  in  July,  1993,   in  connection  with  the  same
          transaction described above.  As of June 12, 1996, the provisions
          of  the  notes  from Investors-NA  to  FIC,  FLC  and FLIIC  were
          modified  as follows: (a) the  $22.5 million note  was amended to
          provide for twenty quarterly principal payments, in the amount of
          $1,125,000  each, to  commence on  December 12,  1996; the  final
          quarterly  principal payment is  due on  September 12,  2001; the
          interest rate  on the note  remains at  11%, (b) the  $30 million
          note  was  amended  to  provide  for  forty  quarterly  principal
          payments,  in the amount of $163,540 each for the period December
          12,  1996  to September  12, 2001;  beginning with  the principal
          payment due on  December 12,  2001, the amount  of the  principal
          payment increases  to $1,336,458;  the  final quarterly principal
          payment is due  on September 12, 2006;  the interest rate on  the
          note remains  at 9%, (c)  the $4.5  million note  was amended  to
          provide for forty quarterly principal payments, in  the amount of
          $24,531  each for the period  December 12, 1996  to September 12,
          2001; beginning  with the principal  payment due on  December 12,
          2001, the amount of the  principal payment increases to $200,469;
          the final quarterly  principal payment  is due  on September  12,
          2006; the interest  rate on the note remains at  9%, (d) the $2.5
          million note was amended to provide that the principal balance of
          the  note is  to be  repaid in  twenty quarterly  installments of
          $125,000  each,  commencing  December  12, 1996  with  the  final
          payment due on September  12, 2001; the rate of  interest remains
          at 12%, (e) the Master PIK note, which was issued  to provide for
          the payment in  kind of interest due under the  terms of the $2.5
          million note prior to  June 12, 1996, was amended to provide that
          the principal balance  of the note ($1,977,119) is to  be paid in
          twenty quarterly principal payments,  in the amount of $98,855.95
          each, to commence December 12, 1996 with the final payment due on
          September 12, 2001; the interest rate on the note remains at 12%.

          The NAIC continued  its rating  of "3" to  the "Notes  receivable
          from affiliates", as amended.  These loans have not been included
          in the preceding description of NAIC rating percentages.

          Management believes that the  absence of any material  amounts of
          "high-yield"  or "non-investment  grade" investments  (as defined
          above)  in  the portfolios  of  its  life insurance  subsidiaries
          enhances  the ability of the Company to service its debt, provide
          security to its policyholders and to credit relatively consistent
          rates of return to its policyholders.


                               Accounting Developments


          Stock-Based Compensation:

          In October, 1995, the Financial Accounting standards Board issued
          Statement of Financial Accounting  Standard No. 123,  "Accounting
          for  Stock-Based  Compensation."     This  Statement   encourages
          companies  to adopt a fair  value based method  of accounting for
          employee stock  options and  other equity instruments  awarded as
          compensation.   Under this method, compensation  expense equal to
          the  fair  value of  the  security  at the  award  grant  date is
          recognized as compensation expense over the vesting period of the
          awarded security.   However, the Statement  also allows companies
          to  continue to  account for  stock-based compensation  under the
          intrinsic  value  based  method,   as  prescribed  by  Accounting
          Principles Board Opinion No. 25, "Accounting for Stock Issued  to
          Employees."    Under  the   intrinsic  value  based  method,  the
          compensation  cost  is computed  as the  excess,  if any,  of the
          quoted market price  of the  equity security  at the  measurement
          date  over the  amount  an  employee  must  pay  to  acquire  the
          security.   If  a company  continues  to account  for stock-based
          compensation under the intrinsic value based method, it must make
          certain pro-forma  disclosures in the footnotes  to the financial
          statements for the difference in the fair value based  method and
          the intrinsic value  based method.   This Statement is  effective
          for stock-based compensation transactions entered  into in fiscal
          years that begin after December 15, 1995.

          The Company adopted FAS No. 123 during 1996, and will continue to
          account for  stock-based compensation under  the intrinsic  value
          based method and  disclose the impact of the fair value method in
          the notes to its financial statements. 

                                   Subsequent Event

          On  March  25,  1997,  ILCO  and  Investors-IN  entered  into  an
          agreement to acquire State  Auto Life Insurance Company,  an Ohio
          domiciled life insurer,  from State  Automobile Mutual  Insurance
          Company, for a cash  purchase price of $11.8 million,  subject to
          certain  post-closing  adjustments.     In  connection with  this
          transaction, the bank group participating in the Senior Loan have
          agreed to defer  payment of  $4.5 million   otherwise payable  on
          April  1, 1997 under the terms of  the Senior Loan, and to reduce
          the amount of  the payment otherwise due on July  1, 1997 by $2.5
          million.   This deferral would  result in extending  the maturity
          date of  the Senior Loan to October 1, 1998.   Under the terms of
          the transaction, State Auto Life would be merged  into Investors-
          IN.  The  closing of the transaction, which is  expected to occur
          during  the  second quarter  of  1997, is  subject  to regulatory
          approvals.  


          Item 8. Financial Statements and Supplementary Data

          The following  Financial Statements of ILCO  and its consolidated
          subsidiaries have been filed as part of this report:

               1.   Report   of   Price    Waterhouse   LLP,    Independent
                    Accountants, dated March 25, 1997.                  .

               2.   Consolidated Balance  Sheets, as of  December 31,  1996
                    and December 31, 1995.

               3.   Consolidated Statements of  Income for the years  ended
                    December 31 1996, 1995 and 1994.

               4.   Consolidated  Statements  of  Changes in  Shareholders'
                    Equity for the  years ended December 31, 1996, 1995 and
                    1994.

               5.   Consolidated  Statements  of Cash  Flows for  the years
                    ended December 31, 1996, 1995 and 1994.

               6.   Notes to Consolidated Financial Statements.

          Item 9.   Changes  in  and  Disagreements  with   Accountants  on
                    Accounting and Financial Disclosure

          No independent  accountant who audited the Registrant's financial
          statements  has resigned  or been dismissed  during the  two most
          recent fiscal years.

                                       PART III

          Item 10.  Directors and Executive Officers of Registrant

               (a) Directors of the Registrant

          The  names and ages of  the current directors  of the Registrant,
          their principal  occupations or  employment during the  past five
          years and other data  regarding them are set forth below.  All of
          the  directors, except Mr. Pruner and Mr. Demgen, were elected at
          the 1996 annual  shareholders meeting. Mr. Pruner  and Mr. Demgen
          were appointed as directors  by the Board of Directors  on August
          26,  1996.  The  data  supplied  below  is  based on  information
          provided by the directors, except to the extent that such data is
          known to the Registrant.


          Name                Age  Director  Principal Occupation
                                   Since     and Other Information



          W. Lewis Gilcrease  65   1988      Dentist   practicing  in   San
                                             Marcos,  Texas.   Director  of
                                             ILCO since 1988.   Director of
                                             FIC from 1979 to July 6, 1991.

          James M. Grace      53   1984      Vice  President and  Treasurer
                                             of the  Company since January,
                                             1985.        Executive    Vice
                                             President,    Treasurer    and
                                             Director  of  InterContinental
                                             Life  Insurance  Company since
                                             1989.       Vice    President,
                                             Treasurer   and  Director   of
                                             Financial           Industries
                                             Corporation since  July, 1976.
                                             Executive  Vice President  and
                                             Treasurer  of  Investors  Life
                                             Insurance  Company   of  North
                                             America since  1989; Executive
                                             Vice President, Treasurer  and
                                             Director   of    Family   Life
                                             Insurance      Company      (a
                                             subsidiary     of    Financial
                                             Industries  Corporation) since
                                             June    1991.        Director,
                                             Executive  Vice  President and
                                             Treasurer  of  Investors  Life
                                             Insurance  Company of  Indiana
                                             since February 1995.

          Richard A. Kosson   64   1981      Certified   Public  Accountant
                                             and a  partner in the  firm of
                                             Manheim,  Kosson  & Novick  in
                                             Millburn, New Jersey.

          Roy F. Mitte        65   1984      Chairman  of   the  Board  and
                                             Chief Executive Officer of the
                                             Company  and  InterContinental
                                             Life  Insurance Company  since
                                             January,  1985.   President of
                                             the Company since April, 1985.
                                             Chairman    of   the    Board,
                                             President and Chief  Executive
                                             Officer      of      Financial
                                             Industries  Corporation  since
                                             1976.  Chairman of  the Board,
                                             President and  Chief Executive
                                             Officer   of  Investors   Life
                                             Insurance  Company  of   North
                                             America since  December, 1988.
                                             Chairman    of   the    Board,
                                             President and Chief  Executive
                                             Officer    of   Family    Life
                                             Insurance  Company since  June
                                             1991.  Chairman of  the Board,
                                             President and  Chief Executive
                                             Officer   of  Investors   Life
                                             Insurance  Company  of Indiana
                                             since      February      1995.
                                             Chairman,    ILG    Securities
                                             Corporation   since   December
                                             1988.

          Donald Shuman       72   1980      Real     estate    specialist,
                                             engaged    in     sales    and
                                             management of  real estate for
                                             his  own  company, Don  Shuman
                                             Associates,   a  real   estate
                                             brokerage and management firm.

          Eugene E. Payne     54   1989      Vice  President of  ILCO since
                                             December  1988   and  Director
                                             since   May    1989.      Vice
                                             President   and  Director   of
                                             Financial           Industries
                                             Corporation   since   February
                                             1992.        Executive    Vice
                                             President,    Secretary    and
                                             Director  of  Investors   Life
                                             Insurance  Company   of  North
                                             America  since December  1988.
                                             Executive Vice President since
                                             December  1988   and  Director
                                             since     May      1989     of
                                             InterContinental          Life
                                             Insurance Company.   Executive
                                             Vice President,  Secretary and
                                             Director   of   Family    Life
                                             Insurance  Company since  June
                                             1991.     Director,  Executive
                                             Vice  President  and Secretary
                                             of  Investors  Life  Insurance
                                             Company   of   Indiana   since
                                             February 1995.

          Theodore A. Fleron    57  1991     Vice President and Director of
                                             ILCO    since    May     1991.
                                             Assistant Secretary since June
                                             1990.     Vice  President  and
                                             Director  of FIC  since August
                                             1996.   Senior Vice President,
                                             General   Counsel,   Assistant
                                             Secretary   and   Director  of
                                             Investors    Life    Insurance
                                             Company  of North  America and
                                             InterContinental          Life
                                             Insurance  Company since  July
                                             1992.       General   Counsel,
                                             Assistant     Secretary    and
                                             Director  of   Investors  Life
                                             Insurance  Company   of  North
                                             America  and  InterContinental
                                             Life  Insurance  Company  from
                                             January  1989  to  July  1992.
                                             Senior Vice President, General
                                             Counsel,      Director     and
                                             Assistant     Secretary     of
                                             Investors    Life    Insurance
                                             Company of  Indiana since June
                                             1995.   Senior Vice President,
                                             General Counsel, Director  and
                                             Assistant Secretary  of Family
                                             Life  Insurance Company  since
                                             August 1996.

          Joseph F. Crowe     58   1991      Vice  President  of ILCO  from
                                             May 1991 to January 1997, when
                                             he retired from active service
                                             with the Company.  Director of
                                             ILCO  since  May  1991.   Vice
                                             President of FIC from February
                                             29, 1992 to  January 3,  1997.
                                             Director of FIC since February
                                             29,  1992.     Executive  Vice
                                             President  of  Investors  Life
                                             Insurance  Company  of   North
                                             America  and  InterContinental
                                             Life  Insurance  Company  from
                                             June  1991  to  January  1997.
                                             Director  of   Investors  Life
                                             Insurance  Company   of  North
                                             America  and  InterContinental
                                             Life  Insurance Company  since
                                             June  1991.    Executive  Vice
                                             President   of   Family   Life
                                             Insurance  Company  from  June
                                             1991    to    January    1997.
                                             Director   of   Family    Life
                                             Insurance  Company since  June
                                             1991.        Executive    Vice
                                             President  of  Investors  Life
                                             Insurance  Company of  Indiana
                                             from February  1995 to January
                                             1997.   Director  of Investors
                                             Life   Insurance  Company   of
                                             Indiana  since February  1995.
                                             From  December  1986 to  March
                                             1991, Executive Vice President
                                             of Personal Financial Security
                                             Division   of  Aetna   Life  &
                                             Casualty Company.


          Steven P. Schmitt   50   1994      Senior  Vice  President  since
                                             April 1992  and Director, Vice
                                             President     and    Assistant
                                             Secretary since August 1989 of
                                             Investors    Life    Insurance
                                             Company  of North  America and
                                             InterContinental          Life
                                             Insurance  Company.     Senior
                                             Vice  President  since   April
                                             1992  and  Director  and  Vice
                                             President  since June  1991 of
                                             Family Life Insurance Company.
                                             Director,      Senior     Vice
                                             President     and    Assistant
                                             Secretary  of  Investors  Life
                                             Insurance  Company of  Indiana
                                             since June 1995.


          H. Gene Pruner      69   1995      Director of  ILCO since August
                                             1996.   Director of Investors-
                                             IN   since   February,   1995.
                                             President  of   Market  Share,
                                             Inc. since April 1985.

          Jeffrey H. Demgen   44   1995      Director  of   FIC  since  May
                                             1995.  Vice  President of  FIC
                                             since   August  1996.     Vice
                                             President and Director of ILCO
                                             since  August 1996.   Director
                                             of   Family   Life   Insurance
                                             Company  since  October  1992.
                                             Executive  Vice  President  of
                                             Family Life  Insurance Company
                                             since  August  1996.    Senior
                                             Vice President  of Family Life
                                             Insurance Company from October
                                             1992    to     August    1996.
                                             Executive  Vice  President and
                                             Director  of   Investors  Life
                                             Insurance  Company   of  North
                                             America  since  August   1996.
                                             Senior   Vice  President   and
                                             Director  of   Investors  Life
                                             Insurance  Company  of   North
                                             America  from October  1992 to
                                             June  1995.    Executive  Vice
                                             President  of InterContinental
                                             Life  Insurance Company  since
                                             August  1996.     Senior  Vice
                                             President  of InterContinental
                                             Life  Insurance  Company  from
                                             October  1992  to  June  1995.
                                             Executive  Vice  President and
                                             Director  of   Investors  Life
                                             Insurance  Company of  Indiana
                                             since  August  1996.    Senior
                                             Vice   President   of   United
                                             Insurance  Company of  America
                                             from  September  1984 to  July
                                             1992.


          Mr.  Shuman  was  the  general partner  of  Shuman-Carlisle  Mall
          Associates,  a  partnership  that  owned a  400,000  square  foot
          shopping  mall located  in  Carlisle, Pennsylvania.   In  January
          1993,  the partnership filed a petition pursuant to Chapter 11 of
          the Federal  Bankruptcy Code, and that  bankruptcy proceeding was
          concluded in early 1995.

          The  incumbent directors  have been  nominated for  submission to
          vote of  the  shareholders  for reelection  at  the  1997  annual
          shareholders' meeting.  

               (b)  Executive Officers of the Registrant

          The following table sets forth the  names and ages of the persons
          who have  served as  Registrant's Executive Officers  during 1996
          together with all  positions and  offices held by  them with  the
          Registrant.   Officers are elected  to serve at  the will of  the
          Board of Directors  or until their  successors have been  elected
          and qualified.

          Name                     Age       Positions and Offices

          Roy F. Mitte             65        Chairman of the Board,
                                             President and Chief
                                             Executive Officer

          James M. Grace           53        Vice President and Treasurer
           
          Eugene E. Payne          54        Vice President and Secretary

          Joseph F. Crowe1         58        Vice President

          Roger H. Hamm2           52        Vice President

          Jeffrey H. Demgen3       44        Vice President


          In May 1991, Roy F. Mitte suffered a stroke, resulting in partial
          paralysis affecting his speech and mobility.  Mr. Mitte continues
          to  make  the  requisite  decisions  in  his  capacity  as  Chief
          Executive Officer,  although his  ability to communicate  and his
          mobility are impaired.

          1.   Mr. Crowe retired from active service with the Company as of
               January  3, 1997.  He will continue  to service on the Board
               of Directors.

          2.   Mr.  Hamm resigned as Director  of the Company  as of August
               26,  1996.   His  appointment as  a  Vice President  of  the
               Company was terminated on that date.

          3.   Mr.  Demgen was appointed a Vice President of the Company on
               August 26, 1996.


               (c)  Identification of certain significant employees

          Not Applicable.


               (d)  Family relationships

          Not Applicable.

               (e)  Business experience

          All  of the executive officers of the  Company are members of the
          Board  of  Directors  and  their  business  experience  has  been
          outlined in Item 10(a).

               (f)  Compliance   with  Section  16(a)   of  the  Securities
                    Exchange Act of 1934

          Section 16(a) of the Securities Exchange Act of 1934 requires the
          Company's officers  and directors, and persons who  own more than
          ten  percent of  a  registered  class  of  the  Company's  equity
          securities, to file reports of beneficial ownership on Form 3 and
          changes  in  beneficial  ownership on  Forms  4  and  5 with  the
          Securities  and  Exchange Commission.    Officers,  directors and
          greater  than   ten-percent  shareholders  are  required  by  SEC
          regulation  to furnish  the Company  with copies  of  all Section
          16(a) forms they  file.  Based solely on review  of the copies of
          such forms  furnished to the Company,  or written representations
          that no Forms 5 were required, the  Company believes that for the
          period from January 1, 1996 through December 31, 1996 all Section
          16(a) filing requirements  applicable to its officers,  directors
          and  greater  than  ten-percent beneficial  owners  were complied
          with, except as follows: (i) Jeffrey  H. Demgen filed a Form 5 in
          February,  1997, to report his  appointment as a  Director of the
          Company as of  August 26,1996, and to report beneficial ownership
          of  (a) 198.5076 shares of ILCO common stock through the Employee
          Stock  Purchase Plan made  available to employees  of the Company
          and  2,803 shares of ILCO common stock through the Employee Stock
          Ownership  Plan,  a  non-contributory,  tax-qualified  plan  made
          available to  employees of the  Company; (ii) W.  Lewis Gilcrease
          filed a  Form 5 in  February, 1997, to report  the disposition in
          December,   1996  of  4,420  shares  of   ILCO  common  stock  to
          participants  in a  tax-qualified  retirement plan  for which  he
          served  as  trustee; (iii)  Eugene E.  Payne  filed a  Form  5 in
          February,  1997, to report the purchase in August, 1990, of 1,200
          shares of ILCO common stock which had not  been included in prior
          Form 4 filings; and (iv) Roy F. Mitte filed a Form 5 in February,
          1997, to report the  surrender, in December, 1996, of  options to
          acquire  120,000 shares of ILCO  common stock and  the receipt of
          final payment from the  Company of amounts payable  in connection
          with such cancellation.


          H. Gene  Pruner filed a Form  5 in February, 1997,  to report his
          appointment as a Director  of the Company as  of August 26,  1996
          and to report no beneficial ownership of ILCO common stock.


          Item 11. Executive Compensation

          Summary Compensation Table

          The  following  table  sets  forth  information  concerning   the
          compensation of the Company's Chief Executive Officer and each of
          the  four other persons who were serving as executive officers of
          the Company at  the end  of 1996 and  received cash  compensation
          exceeding $100,000 during 1996.

                             Annual Compensation    
                                                       Long Term
                                                       Compensa-  
                                                       tion
                                                       Awards
       Name and                                        Stock
       Principal                                       Options    All Other
       Position   Year  Salary1   Bonus1       Other2  (Shares)   Compensation
                                                         
          Roy F.
          Mitte,
          Chairman,
          President
          and Chief  1996  $286,643      -0-       -0-       -0-    $2,446,3973
          Executive  1995  $286,643      -0-       -0-       -0-        713,5134
          Officer    1994  $251,750    $576,1595   -0-       -0-      1,376,6636
                                                                   
          James M.                       
          Grace,
          Vice                                     
          President  1996   195,000      15,000    -0-7      -0-        -0-
          and        1995   195,000      10,000    -0-       -0-       -0-
          Treasurer  1994   195,000       2,000    -0-       -0-       -0-
                                                            
          Eugene E.         
          Payne,            
          Vice                                                          
          President  1996   195,000      15,000    -0-8       -0-       -0-
          and        1995   195,000      10,000    -0-        -0-       -0-
          Secretary  1994   195,000       5,000    -0-        -0-       -0-
                                                              
          Joseph F.         
          Crowe,                                                        
          Vice       1996   196,500      15,000    -0-9       -0-       -0-
          Presi-     1995   195,000      10,000    -0-        -0-       -0-
          dent       1994   195,000       5,500    -0-        -0-       -0-
                                                             
          Jeffrey           
          H. Demgen                                    
          Vice                                    
          Presi-
          dent10     1996   102,500       7,500    -0-        -0-       -0-
                                                             

          (1)  The  executive  officers  of  the  Company  have  also  been
          executive officers  of the  Company's insurance  subsidiaries and
          FIC  and  FIC's insurance  subsidiary,  Family  Life.   The  only
          executive officer who has been  paid compensation by Family  Life
          is Mr. Mitte, who  received $216,857 in salary in  1996, $216,857
          in  salary in 1995, and $251,750 in  salary and $538,080 in bonus
          in 1994 from  Family Life, which amounts are not  included in the
          table above.  Family Life reimbursed the Company (or, in the case
          of  Mr. Mitte paid Mr.  Mitte directly) the  following amounts as
          Family   Life's  share   of   these  executive   officers'   cash
          compensation for  1994, 1995  and 1996:   $789,830, $216,857  and
          $216,857, respectively,  for  Mr.  Mitte;  $70,590,  $88,293  and
          $83,987,  respectively,  for  Mr.  Grace; $126,750,  $79,875  and
          $83,987,  respectively,  for  Dr.   Payne;  $68,250,  88,293  and
          $84,633, respectively, for Mr. Crowe; and $46,125 (1996 only) for
          Mr. Demgen.

          (2)  Does not include the value of perquisites and other personal
          benefits because  the aggregate  amount of any  such compensation
          does not exceed the lesser of $50,000 or 10 percent  of the total
          amount of annual salary and bonus for any named individual.

          (3)  During 1996, the Company paid  Mr. Mitte: (i) $1,862,000 for
          the cancellation in 1996 of options to purchase 121,500 shares of
          the Company's common  stock, plus interest at the  rate of 8% per
          year  on  such amount  for  a one  year  period (for  a  total of
          $2,011,737);  (ii)   $120,700   for  the   federal   income   tax
          reimbursement  relating to the cancellation in 1995 of options to
          purchase  50,000 shares of the  Company's common stock; and (iii)
          $313,960 for the federal income tax reimbursement relating to the
          1996 options cancellation described above in this footnote.  Each
          of these payments was  made pursuant to the contract  referred to
          in footnote 4. 

          (4)  In 1989, the Board  of Directors granted Mr. Mitte   options
          to  purchase 600,000  shares (as  adjusted for  the three-for-one
          stock split effective February  15, 1990) of the Common  Stock of
          the Company in  equal annual installments of 150,000 shares each.
          Each  installment was  subject to  the approval  of the  Board of
          Directors and is exercisable for  a period of ten years from  the
          date the options become exercisable at a price of $1.00 per share
          (as  adjusted).     The  Board   of  Directors  voted   to  award
          installments  of 150,000 shares in  each of 1989,  1990, 1991 and
          1992.  In October 1992, Mr.  Mitte surrendered to the Company for
          cancellation options to purchase 120,000 shares.  The Company and
          Mr.  Mitte  entered into  a contract  in  1993 providing  for the
          cancellation  in 1993 of 240,000  options for an aggregate amount
          of $3,237,120  and the  cancellation in  subsequent years  of the
          remaining options  for  an aggregate  amount of  $3,610,240.   In
          addition,  the  Company  agreed  to  pay  Mr.  Mitte  the  amount
          necessary  to ensure that Mr. Mitte will receive the same amount,
          after  federal income  tax, that  he would  have received  if the
          options had been cancelled  in 1992.  During 1995,  Mr. Mitte was
          paid $836,582 for the cancellation in 1995 of options to purchase
          50,000  shares of ILCO's  Common Stock, $156,323  for the federal
          income tax reimbursement  relating to the cancellation in 1994 of
          options  to purchase  68,500  shares and  $127,608  as the  final
          payment  relating  to  the  cancellation in  1993  of  options to
          purchase 240,000 shares.  These option cancellation payments were
          made  pursuant   to  the  contract  referred  to  above.    FIC's
          Compensation Committee  made a  recommendation to FIC's  Board of
          Directors, which it adopted, that, in lieu of  paying Mr. Mitte a
          bonus as  it has in the  past, FIC paid $407,000  of these option
          cancellation  payments to Mr. Mitte, with the balance of $713,513
          being paid by ILCO.

          (5)   The Company's Compensation Committee  made a recommendation
          to the Board of Directors, which the Board adopted, that a  bonus
          be paid to Mr. Mitte to  enable him to pay off the  $650,000 loan
          that the Company had made  to Mr. Mitte in 1989 and  to reimburse
          him for  the amount of federal  income tax payable on  the bonus.
          Since the Company and FIC have usually each  paid one-half of Mr.
          Mitte's cash  compensation, FIC's  Board of Directors,  acting on
          the  recommendation of  its Compensation  Committee, subsequently
          authorized  FIC to  pay  $500,000 of  that  bonus to  Mr.  Mitte.
          Therefore, the Company paid $576,159,  and FIC paid $500,000,  of
          the bonus.

          (6)  During 1994,  the Company  paid Mr.  Mitte $997,520  for the
          cancellation  in 1994 of options to purchase 68,500 shares of the
          Company's Common  Stock and $379,143  for the federal  income tax
          reimbursement  relating to the cancellation in 1993 of options to
          purchase 240,000  shares.    Both of  these  payments  were  made
          pursuant to the contract referred to in footnote (4).
           
                         
          (7)  Mr. Grace exercised stock options in 1996 to purchase 12,000
          shares of  the Company's  Common Stock.   See  "Aggregated Option
          Exercises in 1996" below.

          (8)  Dr. Payne exercised stock options in 1996 to purchase 6,000 
          shares of  the Company's  Common Stock.   See "Aggregated  Option
          Exercises in 1996" below.

          (9) Mr. Crowe exercised  stock options in 1996 to  purchase 8,000
          shares  of the  Company's Common  Stock.  See  "Aggregated Option
          Exercises in 1996" below. 

          (10)  Mr.  Demgen became an executive  officer of the Company  in
          August, 1996.


          Option Grants in 1996

          No  options were granted to any executive officers of the Company
          during the year 1996.



          Aggregated Option Exercises in 1996

          The  following  table  sets  forth  information  concerning  each
          exercise  of stock options during  1996 by each  of the executive
          officers of the Company.

                                   Shares
                                   Acquired            Value
          Name                     On Exercise (#)     Realized ($)

          Joseph F. Crowe           8,000              $ 44,000
          James M. Grace           12,000               119,040

          Eugene E. Payne           6,000                58,020


          Aggregated Stock Option Values

          The  following table sets  forth information with  respect to the
          unexercised  options  held  by  the  executive  officers  of  the
          Company. 

                                                          Value of
                          Number of                      Unexercised
                       Unexercised Options               In-the-Money
                           Held at                        Options at
                        December 31, 1996              December 31, 1996   
          Name      Exercisable Unexercisable     Exercisable Unexercisable


          James M.     
          Grace       42,000       24,000         $ 420,840      $ 244,080

          Eugene E.    
          Payne       26,000       12,000           264,420        122,040

          Joseph F.    
          Crowe       22,000         -0-            104,500          -0-
                       

          (1) Based on  the closing price of the Company's  Common Stock on
          NASDAQ on December 31, 1996 ($13.50).


          Members of Compensation Committee

          W. Lewis Gilcrease, Donald  Shuman and Richard A. Kosson  are the
          members  of the  Company's  Compensation  Committee, which  makes
          recommendations to  the Board  of Directors  with respect  to the
          Chief Executive Officer's compensation.

          Compensation Committee Interlocks and Insider Participation

          Roy  F.  Mitte  determines  the  compensation  of  all  executive
          officers of  the Company, other than the Chief Executive Officer.
          Mr.  Mitte  is the  Chairman of  the  Board, President  and Chief
          Executive Officer of the Company and FIC.  He also determines the
          compensation of  all executive officers  of FIC,  other than  the
          Chief Executive Officer.

          Pension Plan Table

          The following table sets  forth estimated annual pension benefits
          payable  upon  retirement  at  age  of  65  under  the  Company's
          noncontributory  defined  benefit  plan ("Pension  Plan")  to  an
          employee in the  final pay and  years of service  classifications
          indicated, assuming a straight life annuity form of benefit.  The
          amounts shown in the  table do not reflect the  reduction related
          to Social Security benefits referred to below.
           
           

                                         Years of Service             
                                                              30 or
          Remuneration           15        20        25       more 

          $125,000            $31,250   $41,667   $52,083   $62,500
           150,000             37,500    50,000    62,498    75,000
           175,000             43,750    58,333    72,914    87,500
           200,000             50,000    66,667    83,330   100,000

          The normal  retirement benefit provided under the Pension Plan is
          equal to   1.57%  of final average eligible earnings less   0.65%
          of  the  participant's   Social  Security  covered   compensation
          multiplied by the  number of years of credited  service (up to 30
          years).   The compensation used in determining benefits under the
          Pension Plan is the highest average earnings received in any five
          consecutive full-calendar years during the last ten full-calendar
          years  before the  participant's  retirement date.   The  maximum
          amount of annual salary and bonus that can be used in determining
          benefits under the Pension Plan is $200,000 for any year prior to
          1994 and is $150,000 for 1994 and each subsequent year.

          The  annual eligible  earnings,  for 1996  only,  covered by  the
          Pension  Plan (salary and bonus  up to $150,000)  with respect to
          the individuals  reported in the Summary  Compensation Table were
          as follows, with their respective years of credited service under
          the Pension Plan at December 31, 1996 being shown in parentheses:
          Mr. Mitte, $150,000 (9 years), Mr. Grace, $150,000 (9 years), Dr.
          Payne,  $150,000 (8 years), Mr. Crowe, $150,000 (5 years) and Mr.
          Demgen (4 years).

          Compensation of Directors

          Directors  who are not officers  or employees of  the Company are
          paid a $5,000  annual fee,  and are compensated  $1,000 for  each
          regular or special meeting  of the Board of Directors  which they
          attend in  person.   In the  case of telephonic  meetings of  the
          Board, non-employee directors who participate  in such telephonic
          meetings are  compensated $500 for  such meeting.   Directors who
          participate via telephone in  a regular or special  meeting which
          is held by other than conference telephone are not entitled  to a
          fee for such a meeting.

          Non-employee  directors serving  on committees  of the  Board are
          compensated in the amount of $500 for each committee meeting they
          attend whether  such participation is in person  or by telephone,
          provided that the committee meeting  is held on a day  other than
          that on which the Board meets.
           
          Employment Agreements and Change In Control Arrangements

          The  terms  and  conditions  of employment  agreements  that  the
          Company would  enter into upon  the occurrence of  certain events
          that  result in the agreements taking effect were approved by the
          Board of Directors with respect to Messrs. Grace, Payne and Crowe
          in 1991   Each agreement would include two independent provisions
          with  respect  to  the  effective  date  and  the  term  of  each
          agreement.  First, the term  of the agreement would begin  on the
          earlier of (i) the date of retirement (early, normal or deferred)
          of  Roy F.  Mitte from  his position  as Chairman,  President and
          Chief Executive Officer of the Company or (ii)  the date of death
          or disability  of Mr. Mitte, and would  terminate on the last day
          of  the twelfth month next following the commencement date of the
          term of  the agreement, unless extended  upon mutually acceptable
          terms.

          Independently, the term of the agreement  would commence upon the
          date that any  person who is not currently  a control person with
          respect to the Company  acquires, or enters into an  agreement to
          acquire,  control of  the  Company, directly  or indirectly,  and
          would end on the last day of the twelfth month next following the
          date  on which the employee receives notice of the termination of
          his   employment  with   the  Company   or  the   life  insurance
          subsidiaries of the Company.

          During  the term of the agreement, the employee would be entitled
          to perform all of the duties of the position or positions held by
          the employee with the Company and all subsidiaries of the Company
          on the date  immediately preceding the  commencement date of  the
          agreement.

          During  the term of the agreement, the employee would be entitled
          to  an annual rate  of compensation  which is  not less  than the
          annual  rate of compensation in effect as of the date immediately
          preceding the commencement  date of  the agreement.   During  the
          term  of  the  agreement,  the  employee  would  be  entitled  to
          participate  in and benefit  from all employee  benefit plans and
          other  fringe  benefits  on the  same  basis  as  such plans  and
          benefits are made  available to other executive  personnel of the
          Company.

          The agreement may be  terminated by the Company only in the event
          that the employee  is guilty of theft of property  of the Company
          or commits a  wrongful act  which has a  material adverse  effect
          upon the business  of the Company  and with respect to  which the
          employee  would  not be  entitled  to  indemnification under  the
          provisions of  the Bylaws  of the  Company in  effect  as of  the
          commencement date of  the agreement.  The  employee may terminate
          the agreement  upon  thirty days  advance written  notice to  the
          Company.

          Item 12.  Security Ownership of Certain Beneficial Owners and
                    Management

          The following table presents information as of  March 14, 1997 as
          to  all  persons  who, to  the  knowledge  of  the Company,  were
          beneficial  owners of  five (5%)  percent or  more of  the Common
          Stock of the Company.  
                                             Amount and
                                              Nature of         Percent of
          Name and Address               Beneficial Ownership     Class    

          Financial Industries Corp.
          701 Brazos, Suite 1400
          Austin,  TX   78701.............  3,668,501 1       61.54% 6

          Roy F. Mitte
          701 Brazos, Suite 1400                     
          Austin,  TX   78701.............. 3,723,392  2,3    62.46% 6


          Investors Life Insurance Company 
            of North America
          701 Brazos, Suite 1400
          Austin, TX  78701................   334,960  4       7.86% 6


          InterContinental Life Insurance 
            Company
          701 Brazos, Suite 1400                                       
          Austin, TX 78701.................   281,560  5       6.61% 6   

          Fidelity Management & Research 
          Company
          82 Devonshire Street
          Boston, MA 02109................... 418,300 7        9.82% 6


          1    Includes 1,966,346  shares of the Company's  stock presently
               owned  and an option to  purchase up to  1,702,155 shares of
               the Company's authorized but  unissued Common Stock which is
               the balance  of the  option granted to  Financial Industries
               Corporation ("FIC")  by the Company in December, 1985.  This
               option may  be exercised by FIC  at any time at  an exercise
               price  equal  to the  average  bid prices  of  the Company's
               Common Stock over the six-month period immediately preceding
               such exercise.

          2    As of March 14, 1997, Mr. Mitte owned directly 25,000 shares
               of the Company's stock.    Mr. Mitte, jointly with  his wife
               Joann,  also  owns  1,866,520  common  shares  of  Financial
               Industries Corporation ("FIC") which constitutes 34.39      
               percent of the outstanding common stock of that company, and
               holds  the  position   of  Chairman,  President   and  Chief
               Executive Officer of FIC.

               Since  FIC holds a controlling  interest in the Company, Mr.
               Mitte's personal holdings in  the Company have been combined
               with the  holdings  of FIC  in  determining the  amount  and
               percentage  of  Mr.  Mitte's  beneficial  ownership  of  the
               Company.

          3    Includes  14,611  shares  allocated to  Mr.  Mitte's account
               under the Employee Stock Ownership Plan.

          4    Represents 281,560  shares owned  by ILIC and  53,400 shares
               owned directly  by Investors-NA.   ILIC is a  life insurance
               company subsidiary of Investors-NA.  All of these shares are
               treated as treasury shares.

          5    All are directly owned  by ILIC and are treated  as treasury
               shares.

          6    Assumes that outstanding stock options or warrants available
               to other persons have not been exercised.

          7.   As reported to the Company on a Schedule  13(G) filed by FMR
               Corporation, the  parent  company of  Fidelity Management  &
               Research Company  ("Fidelity").   According to  the Schedule
               13(G), Fidelity  acts as investment advisor  to the Fidelity
               Low-Priced Stock Fund, a  registered investment company, and
               the  Fund  is the  owner of  418,300  shares of  ILCO common
               stock.

          The  following table contains information as of March 14, 1997 as
          to the Common  Stock of  the Company beneficially  owned by  each
          director,  nominee and  executive  officer and  by all  executive
          officers   and  directors  of  the  Company  as  a  group.    The
          information  contained in  the  table has  been  obtained by  the
          Company  from  each director  and  executive  officer except  for
          information known to  the Company.   Except as  indicated in  the
          notes to the table,  each beneficial owner has sole  voting power
          and  sole investment power as  to the shares  listed opposite his
          name.  


                              Amount and Nature of          Percent of
          Name                Beneficial Ownership            Class   


          Joseph F. Crowe 1         38,744 3,4                   *
          Jeffrey H. Demgen          3,001 4                     *

          Theodore A. Fleron        14,366 4,5                   *     
          W. Lewis Gilcrease         -0-
          James M. Grace 1          80,137 2,3,4               1.86%   
          Richard A. Kosson            200                        *
          Roy F. Mitte 1         3,723,292 2,4                62.46%
          Eugene E. Payne 1        54,199 3,4                  1.26%
          H. Gene Pruner             -0-
          Donald Shuman               450                        *
          Steven P. Schmitt        13,041 4,5                    *

          All Executive 
          Officers and 
          Directors as a 
          group, all of 
          whom are listed
          above                 3,912,250 1,2,3,4,5               64   %

          * Less than 1%

          (1)  Is an executive officer  and/or director of FIC which  as of
               March 14,  1997 beneficially  owned 3,668,501 shares  of the
               Company's Common Stock (including option rights to  purchase
               1,702,155  shares  of the  Company).    In  addition to  the
               shareholdings of Mr. Mitte  in FIC (see Note 2,  above), Mr.
               Grace owns 5,600 shares of FIC Common Stock.

          (2)  379,738 shares of the Company's Common Stock are held by the
               Trustees  of the  Company's  Employee  Stock Ownership  Plan
               ("ESOP")  of  which 15,180  shares  are  unallocated to  any
               participant's  account.   Messrs.  Grace and  Mitte are  the
               trustees  of  the ESOP  and are  entitled  to vote  such un-
               allocated shares.   The ESOP participants have the  right to
               direct the  voting of  shares allocated to  their respective
               accounts.  Beneficial ownership of these  unallocated shares
               is disclaimed by Messrs.  Grace and Mitte.  The  same 15,180
               shares are included in  the above table for each  of Messrs.
               Grace and  Mitte as  required for technical  compliance with
               the  definition of  beneficial ownership promulgated  by the
               Securities and Exchange Commission, and are counted once for
               purposes of executive officers and directors as a group.

          (3)  Includes  30,000 shares  issuable upon  exercise of  options
               granted under the Incentive Stock Option Plan during 1987 to
               Mr. Grace at a  price of $3.54  (as adjusted) per share  and
               12,000  shares  issuable upon  exercise  of options  granted
               under the Non-Qualified Stock Option Plan during 1988 to Mr.
               Grace at  a price of $3.33  (as adjusted) per share,  all of
               which are currently available for exercise.  Includes 20,000
               shares issuable  upon exercise of options  granted under the
               Incentive Stock  Option Plan and 6,000  shares issuable upon
               exercise of  options granted  under the  Non-Qualified Stock
               Option Plan during 1988 to Dr. Payne at a price of $3.33 (as
               adjusted) per  share, all  of which are  currently available
               for exercise.  Includes  8,000 shares issuable upon exercise
               of options  granted under the Incentive Stock Option Plan to
               Mr.  Crowe during 1991 at a price  of $8.75 per share, which
               are currently available for exercise.

          (4)  Includes shares beneficially acquired  through participation
               in  the Company's  ESOP and/or  the Employee  Stock Purchase
               Plan, which are group plans for eligible employees.

          (5)  Includes  6,000 shares  issuable  upon  exercise of  options
               granted under  the Non-Qualified  Stock  Option Plan  during
               1988  to each of  Messrs. Fleron and  Schmitt at a  price of
               $3.33  (as   adjusted)  per   share,  which  are   currently
               exercisable.

          Item 13.  Certain Relationships and Related Transactions
                    with Management

          The  obligations  of  the  Company  under  the  Senior  Loan  are
          guaranteed  by FIC.  FIC  presently owns 1,966,346  shares of the
          company's  Common  Stock,  constituting  46.17%  of  such  shares
          outstanding, and holds options to acquire an additional 1,702,155
          shares at the average  bid price of  such shares during the  six-
          month  period preceding  the date of  any such purchase.   In the
          event that such  options were  to be fully  exercised, the  total
          number  of the  Company's shares  owned by  FIC would  constitute
          61.54% of the outstanding shares of the Company's Common Stock.
           
          In May 1989, the Board of  Directors of ILCO granted Roy F. Mitte
          the right  to borrow up to  $650,000 from ILCO to  be used solely
          for the purchase of FIC common stock pursuant to Mr. Mitte's then
          existing options.  A principal purpose of said loan was to enable
          Mr. Mitte to  maintain his  equity position in  FIC, as  required
          under  the  terms of  the  lending  agreements  entered  into  in
          connection with the purchase of the Investors Life Companies (see
          "Acquisition of Investors Life Companies").  Said loan, which was
          exercised on June 1, 1989, carried no interest and was payable in
          five years.   The loan was  paid in full  in 1994.  See  Item 11.
          Executive Compensation.

          When it acquired Austin Centre, Investors-NA leased the  hotel to
          FIC  Realty Services, Inc.  ("FIC Realty"), a  subsidiary of FIC,
          pursuant to which FIC Realty pays monthly rent to Investors-NA in
          an amount equal to 95% of  the net operating profits of the hotel
          for  the preceding month (excess  of all hotel  revenues over all
          hotel  expenses,  including  insurance,  utilities  and  property
          taxes). Any net operating loss for a month is carried forward and
          deducted  from the net operating  profit for the  next month that
          has such a profit.  During 1996 FIC Realty paid  $658,509 of rent
          to Investors-NA pursuant to this lease. FIC Realty  has delegated
          the  management of the hotel to an unrelated third party pursuant
          to  a  management agreement,  but FIC  Realty  bears most  of the
          economic risks in  operating the hotel.  As an  inducement to FIC
          Realty's agreeing to bear those risks, Investors-NA has agreed to
          provide  funds  to pay  expenses in  operating  the hotel  to the
          extent  that the cash flow from such operations is not sufficient
          to do so. This  arrangement was terminated upon  the sale of  the
          Austin Centre in March, 1996.  See Item 2. Properties.

          FIC Realty  conducts the  leasing activities for  the Bridgepoint
          Square properties  owned by  Investors-NA.   In payment for  such
          services, FIC Realty  receives a  commission of 4%  of the  gross
          rent under  each lease which is  negotiated by it.   During 1996,
          Investors-NA paid commissions  in the amount  of $108,811 to  FIC
          Realty. 

          Alcoholic  beverages had been sold  at the hotel  by an unrelated
          third party  pursuant to  a lease  it had  with FIC Realty  until
          September  30, 1994.   Commencing October 1,  1994, all alcoholic
          beverages   sales  have   been   conducted  by   Atrium  Beverage
          Corporation ("Atrium Beverage"), a  new subsidiary of FIC Realty.
          Atrium  Beverage subleases from FIC Realty space in the hotel for
          the storage, service and sale of alcoholic beverages pursuant  to
          which Atrium Beverage pays monthly rent to FIC Realty of $12,500.
          The sublease  provides that  the rent  paid during  each calendar
          year  will  be reduced  to the  extent  necessary to  insure that
          Atrium Beverage's  net operating profit  from alcoholic  beverage
          sales is  not less than 5% of its gross receipts from such sales.
          Atrium Beverage and FIC  Realty are also parties to  a management
          agreement whereby FIC Realty manages  Atrium Beverage's alcoholic
          beverage operations at the hotel  for a monthly fee equal to  28%
          of  the gross  receipts from alcoholic  beverages sales.   During
          1996, Atrium  Beverage paid FIC  Realty rent and  management fees
          totalling $117,998.  All of that amount was included in the hotel
          revenues  of  FIC  Realty for  purposes  of  determining its  net
          operating profits under the hotel lease agreement with Investors-
          NA.

          Investors-NA entered  into  a management  agreement in  September
          1991  with FIC  Property Management,  Inc. ("FIC  Management"), a
          subsidiary of FIC, whereby it appointed FIC Management to manage,
          lease  and operate  the office  tower, retail  areas, underground
          parking garage and common areas of Austin Centre.  FIC Management
          is paid fees in an amount equal to 5% of the net operating profit
          that Investors-NA receives from the properties managed and leased
          by FIC Management.
          During 1996, Investors-NA  paid $33,027 of fees to FIC Management
          under this  agreement. This  arrangement was terminated  upon the
          sale  of  the  Austin  Centre  in  March,  1996.    See  Item  2.
          Properties.

          As  part of  the  financing arrangement  for  the acquisition  of
          Family Life Insurance Company, Family Life Corporation ("FLC"), a
          subsidiary of  FIC, entered into  a senior  loan agreement  under
          which $50  million was provided by a group of banks.  The balance
          of the  financing consisted  of a  $30 million subordinated  note
          issued by  FLC to Merrill  Lynch Insurance Group,  Ins. ("Merrill
          Lynch")  and $14 million  borrowed by  another subsidiary  of FIC
          from  an affiliate  of Merrill  Lynch and  evidenced by  a senior
          subordinated  note in the principal  amount of $12  million and a
          junior subordinated  note in the  principal amount of  $2 million
          and $25 million  lent by  two insurance  company subsidiaries  of
          ILCO. The latter amount  was represented by a $22.5  million loan
          from Investors-NA  to  FLC  and  a  $2.5  million  loan  provided
          directly to FIC  by Investors-CA.   In addition  to the  interest
          provided under  those loans,  Investors-NA and  Investors-CA were
          granted  by  FIC non-transferable  options  to  purchase, in  the
          amounts proportionate to their respective loans, up to a total of
          9.9 percent of shares of FIC's  common stock at a price of $10.50
          per  share ($2.10  per shares  as adjusted  for the  five-for-one
          stock split in  November, 1996), equivalent  to the then  current
          market price,  subject to adjustment  to prevent  dilution.   The
          original provisions of the  options provided for their expiration
          on  June 12, 1998 if not previously exercised. In connection with
          the  1996  amendments to  the  subordinated  notes, as  described
          below,  the  expiration  date  of the  options  were  extended to
          September 12, 2006.

          On July 30,  1993, the subordinated indebtedness  owed to Merrill
          Lynch  and its  affiliate  was prepaid.    The Company  paid  $38
          million plus  accrued interest to retire  the indebtedness, which
          had  a principal balance of approximately $50 million on July 30,
          1993.

          The primary source of  the funds used to prepay  the subordinated
          debt was new subordinated loans totalling $34.5 million that  FLC
          and another  subsidiary of FIC  obtained from Investors-NA.   The
          principal  amount of the new subordinated debt is payable in four
          equal  annual installments in 2000, 2001, 2002 and 2003 and bears
          interest  at an annual rate  of 9%.   The other terms  of the new
          debt are substantially  the same  as those of  the $22.5  million
          subordinated loans  that Investors-NA had previously  made to FLC
          and that continue to be outstanding.

          As of June 12, 1996, the  provisions of the notes from Investors-
          NA to FIC, FLC and FLIIC  were modified as follows: (a) the $22.5
          million  note  was  amended   to  provide  for  twenty  quarterly
          principal payments, in the amount of $1,125,000 each, to commence
          on December  12, 1996; the  final quarterly principal  payment is
          due on September 12, 2001; the  interest rate on the note remains
          at 11%, (b) the $30 million note was amended to provide for forty
          quarterly principal payments, in the  amount of $163,540 each for
          the  period December 12,  1996 to  September 12,  2001; beginning
          with the principal payment  due on December 12, 2001,  the amount
          of the  principal payment  increases to  $1,336,458;   the  final
          quarterly principal  payment is  due on  September 12,  2006; the
          interest  rate on the  note remains at  9%, (c)  the $4.5 million
          note  was  amended  to  provide  for  forty  quarterly  principal
          payments, in the amount  of $24,531 each for the  period December
          12,  1996 to  September 12,  2001; beginning  with  the principal
          payment due on  December 12,  2001, the amount  of the  principal
          payment  increases to  $200,469;   the final  quarterly principal
          payment is due on  September 12, 2006;  the interest rate on  the
          note remains  at 9%,  (d) the  $2.5 million note  was amended  to
          provide that the principal balance of the note is to be repaid in
          twenty   quarterly  installments  of  $125,000  each,  commencing
          December 12, 1996  with the  final payment due  on September  12,
          2001; the rate  of interest remains  at 12%, (e)  the Master  PIK
          note,  which was  issued to  provide for the  payment in  kind of
          interest due under  the terms of the  $2.5 million note  prior to
          June  12, 1996, was amended to provide that the principal balance
          of  the note  ($1,977,119)  is to  be  paid in  twenty  quarterly
          principal payments, in the amount of $98,855.95 each, to commence
          December 12, 1996  with the  final payment due  on September  12,
          2001; the interest rate on the note remains at 12%.

          The Company believes that this restructuring of subordinated debt
          should  enhance the value of the loans that Investors-NA has made
          to  FIC's subsidiaries and the options it holds to purchase FIC's
          stock.

          The Company  reimbursed FIC for rental expenses and certain other
          operating expenses incurred during 1996 on behalf of the Company.
          The amount of such reimbursement was approximately $305,000.

          Pursuant  to a  data processing  agreement  with a  major service
          company, the data  processing needs of ILCO's and FIC's insurance
          subsidiaries were  provided at a central  location until November
          30,  1994.    Commencing December  1,  1994,  all  of those  data
          processing needs  are provided to ILCO's and  FIC's Austin, Texas
          and Seattle, Washington facilities by FIC Computer Services, Inc.
          ("FIC Computer"),  a new  subsidiary of FIC.   Each of  FIC's and
          ILCO's insurance subsidiaries has  entered into a data processing
          agreement with  FIC Computer  whereby FIC Computer  provides data
          processing services  to each  subsidiary for fees  equal to  such
          subsidiary's proportionate share of  FIC Computer's actual  costs
          of  providing those  services to  all of  the subsidiaries.   The
          Company's insurance subsidiaries paid  $2,243,234 and Family Life
          paid  $1,055,639 to  FIC  Computer for  data processing  services
          provided during December 1996.

          In 1995,  Investors-NA entered into a  reinsurance agreement with
          Family  Life pertaining  to universal  life insurance  written by
          Family  Life.   The reinsurance  agreement  is on  a co-insurance
          basis and applies to all covered business with effective dates on
          and after  January 1, 1995.   The agreement applies  to only that
          portion  of the  face amount  of  the policy  which is  less than
          $200,000;  face  amounts of  $200,000  or more  are  reinsured by
          Family Life with a third party reinsurer.  

          In 1996,  Investors-NA entered into a  reinsurance agreement with
          Family Life,  pertaining to  annuity contracts written  by Family
          Life.  The agreement  applies to  contracts  written on  or after
          January 1, 1996. 

          Roy  F. Mitte serves  as Chairman, President  and Chief Executive

          Officer  of both  FIC and ILCO.   James  M. Grace  serves as Vice
          President, Treasurer and Director of both companies and Secretary
          of  FIC; Dr. Payne serves as Vice  President and Director of both
          companies and Secretary of ILCO; Messrs.  Demgen and Fleron serve
          as Vice Presidents and Directors of both companies; and Mr. Crowe
          serves  as a Director of both companies and, until his retirement
          in January, 1997, served  as a Vice President of  both companies.
          Mr.  Roy  Mitte  holds  beneficial ownership  of  34.39%  of  the
          outstanding  shares of  FIC (see  "Security Ownership  of Certain
          Beneficial Owners and Management").

                                       Part IV

          Item 14.  Exhibits, Financial Statements, Schedules, and
                    Reports on Form 8-K

          (a)  The  following documents  have been  filed as  part  of this
               Report.

          1.   Financial Statements as identified in Item 8 above.

          2.   Financial Statement Schedules  Required to be filed  by
               Item 8.

               a.   Schedule I-Summary of Investments  other than
                    Investments in Related Parties.
               b.   Schedule  II-Amounts Receivable  from Related
                    Parties,    Underwriters,    Promoters    and
                    Employees other than Related Parties.
               c.   Schedule  III-Condensed Financial  Statements
                    of Registrant.
               d.   Schedule VI-Reinsurance Ceded and Assumed.

          3.   Exhibits filed with this  report or incorporated herein
               by  reference are as listed in the Index to Exhibits on
               page E-1.

               (b)  Reports on Form 8-K:

                    No reports on Form  8-K were filed during the
                    last  quarter  of   the  fiscal  year   ended
                    December 31, 1996.


                                      SIGNATURES

          Pursuant  to the  requirements of  Section 13  or 15  (d)  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.

                          InterContinental Life Corporation
                                     (Registrant)

          By:  /s/ Roy F. Mitte              By:/s/ James M. Grace         
               Roy F. Mitte, Chairman of        James M. Grace, Treasurer,
               the Board, President and         Principal Accounting
               Chief Executive Officer          and Financial Officer

          Pursuant to the  requirements of the  Securities Exchange Act  of
          1934,  this report has been signed below by the following persons
          on  behalf of the Registrant  and in the  capacities indicated on
          March 27, 1997.

          /s/ Roy F. Mitte              
          Roy F. Mitte, Director

          /s/ James M. Grace                              
          James M. Grace, Director

          /s/ Eugene E. Payne                           
          Eugene E. Payne, Director

          /s/ Joseph F. Crowe              
          Joseph F. Crowe, Director

          /s/ Theodore A. Fleron        
          Theodore A. Fleron, Director

          /s/ H. Gene Pruner             
          H. Gene Pruner, Director

          /s/ Jeffrey H. Demgen                                               __
          Jeffrey H. Demgen, Director

          /s/ Steven P. Schmitt         
          Steven P. Schmitt, Director

          /s/ W. Lewis Gilcrease        
          W. Lewis Gilcrease, Director

          /s/ Richard A. Kosson         
          Richard A. Kosson, Director

          /s/ Donald Shuman             
          Donald Shuman, Director


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                          FORM 10-K--ITEM 14 (a)(1) and (2)
                             LIST OF FINANCIAL STATEMENTS
                                  TABLE OF CONTENTS



          The    following    consolidated    financial    statements    of
          InterContinental Life Corporation  and Subsidiaries are  included
          in Item 8:

          Report of Independent Accountants.............................F-2

          Consolidated Balance Sheets, December 31, 1996 and 1995.......F-3

          Consolidated Statements of Income, for the years ended
           December 31, 1996, 1995 and 1994.............................F-5

          Consolidated Statements of Changes in Shareholders' Equity,
           for the years ended December 31, 1996, 1995 and 1994.........F-6

          Consolidated Statements of Cash Flows, for the years ended
           December 31, 1996, 1995 and 1994.............................F-9

          Notes to Consolidated Financial 

          Statements...................................................F-12

          The following consolidated financial statement schedules of      
          InterContinental Life Corporation and Subsidiaries are included:

          Schedule I   - Summary of Investments Other Than Investments in  
           Related   Parties.............................................F-
          42

          Schedule II  - Amounts Receivable From Related Parties and
           Underwriters, Promoters, and Employees Other Than Related       

          Parties......................................................F-43

          Schedule III - Condensed Financial Statements of                 

          Registrant...................................................F-45

          Schedule      VI           -      Reinsurance      Ceded      and
          Assumed..................F-49


          All other schedules for which provision is made in the applicable
          accounting regulations of the Securities  and Exchange Commission
          are  not required  under  the  related  instructions or  are  not
          applicable, and therefore have been omitted. 


                          REPORT OF INDEPENDENT ACCOUNTANTS



          To the Board of Directors and Shareholders of
          InterContinental Life Corporation



          In our  opinion, the consolidated financial  statements listed in
          the  index  appearing under  Item 14(a)(1)  and  (2) on  page F-1
          present fairly, in all  material respects, the financial position
          of  InterContinental Life  Corporation and its  subsidiaries (the
          Company) at December  31, 1996 and 1995, and the results of their
          operations and  their cash flows for  each of the three  years in
          the period ended December 31,  1996, in conformity with generally
          accepted accounting  principles.  These financial  statements are
          the   responsibility    of   the   Company's    management;   our
          responsibility  is  to  express  an opinion  on  these  financial
          statements based on our audits.  We conducted our audits of these
          statements  in   accordance  with  generally   accepted  auditing
          standards which require  that we  plan and perform  the audit  to
          obtain   reasonable   assurance  about   whether   the  financial
          statements are  free of material misstatement.  An audit includes
          examining, on a  test basis, evidence supporting  the amounts and
          disclosures in the financial statements, assessing the accounting
          principles used and significant estimates made by management, and
          evaluating  the  overall financial  statement  presentation.   We
          believe that  our  audits  provide a  reasonable  basis  for  the
          opinion expressed above.


          Price Waterhouse LLP
          Dallas, Texas
          March 25, 1997


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS
                              (in thousands of dollars)
                                                          December 31,
                 ASSETS                                1996        1995   

          Investments:
           Fixed maturities, at
             amortized cost (market value
             approximates $8,374 and $14,277)       $    8,165  $   14,420
           Fixed maturities available for sale,
             at market value (amortized cost
             $451,550 and $463,701)                    453,896     483,606
           Equity securities, at market value
            (cost approximates $373 and $368)            2,304       1,559
           Policy loans                                 53,030      53,656
           Mortgage loans                               13,494      14,836
           Invested real estate and other invested
             assets                                     38,696      15,467
           Short-term investments                       91,556      85,994
               Total investments                       661,141     669,538 

          Cash and cash equivalents                      3,313       6,537

          Notes receivable from affiliates              59,940      61,224

          Accrued investment income                      7,807       8,190

          Agent advances and other receivables          21,725      16,591

          Reinsurance receivables                       12,123      14,474

          Property and equipment, net                    1,785       4,460

          Real estate occupied by the Company, net         -0-      36,169

          Deferred policy acquisition costs             26,938      24,926

          Present value of future profits of
           acquired businesses                          45,240      48,606

          Deferred financing costs                         636       1,597

          Other assets                                   8,965       6,859

          Separate account assets                      414,329     416,122

               Total Assets                         $1,263,942  $1,315,293


                  The accompanying notes are an integral part of the
                          consolidated financial statements.

                 INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS, Continued
                              (in thousands of dollars)
                                                          December 31,
          LIABILITIES AND SHAREHOLDERS' EQUITY         1996        1995   

          Liabilities:
          Policy liabilities and contractholder
           deposit funds:
          Future policy benefits                    $  119,744  $  128,265
          Contractholder deposit funds                 538,505     544,621
          Unearned premiums                              9,069      10,669
          Other policy claims and benefits payable       5,988       6,125
                                                       673,306     689,680
          Other policyholders' funds                     2,720       2,700
          Senior loans                                  24,944      59,385
          Deferred federal income taxes                 23,692      25,462
          Other liabilities                             13,835      27,105
          Separate account liabilities                 412,084     413,876
            Total Liabilities                        1,150,581   1,218,208

          Commitments and Contingencies
          (Note 13)             

          Redeemable preferred stock:
          Class A Preferred, $1 par value,
           5,000,000 shares authorized, issued           5,000       5,000
          Class B Preferred, $1 par value,
           15,000,000 shares authorized, issued         15,000      15,000
          Redeemable Preferred Stock held               20,000      20,000
           in treasury                                 (20,000)    (20,000)
                                                           -0-         -0-
          Shareholders' Equity:

          Common stock, $.22 par value,
           10,000,000 shares authorized;
           5,223,739 and 5,166,239 shares issued,
           4,232,829 and 4,175,329 shares out-
           standing in 1996 and 1995, respectively       1,150       1,137
          Additional paid-in capital                     3,752       3,521
          Net unrealized appreciation of
           equity securities                             1,255         748
          Net unrealized gain on investments
           in fixed maturities available for sale        1,525      12,938
          Retained earnings                            108,697      81,759
          Common treasury stock, at cost,              116,379     100,103
           990,910 shares                               (3,018)     (3,018)
          Total shareholders' equity                   113,361      97,085
          Total Liabilities and Shareholders'
           Equity                                   $1,263,942  $1,315,293
                 The accompanying notes are an integral part of the 
                         consolidated financial statements. 


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF INCOME
                              (in thousands of dollars)
                             (except for per share data)
                                                 Year Ended December 31,
                                                1996      1995      1994  

          Revenues:
          Premiums                            $  9,980  $ 11,694  $ 14,317
          Net investment income                 59,836    64,781    57,553
          Earned insurance charges              42,238    42,324    39,370
          Gain on sale of real estate           23,520       -0-       -0-
          Other                                  2,670     3,591     3,602
                                               138,244   122,390   114,842
          Benefits and expenses:
          Policyholder benefits and expenses    40,091    42,639    41,243
          Interest expense on contractholder
           deposit funds                        32,068    32,375    29,592
          Amortization of present value of
           future profits of acquired
           businesses                            3,366     6,211     5,393
          Amortization of deferred policy
           acquisition costs                     2,574     3,929     4,116
          Operating expenses                    15,884    15,016    13,574
          Interest expense                       2,820     5,737     5,224
                                                96,801   105,907    99,142

          Income from operations                41,443    16,483    15,700

          Provision for federal income taxes:
           Current                              10,227       945      (465)
           Deferred                              4,278     4,824     6,248
                                                14,505     5,769     5,783

          Net Income                          $ 26,938  $ 10,714  $  9,917

                                             
          Net income per share (Note 14):                

          Common stock and common stock
           equivalents                           5,380     5,389     5,378

          Net income per share available to
           common shareholders                  $ 5.12    $ 2.11    $ 1.93


                  The accompanying notes are an integral part of the
                          consolidated financial statements.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                              (in thousands of dollars)

                                                               Additional
                                        Common Stock           Paid-in
                                     Shares       Amount       Capital   
          Balance at December 31,
            1993                      5,102       $1,123        $2,786
          Net income
           Change in net unrealized
            appreciation of equity
            securities
           Change in net unrealized
            loss on investments
            in fixed maturities
            available for sale
           Options exercised              5            1            68

          Balance at December 31,
            1994                      5,107        1,124         2,854
           Net Income
           Change in net unrealized
            appreciation of equity
            securities
           Change in net unrealized
            loss on investments
            in fixed maturities
            available for sale
           Options exercised             59           13           667

          Balance at December 31,
            1995                      5,166        1,137         3,521   
           Net Income
           Change in net unrealized
            appreciation of equity
            securities
           Change in net unrealized
            gain on investments 
            in fixed maturities
            available for sale
          Options exercised              58           13           231
            
          Balance at December 31,
            1996                      5,224       $1,150        $3,752




                 The accompanying notes are an integral part of these
                          consolidated financial statements.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                              (in thousands of dollars)
                                                  Net
                                                  Unrealized
                                                  Gain (Loss)
                                                  on Invest-
                                     Net          ments in
                                     Unrealized   Fixed
                                     Appreciation Maturities
                                     of Equity    Available    Retained
          Balance at December 31,    Securities   For Sale     Earnings 
            1993                     $   945      $  6,323     $ 61,128
           Net income                                             9,917
           Change in net unrealized
            appreciation of equity
            securities                  (377)
           Change in net unrealized
            loss on investments 
            in fixed maturities
            available for sale                     (26,589)            
            Options exercised                                          

          Balance at December 31,
            1994                         568       (20,266)      71,045 
           Net Income                                            10,714
           Change in net unrealized
            appreciation of equity
            securities                   180
           Change in net unrealized
            loss on investments 
            in fixed maturities
            available for sale                      33,204
           Options exercised                                            

          Balance at December 31,
            1995                         748        12,938       81,759
           Net Income                                            26,938
           Change in net unrealized
            appreciation of equity
            securities                   507
           Change in net unrealized
            gain on investments 
            in fixed maturities
            available for sale                     (11,413)
           Options exercised                                           
            
          Balance at December 31,
            1996                     $ 1,255      $  1,525     $108,697

                 The accompanying notes are an integral part of the 
                          consolidated financial statements.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                              (in thousands of dollars)
                                                  
                                     Common       Total
                                     Treasury     Shareholders
                                     Stock        'Equity   
          Balance at December 31,
            1993                     $ (3,018)    $ 69,287
          Net income                                 9,917
           Change in net unrealized                  
            appreciation of equity
            securities                                (377)
           Change in net unrealized                   
            loss on investments 
            in fixed maturities
            available for sale                     (26,589)
           Options exercised                            69

          Balance at December 31,
            1994                       (3,018)      52,307
           Net Income                               10,714
           Change in net unrealized
            appreciation of equity
            securities                                 180
           Change in net unrealized
            loss on investments 
            in fixed maturities
            available for sale                      33,204
           Options exercised                           680

          Balance at December 31,
            1995                       (3,018)      97,085
           Net Income                               26,938
           Change in net unrealized
            appreciation of equity
            securities                                 507
           Change in net unrealized
            gain on investments 
            in fixed maturities
            available for sale                     (11,413)
           Options exercised                           244
            
          Balance at December 31,
            1996                     $ (3,018)    $113,361


                 The accompanying notes are an integral part of the 
                          consolidated financial statements.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands of dollars)

                                                 Year Ended December 31,
           
          CASH FLOWS FROM OPERATING             1996      1995      1994  
           ACTIVITIES

          Net Income                          $ 26,938  $ 10,714  $  9,917

           Adjustments to reconcile net
           income to net cash (used in)      
           provided by operating activities:
          Amortization of present value of
           future profits of acquired                     
           businesses                            3,366     6,211     5,393
          Amortization of deferred policy
           acquisition costs                     2,572     3,929     4,116
          Depreciation                           1,356     2,610       268
          Net gain on sales of investments     (23,394)     (418)     (695)
          Financing costs amortized                961       865     1,411 
          Amortization of deferred gain on
           sale of real estate                    (110)     (110)     (151)

          Changes in assets and liabilities:

          Decrease (increase) in accrued     
           investment income                       383     1,759      (698)
          (Increase) decrease in agent
           advances and  other receivables      (2,783)    4,656    (2,467)
          Policy acquisition costs deferred     (4,584)   (3,573)   (3,597)
          Decrease in policy liabilities 
           and contractholder deposit funds    (16,374)  (27,753)  (17,685)
          Increase (decrease) in other policy
           holders' funds                           20      (349)       78 
          (Decrease) increase in other 
           liabilities                         (13,270)      911      (707)
          (Decrease) increase in deferred 
           federal income taxes                 (1,770)    4,696    (8,124)
          (Increase) decrease in other assets   (2,106)    7,527    (1,037)
          Other, net                             5,331    (1,388)   (1,371)
          Net cash (used in) provided by 
           operating activities                (23,464)   10,287   (15,349)


                 The accompanying notes are an integral part of the 
                          consolidated financial statements.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands of dollars)


                                                 Year Ended December 31,
           
          CASH FLOWS FROM INVESTING              1996      1995     1994  
          ACTIVITIES


          Purchase of insurance subsidiary         -0-   (17,492)      -0-
          Investments purchased               (55,395)   (38,781) (130,710)
          Proceeds from sales and maturities
           of investments                     112,791     50,181    97,019
          Net change in short-term 
           investments                         (5,562)     8,847    68,505
          Purchases & retirements of
           equipment                            1,319     (4,403)     (655)
          Notes receivable from affiliates      1,284       (465)     (413)
          Net cash provided by (used in) 
           investing activities                54,437     (2,113)   33,746


          CASH FLOWS FROM FINANCING 
          ACTIVITIES

          Issuance of common stock                244        -0-       -0-
          Issuance of senior loan                 -0-     15,000       -0-
          Repayment of debt                   (34,441)   (22,200)  (17,415)
          Net cash used in financing 
           activities                         (34,197)    (7,200)  (17,415)
          Net (decrease) increase in cash 
           and cash equivalents                (3,224)       974       982
          Cash and cash equivalents, 
           beginning of year                    6,537      5,563     4,581

          Cash and cash equivalents, 
           end of year                        $ 3,313   $  6,537  $  5,563



                 The accompanying notes are an integral part of the 
                          consolidated financial statements.



                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands of dollars)


          Supplemental Cash Flow Disclosures:
                                                Year Ended December 31,
                                            1996          1995     1994


          Income taxes paid            $  13,567       $  560      2,675  
          

          Interest  paid               $   3,377       $5,905    $ 4,733
          


          Supplemental Schedule of Non-Cash Investing Activities:

          The  Company purchased  the outstanding  capital stock of  a life
          insurer in the first quarter of 1995 for a cash purchase price of
          $17.1 million net  of post  closing adjustments.   This  purchase
          resulted in  the Company  receiving tangible assets  and assuming
          liabilities as follows:

               Assets                             $99,642,000
               Liabilities                        $90,816,000


                 The accompanying notes are an integral part of the 
                          consolidated financial statements.

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          1. Organization and Summary of Significant Accounting Policies

          Organization

          InterContinental  Life  Corporation (ILCO  or  the "Company")  is
          principally  engaged, through its  subsidiaries, in administering
          existing  portfolios of  individual  and  group  life  insurance,
          credit  life  and  disability  insurance  policies   and  annuity
          products.  The Company's  insurance subsidiaries are also engaged
          in  the business  of marketing  and underwriting  individual life
          insurance,  credit  life  and disability  insurance  and  annuity
          products  in  49  states and  the  District  of  Columbia.   Such
          products  are marketed through independent, non-exclusive general
          agents.  The Company also  administers an in-force book of health
          insurance business.

          Principles of Consolidation

          The consolidated  financial statements  include  the accounts  of
          InterContinental  Life  Corporation and  its  subsidiaries.   All
          significant  intercompany  accounts  and  transactions  have been
          eliminated. 

          Basis of Presentation

          The financial  statements have  been prepared in  conformity with
          generally  accepted  accounting  principles  which   differ  from
          statutory   accounting   principles   required    by   regulatory
          authorities   for   the    Company's   insurance    subsidiaries.
          Significant accounting policies followed by the Company are:

          Investments

          The  Company's general  investment  philosophy is  to hold  fixed
          maturity securities  until maturity.   However, fixed  maturities
          may be sold  prior to the maturity dates in  response to changing
          market  conditions, duration  of liabilities,  liquidity factors,
          interest   rate   movements   and   other   investment   factors.
          Accordingly, most  fixed maturity  investments are  classified as
          available for  sale and are carried  at market value.   All other
          fixed  maturities are carried at  the lower of  amortized cost or
          net realizable  value as management  has the positive  intent and
          the Company has the ability to hold such investments to maturity.
          Unrealized gains and losses on securities available for  sale are
          not recognized  in  earnings  but  are  reported  as  a  separate
          component of equity, net of the income tax effect.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Premiums  and  discounts on  collateralized  mortgage obligations
          (CMOs) are amortized over the estimated redemption period as
          opposed   to  the  stated  maturities.    An  adjustment  to  the
          investment  and investment  income is  booked on  a retrospective
          basis to reflect  the amounts that would have existed had the new
          effective yield been applied since the acquisition of the CMOs.

          Equity securities  are carried at market value.  Unrealized gains
          and losses on equity securities, net of deferred income taxes, if
          applicable,  are  reflected  directly  in  shareholders'  equity.
          Mortgage loans and policy loans are recorded at  unpaid balances.
          Real  estate is  carried at  cost less  accumulated depreciation,
          which is generally calculated using the straight-line method over
          20  to 40 years.  Accumulated depreciation on investments in real
          estate is  $5,788,424  and $5,021,082  at December  31, 1996  and
          1995, respectively.  Short-term  investments are carried at cost,
          which approximates  market value, and generally  consist of those
          fixed maturities  and other investments  that are intended  to be
          held less than one year from the date of purchase.

          Investments in real  estate are carried at cost  less accumulated
          depreciation.   Interest  is  capitalized on  funds expended  for
          construction  of facilities  for the  Company's own  use and  for
          facilities intended for sale or lease.  Interest cost capitalized
          and included as a component of the historical cost of  the assets
          was  approximately $620,000  in  1996.    No  interest  cost  was
          capitalized in 1995 and 1994.

          Realized gains and losses on disposal of investments are included
          in net income.  The cost of investments sold is determined on the
          specific identification  basis, except for equity securities, for
          which  the  first-in, first-out  method  is  employed.   When  an
          impairment of the value of an investment is considered other than
          temporary, the decrease  in value is reported in net  income as a
          realized investment loss and a new cost basis is established.    

          Cash and Cash Equivalents

          Short-term investments with maturities of three months or less at
          the time of purchase are reported as cash equivalents.

          Property and Equipment and Home Office Real Estate

          Net income for 1996 includes $23.5 million (before federal income
          tax) resulting from the sale during  the first quarter of 1996 of
          the  Austin Centre,  a hotel/office  complex, located  in Austin,
          Texas, which serves as  the Company's home office building.   The
          selling  price was  $62.672 million,  less $1  million paid  to a
          capital  reserve account  for the  purchaser.   The  property was


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          purchased in  1991 for $31.275  million.   The book value  of the
          property, $36.8 million,  net of  improvements and  amortization,
          was retained  and reinvested by the Company.   The balance of the
          proceeds  of the  sale, net  of federal income  tax, was  used to
          reduce the Company's senior loan obligations by $15 million.  The
          sale closed on  March 29, 1996.  The Company  continues to occupy
          space in the building under the terms of an operating lease which
          expires in September 1997.

          Property and equipment and  home office real estate is  stated at
          cost  less accumulated depreciation.   Depreciation is calculated
          using straight-line and accelerated methods over estimated useful
          lives  of 10 to  33 years for  buildings and  improvements and 10
          years for furniture  and equipment.  Maintenance  and repairs are
          charged to  expense when incurred.   Accumulated depreciation for
          property and equipment and home office real estate was $4,364,064
          and $8,984,287 at December 31, 1996 and 1995, respectively.

          Deferred Acquisition Costs

          The cost of acquiring new and renewal business, principally first
          year commissions and  certain expenses of the policy issuance and
          underwriting  departments,  which  vary  with and  are  primarily
          related  to the production of new and renewal business, have been
          deferred to the extent recoverable.  Acquisition costs related to
          universal life products are  deferred and amortized in proportion
          to the ratio of estimated annual gross profits to total estimated
          gross  profits   over  the  expected  lives   of  the  contracts.
          Acquisition  costs related to traditional life insurance business
          are  deferred and amortized over the premium paying period of the
          related policies.

          Present Value of Future Profits 

          The present  value of future profits of acquired traditional life
          business  is amortized  over  the premium  paying  period of  the
          related policies in proportion to the ratio of the annual premium
          revenue to  total anticipated premium revenue  applicable to such
          policies.   Interest on  the unamortized balance  is accreted  at
          rates from 8.5% to 9%.

          For  interest-sensitive products,  these costs  are amortized  in
          relation  to  the  present  value,  using  the  current  credited
          interest rate, of expected gross profits of the policies over the
          anticipated coverage period.

          Retrospective adjustments of these  amounts are made periodically
          upon the revision of estimates of current or future gross profits
          on  universal life-type products to  be realized from  a group of


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          policies.  Recoverability of  present value of future  profits is
          evaluated  periodically  by  comparing  the current  estimate  of
          future profits to the unamortized asset balances.

          Anticipated  investment  returns,  including realized  gains  and
          losses,  from   the  investment  of   policyholder  balances  are
          considered in  determining the  amortization of present  value of
          future profits acquired.

          Deferred Financing Costs

          Financing costs  associated with  the Company's Senior  Loan have
          been deferred and  are being amortized over the borrowing periods
          using the interest method.

          Separate Accounts

          Separate account assets, carried at market value, and liabilities
          represent   policyholder  funds  maintained  in  accounts  having
          specific investment objectives.  The net investment income, gains
          and losses  of these accounts, less  applicable contract charges,
          generally  accrue  directly  to  the policyholders  and  are  not
          included in the Company's statement of income. 


          Solvency Laws Assessments

          The  solvency  or  guaranty laws  of  most  states  in which  the
          Company's  insurance  subsidiaries do  business  may require  the
          Company's  insurance  subsidiaries  to  pay  assessments  (up  to
          certain  prescribed   limits)  to  fund  policyholder  losses  or
          liabilities of insurance companies  that become insolvent.  These
          assessments may be deferred or forgiven under  most guaranty laws
          if they would  threaten an insurer's  financial strength and,  in
          certain instances,  may be  offset against future  premium taxes.
          The Company's  insurance  subsidiaries  record  the  expense  for
          guaranty fund assessment from  states which do not  allow premium
          tax  offsets in  the  period assessed.   The  Company's insurance
          subsidiaries recorded expenses of $100,165, $241,692 and $192,371
          in  the   years  ended   December  31,   1996,  1995  and   1994,
          respectively, as a result of such assessments.

          Policy Liabilities and Contractholder Deposit Funds

          Liabilities  for future  policy benefits  related  to traditional
          life  products are computed using the net level premium method or
          an  equivalent   actuarial  method.     Assumptions   for  future
          investment  yields   are   incorporated  in   these   liabilities
          (principally 8%  for guaranteed  premium products).   Assumptions


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          for  mortality  and withdrawal,  based  on  industry and  Company
          experience  for  all products,  include  provisions  for possible
          unfavorable deviations.  The liability for future policy benefits
          for traditional life policies is graded to reserves stipulated by
          regulatory  authorities over a 30-year  period or the  end of the
          premium paying period, if less.

          Contractholder deposit funds  are liabilities for  universal life
          and  annuity products.    These liabilities  consist of  deposits
          received from customers and  accumulated net investment income on
          their fund balances, less administrative charges.  Universal life
          fund  balances are  also assessed  mortality  charges.   The cash
          value benefit  for these  products is  based on actual  crediting
          rates, which are lower than assumed investment yields.

          Liabilities for future policy benefits  related to non-cancelable
          and  guaranteed  renewable  accident  and  health  contracts  are
          computed based  on industry and Company  experience and estimated
          future investment yields  ranging from  4 1/2% to  6%.   Unearned
          premium  reserves  for  credit   life  and  accident  and  health
          contracts are computed on  either the sum-of-the-year's digits or
          pro rata methods depending upon the type of coverage.



          Other Policy Claims and Benefits Payable 

          The  liability  for  other  policy claims  and  benefits  payable
          represents  management's  estimate unpaid  losses  on claims  and
          other  miscellaneous  liabilities  to  policyholders  reduced  by
          amounts anticipated to be  recovered from reinsurance.  Estimated
          unpaid  losses on claims are  comprised of losses  on claims that
          have been  reported  but not  yet  paid, including  estimates  of
          additional development  of initial claims  estimates, and  claims
          that  have been  incurred  but not  yet  reported (IBNR)  to  the
          Company. 

          The liability  for other policy  claims and  benefits payable  is
          subject to the impact of changes in claim severity, frequency and
          other  factors.    Although  there  is  considerable  variability
          inherent  in   such  estimates,  management   believes  that  the
          liability recorded is adequate.

          Revenue Recognition

          Premiums on  traditional life and health  products are recognized
          as revenue over the premium paying period when due.   Credit life
          and health  insurance premiums  are recognized over  the contract
          period on a  pro rata basis,  or the sum  of years digits  basis.

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Benefits and expenses are associated with  earned premiums, so as
          to  result  in  recognition of  profits  over  the  lives of  the
          contracts.

          Proceeds  from  investment-related  products and  universal  life
          products are recorded as liabilities when received.  Revenues for
          investment-related  products consist of contract charges assessed
          against  the  deposit  fund  values and  net  investment  income.
          Related benefit expenses  primarily consist of interest  credited
          to the fund  values after  deductions for  investment and  policy
          charges.   Revenues for universal  life products  consist of  net
          investment  income, mortality and  administration charges against
          deposits and  fund values and surrender  charges assessed against
          the fund values.  Related benefit expenses include universal life
          benefit  claims in excess of fund values and interest credited to
          universal life fund values.

          Net Income Per Share

          Net income per  share is based on the  weighted average number of
          shares of  common stock and common  stock equivalents outstanding
          during each year  and net  income increased by  the reduction  in
          interest expense caused by the assumed conversion of common stock
          equivalents.    There  are  no  significant  differences  between
          primary and fully diluted income per share amounts.


          Federal Income Taxes

          In  February,  1992,  the  Financial Accounting  Standards  Board
          issued  Statement of  Financial  Accounting Standards   No.  109,
          "Accounting for Income Taxes" (FAS 109).  The Company adopted FAS
          109 on a prospective  basis effective January 1,  1993.  FAS  109
          mandates the  asset and  liability method for  computing deferred
          income  taxes.   Under  this method,  balance  sheet amounts  for
          deferred income taxes are computed based on the tax effect of the
          differences between the  financial reporting  and federal  income
          tax bases of assets and liabilities using the tax rates which are
          expected be in  effect when these differences are  anticipated to
          reverse.

          Under  FAS  109,  assets  acquired  and  liabilities  assumed  in
          purchase business  combinations are  assigned  their fair  values
          assuming equal  tax basis  and deferred  taxes  are provided  for
          lower or  higher tax  basis.   Under Accounting  Principles Board
          (APB) Opinion No.  22 (the previous  accounting standard used  by
          the  Company to  account  for income  taxes), values  assigned to
          assets  acquired and  liabilities  assumed were  net-of-tax.   In
          adopting FAS 109,  the Company adjusted  the carrying amounts  of

                                         


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Investors-NA which was  acquired in  1988.   Pre-tax income  from
          operations  for the calendar year ended December 31, 1993 was not
          impacted.

          Under FAS 109, as under APB  11, the Company will disclose in its
          financial statements  a reconciliation between  the effective tax
          rate  and the  amount derived  by multiplying  pre-tax accounting
          income by the currently enacted federal income tax rate.

          Use of Estimates

          The  preparation  of  financial  statements  in  conformity  with
          generally accepted accounting  principles requires management  to
          make estimates  and assumptions that affect  the reported amounts
          of assets and liabilities and disclosure of contingent assets and
          liabilities  at  the date  of  the financial  statements  and the
          reported amounts  of revenues  and expenses during  the reporting
          period.  Actual results will differ from those estimates.

          New Accounting Pronouncements:

          During 1995, the FASB  issued FAS No. 123 "Accounting  for Stock-
          Based Compensation," which encourages companies to adopt the fair
          value based  method of  accounting for stock-based  compensation.
          This method  requires  the recognition  of  compensation  expense
          equal to the fair value of  such equity securities at the date of
          the grant.  This  statement also allows companies to  continue to
          account for  stock-based compensation  under the  intrinsic value
          based method, as prescribed by APB Opinion No. 25 "Accounting for
          Stock Issued to  Employees," with footnote disclosure of  the pro
          forma effects of  the fair value  based method.   FAS No. 123  is
          effective for transactions entered into in years that begin after
          December 15, 1995.

          The Company adopted FAS No. 123 during 1996  and will continue to
          account  for stock-based  compensation under the  intrinsic value
          method  and disclose the impact  of the fair  value method in the
          footnotes to the financial statements.

          2. Investments

          Fixed Maturities

          The amortized  cost, gross unrealized gains and losses and market
          values  of   fixed  maturities  available  for   sale  and  fixed
          maturities  held  to  maturity at  December  31,  1996 and  1995,
          respectively were as follows (in thousands): 

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                                          
                                                 Gross    Gross
                                        Amort-   Unreal-  Unreal-
                                        ized     ized     ized     Market
                                        Cost     Gains    Losses   Value   
          Fixed Maturities Available
           For Sale as of December 31,
           1996:
          U.S. Treasury securities and 
           obligations of U.S.         
           government agencies and     
           corporations                 $ 13,817 $    902 $     18 $ 14,701
          Obligation of states and         4,727      163      -0-    4,890
           political subdivisions
          Foreign government debt
           securities                          5      -0-      -0-        5
          Corporate securities           120,263    2,582    3,625  119,220
          Mortgage-backed securities     312,738    7,473    5,131  315,080
            Total Fixed Maturities
             Available For Sale          451,550   11,120    8,774  453,896
          Fixed maturities held to
           Maturity:
           Private Placements-Corporate    8,165      320      111    8,374
           Total Fixed Maturities       $459,715 $ 11,440 $  8,885 $462,270

          Fixed Maturities Available 
           For Sale as of December 31,
           1995:
          U.S. Treasury securities and 
           obligations of U.S.
           government agencies and 
           corporations                 $ 15,826 $  1,494 $      5 $ 17,315
          Obligations of states and 
           political subdivisions          4,686      266      -0-    4,952
          Foreign government debt                 
           securities                         15      -0-        1       14
          Corporate securities            98,822    5,092    1,048  102,866
          Mortgage-backed securities     344,352   14,600      493  358,459
          Total Fixed Maturities                                    
           Available For Sale            463,701   21,452    1,547  483,606
          Fixed Maturities held to 
           Maturity:
          Private Placements-Corporate    14,420      370      513   14,277
            Total Fixed Maturities      $478,121 $ 21,822 $  2,060 $497,883


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          The amortized cost and  market value of fixed  maturities carried
          at  amortized cost  at  December  31,  1996  is  shown  below  by
          contractual  maturity.    Actual   maturities  may  differ   from
          contractual maturities  because borrowers  may have the  right to
          call or  prepay obligations  with or  without call  or prepayment
          penalties.


                                       Fixed Maturities Available for Sale
                                       Amortized                 Market
                                       Cost     (in thousands)   Value    

          Due in one year or less......$  4,465               $   4,502
          Due after one through 
            five years.................  16,473                  17,030  
          Due after five through ten 
            years......................  18,637                  19,246   
          Due after ten years..........  99,237                  98,038   
          Mortgage backed securities... 312,738                 315,080

               Total Fixed Maturities
               Available for Sale     $ 451,550               $ 453,896

                                       Fixed Maturities Held to Maturity

                                       Amortized                 Market
                                       Cost     (in thousands)   Value    

          Due in one year or less.....$   2,500                $  2,547    
          Due after one through
            five years................    3,534                   3,716   
          Due after five through ten
            years.....................    1,463                   1,415   
          Due after ten years.........                                 
          Mortgage backed securities..      668                     696

               Total Fixed Maturities
               Held to Maturity       $   8,165               $   8,374

          Proceeds  from  sales  and  maturities of  investments  in  fixed
          maturities  during   1996,  1995  and   1994  were  approximately
          $53,888,000,  $47,316,000,  and  $59,247,000.    Gross  gains  of
          approximately $322,000, $578,000,  and $824,000 and  gross losses
          of approximately $100,000, $22,000, and $193,000 were realized on
          those sales and maturities in 1996, 1995 and 1994, respectively.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Equity Securities

          The change  in net unrealized appreciation  for equity securities
          was $780,000 and $277,000  for the years ended December  31, 1996
          and  1995, respectively.    Amounts as  of  December 31  were  as
          follows:

                                                      1996         1995  
                                                        (in thousands)     
          Unrealized appreciation                  $   1,946    $    1,172
          Unrealized depreciation                        (15)          (21)
          Net unrealized appreciation              $   1,931    $    1,151

          Net Investment Income

          The  components  of  net  investment  income  are  summarized  as
          follows:

                                                   Year Ended December 31, 
                                                       (in thousands)
                                                   1996     1995     1994  


          Fixed maturities                       $47,448  $49,329  $40,938
          Equity securities                           12       65       12
          Other, including policy loans,
           real estate and mortgage loans         15,708   19,392   19,650
                                                  63,168   68,786   60,600
          Investment expenses                     (3,332)  (4,005)  (3,047)

          Net investment income                  $59,836  $64,781  $57,553


          Realized Gains and Losses

          Net realized gains (losses) included in net investment income are
          summarized below:
                                                  Year Ended December 31,
                                                       (in thousands)
                                                   1996     1995     1994  

          Fixed maturities available for sale    $   222  $   556  $    78

          Equity securities                            1      (26)     324

          Other investments                         (256)     (97)     293
                                                     (33)     433      695
          Income taxes                               (12)     152      243


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Net realized (losses) gains            $   (21) $   281  $   452

          Non-income producing investments

          The carrying value of non-income producing investments were as
          follows as of December 31:

                                                       1996         1995
                                                         (in thousands)    

          Fixed maturities                         $     100     $      48
          Mortgage loans                                  81           400
          Total                                    $     181     $     448

          Mortgage loans and invested real estate

          The  Company's  mortgage  loans  and  invested  real  estate  are
          diversified  by property  type,  location and  issuer.   Mortgage
          loans are collateralized by the related properties and such loans
          generally range from 15%  to 80% of  the property's value at  the
          time the  loan is made.   No new mortgage loans  were made during
          the three year period ended December 31, 1996.

          Financial Industries Corporation

          Equity securities includes a  $2,158,407 investment, ($318,390 at
          cost), in 189,750 shares of  common stock of Financial Industries
          Corporation  (FIC) (See Note 9).   This represents  3.5% of FIC's
          outstanding common stock at December 31, 1996.

          3. Disclosures about Fair Value of Financial Instruments

          The estimated fair values  of the Company's financial instruments
          at December 31, 1996 are as follows:
                                                        Carrying  Fair
                                                        Amount    Value   
                                                          (in thousands)
          Financial assets:                             
          Fixed maturities                              $462,061  $462,270
          Policy loans                                    53,030    53,030
          Mortgage loans                                  13,494    14,066 
          Short-term investments                          91,556    91,556
          Cash and cash equivalents                        3,313     3,313
          Notes receivable from affiliates                59,940    59,940

                                                        Carrying  Fair
                                                        Amount    Value   
                                                          (in thousands)
          Financial liabilities:                        


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Deferred annuities                            $115,039  $114,445
          Supplemental contracts                          11,452    11,008
          Senior loans                                    24,944    24,944
          The  following methods and assumptions  were used to estimate the
          fair value of each class of financial instrument:

          Fixed maturities

          Fair values are based on quoted market prices or dealer quotes.

          Policy loans

          Policy  loans  are, generally,  issued  with  coupon rates  below
          market  rates  and  are  considered early  payment  of  the  life
          benefit.    As  such,  the  carrying  amount of  these  financial
          instruments is a reasonable estimate of their fair value.

          Mortgage loans

          The  fair value of mortgage loans is estimated using a discounted
          cash  flow analysis using rates for BBB- rated bonds with similar
          coupon rates and maturities.

          Cash and cash equivalents and short-term investments

          The  carrying amount  of  these  instruments approximates  market
          value.

          Notes receivable from affiliates

          The  fair  value is  estimated based  on  a discounted  cash flow
          analysis using current rates  offered to the Company for  debt of
          the same remaining maturities.

          Senior loans

          The fair value has been set at the price to call the debt.

          Deferred annuities and supplemental contracts

          The  fair value  of deferred  annuities is  estimated using  cash
          surrender  values.   Fair  values for  supplemental contracts  is
          estimated  using  a  discounted  cash  flow  analysis,  based  on
          interest rates currently offered on similar products.


                 INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          4. Present value of future profits of acquired business

          An  analysis of the present  value of future  profits of acquired
          businesses is as follows:



                                                    1996           1995   
          Beginning balance                      $   48,606     $   46,153
          Acquisition of insurance subsidiary           -0-          8,664
          Accretion of interest                       4,401          4,437
          Amortization                               (7,767)       (10,648)
          Ending balance                         $   45,240     $   48,606

          Amortization of the present value  of future profits included  in
          the  consolidated statements  of income is  presented net  of the
          accretion of interest.

          The estimated amount  of present  value of future  profits to  be
          amortized  net of interest accretion during each of the next five
          years is as follows:
                                        
                                        1997             $ 5,354
                                        1998             $ 4,876
                                        1999             $ 2,969
                                        2000             $ 2,639
                                        2001             $ 2,324

          5. Acquisition of Business

          On February 14,  1995, the Company and Investors-NA completed the
          purchase  of  Meridian  Life  Insurance Company  (MLIC),  a  life
          insurer  domiciled in  Indiana,  from  Meridian Mutual  Insurance
          Company.   Under the terms of the agreement, the Company acquired
          approximately 82% of the outstanding common stock of MLIC for $14
          million.  Investors-NA acquired the remaining 18% for $3 million.
          Immediately  after finalizing  the transaction,  ILCO contributed
          its  acquired  shares  to  unassigned  surplus  of  Investors-NA,
          resulting in MLIC  being a wholly owned subsidiary  of Investors-
          NA.  ILCO's senior loan was increased  by $15 million (through an
          amendment  to  the loan  agreement) to  fund  its portion  of the
          purchase price.    Subsequent to  the purchase,  MLIC's name  was
          officially  changed  to  Investors'  Life  Insurance  Company  of
          Indiana  (INVIND).   The  transaction  was  accounted  for  as  a
          purchase  business combination.    Accordingly,  the  results  of
          INVIND's operations are included  in income from the date  of the
          acquisition.  The purchase  price has been allocated to  the fair
          values  of the  assets  and liabilities  acquired, including  the
          present value of future profits disclosed in Note 4.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          The pro forma unaudited results of operations for the years ended
          December  31, 1995 and 1994, assuming the acquisition of MLIC had
          been consummated as of the beginning of 1994, are as follows:

                                                      Unaudited
                                                1995              1994  
                                                (in thousands, except
                                                    per share data)

          Total revenues                      $123,905          $134,431
          Net income                          $ 10,391          $  9,889
          Net income per share                                          
           available to common shareholders   $   2.05          $   1.92


          6. Senior Loans

          The  Company's outstanding  debt at  December 31,  1996 and  1995
          consists of a series of separate notes, each of  which is payable
          to a member bank  of a lending syndicate with  principal payments
          beginning April  1, 1993 and a final payment on or before July 1,
          1999.  The balance  of the notes was $24,944,000  and $59,385,000
          at December 31, 1996 and 1995, respectively.  Interest is payable
          at  the  Company's  option  based  on  (1)  the  managing  bank's
          corporate base  rate plus  1.25%  declining to  .5% as  principal
          declines, or (2) LIBOR plus 2.5% declining to 1.75%.  The rate in
          effect  at  December  31, 1996  and  1995  was  7.56% and  8.18%,
          respectively.

          The obligations of the Company under the Senior Loans are secured
          by:  (1) all of the outstanding shares of stock of  Investors-NA,
          (2) a  $15,000,000 surplus  debenture of Investors-NA  payable to
          the  Company,  which  had  an outstanding  principal  balance  of
          $5,706,224 as of December 31, 1996 and (3) a $140,000,000 surplus
          debenture of  Investors-NA payable to  the Company, which  had an
          outstanding principal  balance of $32,840,000 as  of December 31,
          1996.   The obligations of the Company under the Senior Loans are
          guaranteed by FIC.

          The  Senior  Loans documents  also  require the  Company  to make
          additional   mandatory  principal   payments  which   reduce  the
          quarterly  principal payments in  the inverse order  of their due
          dates.   The payments are equal  to (a) 100% of  the net proceeds
          from  the  issuance  of  the  Company's  capital  stock  or  debt
          securities  and (b)  the applicable  percentage of  the Company's
          annual  Excess  Cash Flow  (as  defined).   Additional  mandatory
          principal  payments during  1996,  1995 and  1994 were  $941,000,
          $4,200,000  and $3,915,000, respectively.  The Senior Loan may be
          prepaid,  in  whole or  in  part,  without  penalty  or  premium.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Prepayments during 1996, 1995 and 1994 were $15,500,000, $-0- and
          $-0-, respectively.
          In  connection with  the acquisition  of Meridian  Life Insurance
          Company in February, 1995  (See Note 5), the Company  borrowed an
          additional $15 million under the Senior Loans to help finance the
          purchase.   In addition,  the maturity schedule  was extended one
          year to  July 1, 1999.   Maturities of the Senior  Loans over the
          next three years are as follows:

                                     (in thousands)
                                 1997          $  18,080
                                 1998              6,864
                                 1999                -0-
                                               $  24,944                

          7. Federal Income Taxes

          The Company  files consolidated  federal income tax  returns with
          its  non-life   subsidiaries.    The  Company's   life  insurance
          subsidiaries file  consolidated federal  income tax returns.   In
          accordance with  the Company's tax allocation  agreement, federal
          income tax expense or  benefit is allocated to each member of the
          consolidated  group as  if  each member  were  filing a  separate
          return.

          The  U.S.  federal  income  tax provision  (benefit)  charged  to
          continuing operations  for the  years ended  December 31,  was as
          follows:
                                                   1996     1995     1994 
                                                  (amounts in thousands)
          Current tax provision                  $ 10,227 $   945  $ (465)
          Deferred tax provision                    4,278   4,824   6,248
            Total provision for income taxes     $ 14,505 $ 5,769  $5,783

                                                          
          Provision  has not  been made  for state  and foreign  income tax
          expense since expense is minimal.

          The  provision for income taxes differs from the amount of income
          tax determined by applying the  U.S. statutory federal income tax
          rate of 35% to pre-tax  income from continuing operations  before
          extraordinary item as a result of the following differences:
                                                          

                                                   1996     1995     1994  
          Income taxes at the statutory rate     $14,505  $ 5,769  $ 5,495
          Increase (decrease) in taxes resulting
           from:                                                    

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

           Deferred compensation arrangement         -0-      -0-      375
           Other items, net                          -0-      -0-      (87)
           Total provision for income taxes      $14,505  $ 5,769  $ 5,783

          Deferred taxes are recorded for temporary differences between the
          financial reporting bases and the federal income tax bases of the
          Company's  assets   and  liabilities.    The   sources  of  these
          differences and the estimated tax effect of each are as follows: 

                                           Dec. 31,   Dec. 31,
                                             1996       1995  
          Deferred Tax Liability:

          Deferred policy acquisition
           costs                           $ 4,989    $ 4,058
          Present value of future profits   11,715     10,201
          Invested assets                      769        998
          Net unrealized appreciation on 
           marketable securities             1,497      7,369
          Acquisition discounts on 
           mortgages/policy loans            1,984      2,404
          Reinsurance recoverable            3,268      3,953
          Other taxable temporary 
           differences                       2,876      3,135
          Total deferred tax liability     $27,098    $32,118

                                           Dec. 31,   Dec. 31,
                                             1996       1995  
          Deferred Tax Asset:                         

          Policy Reserves                  $ 1,594    $ 4,757
          Other deferred tax asset             -0-        527
          Net operating loss carry forward   1,512        828
          Minimum tax credit                   300        281
          Deferred Compensation                -0-        263
          Total deferred tax asset           3,406      6,656
                                              
               Net deferred tax liability  $23,692    $25,462


          Deferred federal income tax (benefit) expense of $(5,872,000) and
          $17,976,000 for  1996 and 1995, respectively,  have been provided
          on  the  unrealized  (depreciation)  appreciation  of  marketable
          securities and  included in  the deferred  tax  liability.   This
          decrease  in  deferred  tax  liability has  been  recorded  as  a
          reduction  to  the equity  adjustment due  to  the net  change in
          unrealized  appreciation   or  depreciation  and  has   not  been
          reflected in the deferred income tax expense.


                 INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          Under the  provisions of  pre-1984 life insurance  company income
          tax  regulations, a portion of "gain from operations" of ILIC and
          Investors-NA  was  not  subject   to  current  taxation  but  was
          accumulated, for tax purposes, in special tax memorandum accounts
          designated  as  "policyholders'  surplus  accounts".  Subject  to
          certain  limitations,"policyholders' surplus" is  not taxed until
          distributed or the  insurance company no  longer qualifies to  be
          taxed as a  life insurance  company.  The  accumulation in  these
          accounts  for Investors-NA and ILIC at December 31, 1996 and 1995
          was $8,225,000 and $4,357,000,  respectively.  Federal income tax
          of $2,879,000 and $1,525,000  would be due if the  entire balance
          is distributed at a tax rate of 35%.

          The Company does not anticipate any transactions that would cause
          any part of the policyholders' surplus accounts to become taxable
          and, accordingly,  deferred taxes have not been  provided on such
          amounts.   At December 31,  1996 and 1995,  Investors-NA and ILIC
          have approximately $106,000,000 and $5,800,000,  respectively, in
          the aggregate in their  shareholders' surplus accounts from which
          distributions  could be  made without  incurring any  federal tax
          liability.

          At December 31,  1996, the Company and  its non-life wholly-owned
          subsidiaries   have   net   operating   loss   carryforwards   of
          approximately $4.3 million.

          At  December 31, 1996, there were no IRS examinations in progress
          for the Company or its subsidiaries.

          8. Reinsurance

          The  Company  reinsures  portions  of  certain  policies  thereby
          providing greater diversification of risk and minimizing exposure
          on  larger  policies.    The  Company's  retention  on  any   one
          individual ranges from $60,000 to $250,000 depending on the risk.
          The  Company  remains  liable   to  the  extent  the  reinsurance
          companies  are  unable  to   meet  their  obligations  under  the
          reinsurance agreements.

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          The amounts reported in the consolidated financial statements for
          reinsurance ceded are as follows:
                                                      December  31,        

                                                   1996          1995    
                                                     (in thousands)      

          Future policy benefits               $   7,314       $   7,964
          Unearned premiums                        1,946           2,634
          Other policy claims and benefits
           payable                                    76             155
          Amounts recoverable on paid claims       2,787           3,721
          Reinsurance receivables              $  12,123       $  14,474

                                                Years ended December 31,
                                              1996       1995        1994
                                                    (in thousands)         

          Premiums                         $   7,962  $   8,568   $  10,907
          Policyholder benefits and
           expenses                        $  14,712  $  14,404   $  14,176

          9. Shareholders' Equity

          The  Company is  controlled  by  FIC,  a life  insurance  holding
          company,  through FIC's  ownership  of approximately  46% of  the
          Company's outstanding  common stock.   FIC also holds  options to
          purchase up to  an additional 1,702,155  shares of the  Company's
          authorized  but unissued  common stock  at a  price equal  to the
          average market value during the six months preceding the exercise
          date.   If all  of these options  were exercised at  December 31,
          1996,  FIC  would own  approximately  61.81%  of the  issued  and
          outstanding  shares of  the Company's  common stock,  assuming no
          other options or warrants held by other parties were exercised. 

          In the event that any other party seeks to acquire  the Company's
          outstanding shares, FIC has  the right to acquire,  without prior
          approval and under the same pricing formula, the number of shares
          of common  stock which when  added to  the number of  shares then
          owned by FIC,  amount to  51% of  the outstanding  shares of  the
          Company.   These options will  remain in  effect as  long as  any
          indebtedness guaranteed by FIC remains outstanding (See Note 6).

          The  Company's ability  to pay  dividends to its  shareholders is
          affected, in part, by the receipt of dividends from Investors-NA,
          which is organized  under the  laws of the  state of  Washington.
          Under current Washington law, any proposed payment of  a dividend
          or distribution  which, together with  dividends or distributions
          paid  during the preceding twelve  months, exceeds the greater of
          (i) 10% of  statutory surplus as of the preceding  December 31 or
          (ii)  statutory  net  gain  from  operations  for  the  preceding
          calendar year is  called an "extraordinary dividend" and  may not
          be  paid until either it  has been approved,  or a waiting period
          shall  have passed during which  it has not  been disapproved, by
          the insurance commissioner.

          In addition, Washington Laws require that prior notification of a
          proposed   dividend   be  given   to  the   Washington  Insurance
          Commissioner  and  that dividends  may be  paid only  from earned
          surplus.  

          The New Senior  Loan described  in Note 6  restricts the  Company
          from paying any dividends on its common stock during its term.

          Net  income  (before  surplus  debenture  interest  expense)  and
          capital  and surplus  of  Investors-NA as  reported to  insurance
          regulators  and  as  determined  in  accordance   with  statutory
          accounting practices are as follows:


                                            Year Ended December 31        
                                                (in thousands)           
                                        1996         1995         1994   

          Net Income                 $  33,068    $  23,810    $  21,706
          Capital and Surplus        $  56,174    $  61,896    $  53,841

          The insurance  regulations of the  state of Washington  limit the
          amount  an insurer  may  invest in  the  obligations of  any  one
          corporation to  four percent of the  insurer's statutory admitted
          assets.    Investors-NA  held  $51,211,460  and   $52,500,000  in
          subordinated notes  issued by Family Life  Corporation, a wholly-
          owned  subsidiary  of  FIC,  at  December  31,  1996  and   1995,
          respectively.   This investment exceeds the  limit on investments
          prescribed  by   the  state  of  Washington   by  $8,787,303  and
          $9,282,287 at December 31, 1996 and 1995, respectively.  Prior to
          the  acquisition of  these notes,  Investors-NA  received written
          approval from  the Washington State Insurance  Department for the
          inclusion  of the  full amount  of these  notes in  its statutory
          admitted assets.  At  December 31, 1996 and 1995,  this permitted
          practice increased statutory surplus by $8,787,303 and $9,282,287
          over  what   it  would  have  been   under  prescribed  statutory
          accounting practices.

          In 1988, the Company authorized the issuance of 10 million shares
          of Class C Preferred Stock, $1.00  par value.  The Company is not
          permitted, under the provisions of the Senior Loan Agreement (See
          Note 6), to issue any preferred stock except Class A  and Class B
          issued in connection with  the acquisition of the  Investors Life
          Companies.   The Company  has reacquired the Class  A and Class B
          Preferred Stock and holds the shares in treasury.

          10. Retirement Plans and Employee Stock Plans

          Retirement Plan

          The Company  maintains a retirement plan,  ("ILCO Pension Plan"),
          covering substantially all employees  of the Company.    The plan
          is a non-contributory, defined benefit pension plan, which covers
          each eligible employee  who has attained 21 years of  age and has
          completed one  year  or  more of  service.    Each  participating
          company   contributes  an   amount   necessary  (as   actuarially
          determined) to  fund the benefits provided  for its participating
          employees.

          The Plan's  basic retirement income benefit  at normal retirement
          age is 1.57%  of the participant's  average annual earnings  less
          0.65%  of the participant's final average  earnings up to covered
          compensation  multiplied  by  the  number  of  his/her  years  of
          credited service.   For participants who  previously participated
          in the plan  maintained by the Company for the  benefit of former
          employees of  the  IIP Division  of  CIGNA Corporation  (the  IIP
          Plan),  the benefit  formula described  above applies  to service
          subsequent to  May 31, 1996.   With respect  to service prior  to
          that  date, the  benefit  formula provided  by  the IIP  Plan  is
          applicable,  with certain  exceptions  applicable  to former  IIP
          employees who are classified as highly compensated employees.

          Former   eligible   IIP    employees   commenced    participation
          automatically.   The  Plan  also provides  for early  retirement,
          postponed   retirement  and   disability  benefits   to  eligible
          employees.    Participant  benefits  become  fully  vested   upon
          completion of five years of service, as defined, or attainment of
          normal retirement age, if earlier.


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          The pension costs for all plans include the following components:

                                                   1996             1995
                                                      (in thousands)      
          Service cost-benefits earned
           during the period                      $  502           $  313

          Interest cost on projected
           benefit obligation                        686              571

          Return on plan assets                   (1,128)          (1,081)

          Amortization                              (229)            (269)

          Pension benefit                         $ (169)          $ (466)


          The  following  summarizes the  funded  status  of the  plans  at
          December 31:
                                                  1996              1995   

                                                      (in thousands)       
           
          Actuarial present value of:
            Vested benefit obligation           $ (7,726)         $ (7,495)

            Accumulated benefit obligation      $ (7,914)         $ (7,870)

          Projected benefit obligation          $ (8,936)         $ (9,155)

          Plan assets at market value             15,322            14,316 

          Plan assets in excess of projected
            benefit obligations                 $  6,386          $  5,161 

          Unrecognized prior service cost       $   (926)         $ (1,888)

          Unrecognized net (gain) loss           $ (1,317)         $   700


          Prepaid pension expense               $  4,143          $  3,973

          The significant assumptions for the plans are as follows:

          The discount rate for projected benefit obligations was 7.75% and
          7.0% in 1996 and  1995, respectively. The assumed  long-term rate
          of  compensation increases was 6.0%  and 6.5% for  1996 and 1995,
          respectively.   The long-term rate  of return on  plan assets was
          8.0% for 1996 and 1995.  Assumed expenses as a percentage of plan
          assets were 0.5.% and 0% for 1996 and 1995, respectively.

          Savings and Investment Plan

          The Company adopted  a Savings and Investment  (401(k)) Plan that
          allows  eligible  employees  who  have  met  a  one-year  service
          requirement to  make contributions to the Plan  on a tax-deferred
          basis.  A  Plan participant may elect to contribute  up to 16% of
          eligible earnings  on a  tax deferred  basis, subject  to certain
          limitations  applicable  to  "highly  compensated  employees"  as
          defined  in the  Internal  Revenue Code.   Plan  participants may
          allocate contributions, and earnings thereon,  between investment
          options selected by  participants.  The  Account Balance of  each
          Participant is 100%  vested at all  times.  Prior  to January  1,
          1990, the Company made matching contributions of up to 50% of the
          first  6%  of  eligible  compensation  contributed  by  the  plan
          participants.   Vesting of such company contributions is based on
          number  of years  of service.   The  employer contributions  were
          discontinued effective January 1, 1990.

          During 1995,  the Plan was amended  to allow for  the addition of
          Family Life Insurance  Company (FLIC), a  wholly-owned subsidiary
          of FIC, as a participating employer, thus allowing FLIC employees
          to  participate in the  Plan.  The  amendment did  not affect the
          Plan's tax-qualified status.

          Employee Stock Ownership Plan

          During 1979, the Company  established an Employee Stock Ownership
          Plan and a related trust  for the benefit of its employees.   The
          Plan generally covers employees  who have attained the age  of 21
          and have completed one year  of service.  Vesting of  benefits to
          employees  is  based  on   number  of  years  of  service.     No
          contributions were  made to the Plan  in 1996, 1995 or  1994.  At
          December 31, 1996, the Plan  had a total of 349,625 shares  which
          are   allocated   to  participants   and   15,180  which   remain
          unallocated.

          During 1995,  the Plan was amended  to allow for the  addition of
          FLIC as a participating employer, thus allowing FLIC employees to
          participate in the Plan.  The amendment did not affect the Plan's
          tax-qualified status.

          Stock Option Plans

          The   Company   applies   APB   Opinion  No.   25   and   related
          Interpretations in  Accounting for its stock  option plans, which
          are described below  accordingly.  No compensation cost  has been
          recognized for its stock option plans.  Had compensation cost for
          the Company's stock  option plans  been determined  based on  the
          fair market value at the grant dates for awards under those plans
          consistent with the method provided by FAS No. 123, the impact to
          the Company's net income would have been immaterial.

          Under  the  Company's Incentive  Stock  Option  Plan, options  to
          purchase  shares of the Company's  common stock, at  100% of fair
          market  value on  the  date of  grant, have  been granted  to key
          employees.  A  total of  315,000 shares of  the Company's  common
          stock are currently reserved for  issuance under this  plan.   As
          of December  31, 1996, options  to purchase  327,850 shares  have
          been granted since the plan's inception. As of December 31, 1996,
          161,750 options have  been exercised and 86,100 options have been
          terminated.

          At December 31,  1996  72,000 options  to purchase shares  of the
          Company's common  stock at  prices ranging  from  $3.33 to  $8.75
          remain outstanding. The number of options exercised in 1996, 1995
          and 1994 were 9,500, 11,000 and 5,500, respectively.

          Under the  Non-Qualified Stock Option Plan  for certain officers,
          directors,  agents   and  others,  the  Board   of  Directors  is
          authorized to issue options  to purchase up to 600,000  shares of
          the  Company's common stock  at 100% of the  fair market value on
          the date of grant but in  no case less than $3.33 per share.   In
          1988,  options to purchase 330,000 shares were granted at a price
          of $3.33 per share.  In  1991, options to purchase 50,000  shares
          were granted at prices ranging from $8.75 to $9.25.   In 1992 and
          1990 options to purchase 
          60,000 and 30,000 shares respectively, expired.  In 1995, options
          to purchase 60,000  shares were granted at a  price of $11.12 per
          share.  These same options, along with 20,000 other options, were
          terminated in  1996.  There were no options granted in 1996.  The
          number of options exercised  in 1996, 1995 and 1994  were 48,000,
          48,000 and -0-, respectively.

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          The following table summarizes activity under  all Plans for each
          of the three years ended December 31, 1996: 
                                                         1994   Weighted
                                                                Average
                                                     Shares     Exercise
                                                     (000's)    Price   
          Outstanding at the
           beginning of the year                         388     $ 4.61
              Granted                                      0       0.00
              Exercised                                   (5)      9.25
              Canceled                                     0       0.00
          Outstanding at the end of the year             383     $ 4.58

          Options exercisable at year end                132     $ 4.79

          Weighted average fair value of
           options granted during the year                       $ 0.00

                                                         1995   Weighted
                                                                Average
                                                     Shares     Exercise
                                                     (000's)    Price   
          Outstanding at the
           beginning of the year                         383     $ 4.58
              Granted                                     60      11.12
              Exercised                                  (59)      3.67
              Canceled                                     0       0.00
          Outstanding at the end of the year             384     $ 5.75

          Options exercisable at year end                130     $ 4.70

          Weighted average fair value of
           options granted during the year                60     $11.12

                                                         1996   Weighted
                                                                Average
                                                     Shares     Exercise
                                                     (000's)    Price   
          Outstanding at the
           beginning of the year                         384     $ 5.75
              Granted                                      0       0.00
              Exercised                                  (58)      4.24
              Canceled                                   (80)     10.65
          Outstanding at the end of the year             246     $ 4.50

          Options exercisable at year end                120     $ 4.38

          Weighted average fair value of
           options granted during the year                       $ 0.00


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               
                                                              Options
                                                            outstanding
                                                          weighted-average
                                       Number                remaining
              Range of              outstanding             contractual
           exercise prices       December 31, 1996          life (years)

            $3.33 - 3.54             194,000                   1.85

            $8.75                     52,000                   4.42

            $3.33 - 8.75             246,000                   2.39



               Range of           Weighted average
           exercise prices         exercise price

            $3.33 - 3.54               $3.36

            $8.75                      $8.75

            $3.33 - 8.75               $4.50



               Range of          Number exercisable       Weighted average
           exercise prices       December 31, 1996         exercise price

            $3.33 - 3.54              98,000                  $3.39

            $8.75                     22,000                  $8.75

            $3.33 - 8.75             120,000                  $4.38


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          In  1989  options to  purchase  600,000 shares  of  the Company's
          common  stock at $1.00  per share  were granted  by the  Board of
          Directors  to the Company's Chairman of the Board.  These options
          became exercisable  upon approval  of the  Board of Directors  in
          annual installments of 150,000 shares each.  The last installment
          was  granted  in 1992.   In  1992,  the chairman  surrendered for
          cancellation 120,000 of these  options.  In October of  1993, the
          Company entered  into an agreement with the Chairman, whereby the
          Chairman agreed  to surrender all  of his remaining  common stock
          options between 1993 and  1996.  Pursuant to this  agreement, all
          remaining options  were  surrendered through  December 31,  1996,
          (see Note 12).

          11. Leases

          The Company  and its subsidiaries occupy  office facilities under
          lease  agreements which  expire  at various  dates through  2005.
          Certain office space leases  may be renewed at the option  of the
          Company.

          Rent  expense in 1996, 1995, and 1994 was $2,466,679, $2,531,085,
          and  $1,424,946,  respectively,  under  these  lease  agreements.
          Minimum annual future rentals are as follows:
                                                        (in thousands)
                                                       1997       1,115
                                                       1998         637
                                                       1999         637
                                                       2000         637
                                                       2001         637
                                                Thereafter        2,546
                                                               $  6,209

          12. Related Party Transactions 

          On  June 12,  1991,  FIC (which  owns  approximately 46%  of  the
          outstanding   common  stock  of  the  Registrant)  completed  the
          purchase of all the  outstanding shares of Family  Life Insurance
          Company,  a  Washington  domiciled life  insurance  company, from
          Merrill  Lynch  Insurance  Group,   Inc.    The  transaction  was
          financed, in part, by a senior subordinated loan of $22.5 million
          by  Investors - NA to Family Life Corporation (FLC), an indirect,
          wholly-owned subsidiary of FIC, and a senior loan of $2.5 million
          by  Investors - NA to FIC.   In addition to the interest provided
          under the terms of  said loans, Investors -  NA was granted  non-
          transferrable options to purchase up to a total of 9.9 percent of
          the common shares of FIC.  The option price is  $10.50 per share,
          equivalent  to   the  then  current  market   price,  subject  to
          adjustment  to prevent the effect of dilution. As a result of the
          five-for-one  stock  split  implemented   by  FIC,  effective  in
          November 1996, the exercise  price of the options was  changed to
          $2.10  per share.   The initial terms of  the option provided for
          their expiration on  June 12, 1998, if not  previously exercised.
          In connection with  the 1996 amendments to the subordinated loans
          held  by Investors-NA,  the expiration  date of  the options  was
          extended to September 12, 2006.

          On July  30, 1993,  FLC prepaid  its  Merrill Lynch  subordinated
          loans.   The transaction was financed, in part, by a subordinated
          loan  of  $30  million  by  Investors  -  NA  to  FLC  and  by  a
          subordinated loan of  $4.5 million  by Investors -  NA to  Family
          Life  Insurance  Investment  Company,  (FLIIC),   a  wholly-owned
          subsidiary of FIC and parent of FLC.

          Notes  receivable   from   affiliates  of   $59,940,193   include
          $51,211,460  of senior  subordinated loans by  Investors -  NA to
          FLC, a subordinated  loan of  $4,475,469 to FLIIC,  and a  senior
          loan  of  $4,253,264 to  FIC.   Interest  earned by  ILCO  on the
          aforementioned   loans   totaled   $6,095,877,   $6,044,322   and
          $5,993,512 in 1996, 1995 and 1994, respectively.  At December 31,
          1996  and December  31, 1995  accrued  interest was  $297,486 and
          $1,459,408, respectively.

          Rent   and   certain   other   operating   expenses   aggregating
          approximately $305,000, $830,000, and $585,000, were  incurred by
          FIC  in 1996,  1995  and 1994,  respectively,  on behalf  of  the
          Company.  The Company reimbursed FIC for these costs.

          ILCO  received $14  million,  $15 million,  and $13  million from
          Family Life Insurance  Company for direct costs incurred  by ILCO
          on behalf of  Family Life Insurance Company's operations in 1996,
          1995 and 1994, respectively.  Under an agreement between ILCO and
          Family Life all direct  costs incurred on behalf of the other are
          to be reimbursed.

          In 1995,  Investors-NA entered into a  reinsurance agreement with
          Family  Life pertaining  to universal  life insurance  written by
          Family  Life.   The  reinsurance agreement  is on  a co-insurance
          basis and applies to all covered business with effective dates on
          and after January  1, 1995.  The  agreement applies to only  that
          portion  of the  face  amount of  the policy  which is  less than
          $200,000; face  amounts  of $200,000  or  more are  reinsured  by
          Family  Life with a third party reinsurer.  In 1996, Investors-NA
          entered into a reinsurance agreement with Family Life, pertaining
          to  annuity contracts  written  by Family  Life.   The  agreement
          applies to contracts written on or after January  1, 1996.  These
          reinsurance  arrangements reflect  management's plan,  to develop
          universal life and annuity  business at Investors-NA, with Family
          Life  concentrating  on  the   writing  of  term  life  insurance
          products.

          In  October of 1993, the  Company entered into  an agreement with
          the Chairman, whereby the Chairman agreed to surrender all of his
          remaining common  stock options  for consideration  of $6,847,000
          (See  Note 11).    Prior to  entering  into this  agreement,  the
          Company had accrued compensation expense related to these options
          of  $4,225,000.   Upon  entering into  the agreement,  additional
          compensation was recorded totaling  $2,622,000 for the year ended
          December 31, 1993 to increase total compensation to the surrender
          price.   Accordingly,  a  liability was  recorded for  the unpaid
          portion of  the agreement.   Pursuant to  this agreement,  during
          1993 the Chairman was paid $3,237,120 for cancellation of 240,000
          of  these  options  and during  1994  he  was  paid $997,520  for
          cancellation of  68,500 options  and $379,143 for  federal income
          tax  reimbursement relating  to  the cancellation  of options  in
          1993.   During  1995,  the Chairman  was  paid $836,582  for  the
          cancellation  in 1995  of options  to purchase  50,000 shares  of
          ILCO's  Common  Stock,  $156,323   for  the  federal  income  tax
          reimbursement relating to the cancellation in 1994 of  options to
          purchase 68,500 shares and $127,608 as the final payment relating
          to the  cancellation  in  1993 of  options  to  purchase  240,000
          shares.   The federal income  tax reimbursements are  expensed in
          the period when they are incurred.  During 1996, the Company paid
          the Chairman:   (i) $1,862,000  for the cancellation  in 1996  of
          options to purchase 121,500 shares of the Company's common stock,
          plus interest at the rate of 8% per year on such amount for a one
          year  period (for a total  of $2,011,737); (ii)  $120,700 for the
          federal income tax reimbursement  relating to the cancellation in
          1995 of options to purchase 50,000 shares of the Company's common
          stock;   and  (iii)   $313,960   for  the   federal  income   tax
          reimbursement relating to the 1996 options cancellation.

          Pursuant to  a data  processing  agreement with  a major  service
          company, the  data processing needs of ILCO's and FIC's insurance
          subsidiaries  were  provided  by  an offsite  third  party  until
          November 30, 1994.   Commencing  December 1, 1994,  all of  those
          data processing  needs are provided  to ILCO's and  FIC's Austin,
          Texas   and  Seattle,  Washington   facilities  by  FIC  Computer
          Services,  Inc. ("FIC Computer"), a  subsidiary of FIC.   Each of
          FIC's and ILCO's  insurance subsidiaries has entered  into a data
          processing  agreement  with  FIC Computer  whereby  FIC  Computer
          provides  data processing  services to  each subsidiary  for fees
          equal to such subsidiary's  proportionate share of FIC Computer's
          actual  costs  of   providing  those  services  to   all  of  the
          subsidiaries.    Family  Life  paid   $1,055,639,  $779,052,  and
          $151,977 and Investors-NA, Investors-IN and ILIC paid $2,243,234,
          $1,655,486,  and $181,971  to  FIC Computer  for data  processing
          services provided during 1996, 1995 and 1994, respectively.

                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          13. Commitments and Contingencies

          The  Company and its subsidiaries are defendants in certain legal
          actions related to the normal business operations of the Company.
          Management believes that the resolution  of such matters will not
          have a material impact on the financial statements. 

          14. Net Income Per Share

          Net  income  per  share was  determined  by  dividing net  income
          available to  common shareholders by the  weighted average number
          of  shares   of  common   stock  and  common   stock  equivalents
          outstanding during each year.

          For  the years ended December 31, 1996, 1995 and 1994, net income
          available to common shareholders is calculated as follows:

                                                  1996          1995       
          1994 
                                                       (in thousands)
                                                          
          Net income                             $26,938  $10,714  $ 9,917

          Interest expense reduction, 
           net of income tax effect                  643      671      472

          Net income available to 
           common shareholders                   $27,581  $11,385  $10,389



          Changes  in the market price  of the Company's  common stock also
          impacts the number of common stock options and warrants which are
          considered   dilutive  under   the   treasury  stock   method  of
          calculating the  weighted average  common stock and  common stock
          equivalents.  For the  years ended  December 31,  1996, 1995  and
          1994, weighted average common  stock and common stock equivalents
          is calculated as follows: 


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                          1996        1995        1994  
                                                  (In thousands)
          Weighted average common
           shares outstanding             4,233       4,139       4,116
          Common stock equivalents:

           Common stock options           1,994       2,085       2,084


          Less assumed repurchase of 
           shares using the treasury
           stock method                    (847)       (835)       (822)

          Common stock and common 
           stock equivalents              5,380       5,389       5,378


          15.  Quarterly Financial Data (unaudited)
               (in thousands, except per share amounts)

                                           Three Months       Three Months
                                           Ended              Ended
                                           March 31,          June 30,
                                        1996      1995     1996     1995   

          Net Operating Revenue         $53,581  $29,105  $27,836  $31,017

          Net Income                    $18,042  $ 2,589  $ 2,936  $ 2,601

          Net income per share
           available to common
           shareholders                 $  3.35  $  0.51  $  0.57  $  0.52
                                                                    
           
                                           Three Months      Three Months
                                           Ended             Ended
                                           September 30,     December 31,
                                        1996       1995     1996      1995 


          Net Operating Revenue         $29,474  $30,453  $27,353  $31,815

          Net Income                    $ 2,973  $ 2,498  $ 2,987  $ 3,026

           Net income per share
            available to common
            shareholders                $  0.59  $  0.50  $  0.59  $  0.58


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                    SCHEDULE I - SUMMARY OF INVESTMENTS OTHER THAN
                             INVESTMENTS IN RELATED PARTIES
                                  December 31, 1996
                              (in thousands of dollars)
                                                

          Column A                            Column B  Column C  Column D
                                                                  Amount at
                                                                  Which
                                                                  Shown in
                                                                  the
                                                                  Balance
          Type of Investment                  Costs     Value     Sheet    
          Fixed maturities available for
           sale:
          United States Government and
           government agencies and
           authorities                        $ 13,817  $ 14,701  $ 14,701
          States, municipalities and
           political subdivisions                4,727     4,890     4,890
          Foreign governments                        5         5         5
          Corporate securities                 120,263   119,220   119,220
          Mortgage-backed securities           312,738   315,080   315,080

          Total fixed maturities available
           for sale                            451,550   453,896   453,896
                                                                   
          Fixed maturities held to maturity      8,165     8,374     8,165

          Total fixed maturities               459,715   462,270   462,061

          Equity securities:
          Public utilities                           2         3         3
          Banks, trust and financial
           institutions                             31        85        85
          Industrial, miscellaneous and all
           other                                    22        30        30

          Total equity securities                   55       118       118

          Policy loans                          53,030    53,030    53,030
          Mortgage loans                        13,494    14,066    13,494
          Real estate                           38,696    38,696    38,696
          Short term investments                91,556    91,556    91,556

          Total investments                   $656,546  $659,736  $658,955


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
              SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
          UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
                           December 31, 1996, 1995 and 1994
                                                 



          Column A                                    Column B   Column C
                                                      Balance at
                                                      Beginning
          Name of Debtor                              of Period  Additions

          December 31, 1996                           $    -0-      -0-


          December 31, 1995

                                                      $    -0-      -0-
          December 31, 1994

          Roy F. Mitte
            Non-interest bearing loan
             repayable in three years unless
             forgiven by Board of Directors           $650,000      -0-


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
              SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
          UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
                     December 31, 1996, 1995 and 1994, Continued
                                                 

                                                        
          Column A                            Column D            Column E
                                                        Amounts   Balance
                                              Amounts   Written   at End of
          Name of Debtor                      Collected Off       Period   

          December 31, 1996                        -0-      -0-   $    -0-


          December 31, 1995                        -0-      -0-   $    -0-


          December 31, 1994

          Roy F. Mitte
            Non-interest bearing loan
             repayable in three years unless    650,000     -0-   $    -0-
             forgiven by Board of Directors

                  INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
             SCHEDULE III - CONDENSED FINANCIAL STATEMENTS OF REGISTRANT
                                    BALANCE SHEETS
                              December 31, 1996 and 1995
                              (in thousands of dollars)




          ASSETS                                        1996         1995 

          Short-term investments                $      6,252  $     7,022

          Cash and cash equivalents                      126           63

          Subordinated debenture receivables
           from Investors Life Insurance 
           Company of North America, 
           due September 30, 1999                     38,546       72,835

          Investments in and advances to 
            subsidiaries                              91,601       76,730

          Accounts receivable                          6,117        6,117

          Property, plant and equipment, net             277          279

          Federal income tax receivable                  -0-          -0-

          Other assets                                 1,022        2,237

                                                $    143,941  $   165,283


                  INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
             SCHEDULE III - CONDENSED FINANCIAL STATEMENTS OF REGISTRANTS
                              BALANCE SHEETS, continued
                             December 31, 1996 and 1995 
                              (in thousands of dollars)

          LIABILITIES AND SHAREHOLDERS' EQUITY              1996      1995 
          Liabilities:
          Accounts payable and accrued expenses         $  2,226  $  5,293
          Senior loans                                    24,944    59,385
          Deferred gain on sale of real estate               956     1,066
                                                          28,126    65,744
          Redeemable preferred stock:
           Class A preferred stock, $1 par value,
            shares authorized and issued                   5,000     5,000
           Class B preferred stock, $1 par value,
            shares authorized, and issued                 15,000    15,000
                                                          20,000    20,000
          Redeemable preferred stock, repurchased and
           held as treasury stock                        (20,000)  (20,000)
                                                             -0-       -0-
          Shareholders' equity:
                                                 
                                                     
            Common stock, $.22 par value, 10,000,000
            shares authorized; 5,223,739 and 5,166,239
            shares issued, 4,232,829 and 4,175,329
            shares outstanding in 1996 and 1995,
            respectively                                   1,150     1,137
           Additional paid-in capital                      3,752     3,521
           Net unrealized appreciation of securities
            held by insurance subsidiaries                 1,255       748
           Net unrealized gain (loss)                         
            on investments in fixed
            maturities available for sale held by          
            insurance subsidiaries                         1,525    12,938 
           Retained earnings (including $105,628 and
            $78,639 of undistributed earnings of
            subsidiaries at December 31, 1996 and 1995,
            respectively)                                108,697    81,759
           Common treasury stock, at cost, 665,950       116,379   100,103
            shares in 1996 and 1995                         (564)     (564)
           Total shareholders' equity                    115,815    99,539
           Total liabilities and shareholders' equity   $143,941  $165,283


                  INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
             SCHEDULE III - CONDENSED FINANCIAL STATEMENTS OF REGISTRANT,
                           STATEMENTS OF INCOME, continued
                     Years Ended December 31, 1996, 1995 and 1994
                              (in thousands of dollars)
                     

                                            1996         1995        1994 
          Revenues charged to 
           subsidiaries:
           Interest income             $    4,915  $     8,236 $     7,888
           Other income                       133          134         113
                                            5,048        8,370       8,001

          Operating expenses                2,513        1,779       1,386
          Interest expense                  2,613        5,469       4,914
                                            5,126        7,248       6,300

          Income (loss) from
           operations                         (78)       1,122      1,701 
          Federal income tax 
           provision                          (27)         393         970 

          Net income (loss) before   
           equity in undistributed 
           earnings from subsidiaries
           extraordinary item and 
           change in accounting 
           principle                          (51)         729        731 

          Equity in undistributed 
           earnings from subsidiaries      26,989        9,985      9,186 

          Net Income                  $    26,938 $     10,714 $    9,917


                  INTERCONTINENTAL LIFE CORPORATION (PARENT COMPANY)
                  SCHEDULE III - CONDENSED STATEMENTS OF REGISTRANT
                          STATEMENT OF CASH FLOWS, continued
                              (in thousands of dollars)

                                                 Year ended December 31,
          CASH FLOWS FROM OPERATING               1996      1995      1994
           ACTIVITIES:
          Net income                          $ 26,938  $ 10,714  $  9,917
          Adjustments to reconcile net income
           to net cash provided by (used in)
           operating activities:
          Amortization of deferred gain on
           sale of real estate                    (110)     (109)     (109)
          Unrealized appreciation
           (depreciation) of equity
           securities held by insurance
           subsidiaries                            507       180      (377)
          Decrease in accounts receivable          -0-        32       615
          Increase in investment
           in and advances to subsidiaries     (26,284)  (21,748)   (3,742)
          (Decrease) increase in accounts
           payable and accrued expenses         (3,067)      723       384
          Decrease in deferred federal income
           taxes, net                              -0-       -0-        83
          Decrease (increase) in other assets    1,215       640     1,028 
          Other                                      2       (87)       79
           Net Cash (used in) provided by
            operating activities                  (799)   (9,655)    7,878 
          CASH FLOWS FROM INVESTING
           ACTIVITIES:
          Investments (purchased) sold             770    (1,283)     (302)
           Net cash provided by (used in)
            investing activities                   770    (1,283)     (302)
          CASH FLOWS FROM FINANCING
           ACTIVITIES:
          Repayment of debt                    (34,441)   (7,200)  (17,415)
          Payment on subordinated debenture
           payable                                 -0-      (200)      (50)
          Stock options exercised                  244       680       -0-
          Payment received on subordinated
           debenture receivable                 34,289    14,960     8,744
            Net cash provided by (used in) 
             financing activities                   92     8,240    (8,721)

          Net increase in cash                      63      (132)   (1,145)
          Cash, beginning of year                   63       195     1,340
          Cash, end of year                   $    126  $     63  $    195


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                     SCHEDULE VI - REINSURANCE CEDED AND ASSUMED
                 For the years ended December 31, 1996, 1995 and 1994
                              (in thousands of dollars)


                                                    Ceded To    Assumed
                                        Direct      Other       From Other
          1996                          Amount      Companies   Companies 

          Life insurance in-force       $7,009,993  $1,112,318  $   18,481

          Premium:
           Life insurance               $   16,863  $    8,164  $      100
           Accident-health insurance           948        (202)         31

          Total                         $   17,811  $    7,962  $      131

          1995          ____

          Life insurance in-force       $7,693,274  $  864,512  $    8,124

          Premium:
           Life insurance               $   18,561  $    8,773  $      127
           Accident-health insurance         2,260        (205)         38

          Total                         $   20,821  $    8,568  $      165

          1994

          Life insurance in-force       $7,056,436  $  427,611  $   24,073

          Premium:
           Life insurance               $   20,712  $    9,998  $      676
           Accident-health insurance         3,703         909         133

          Total                         $   24,415  $   10,907  $      809


                  INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                     SCHEDULE VI - REINSURANCE CEDED AND ASSUMED
                 For the years ended December 31, 1996, 1995 and 1994
                              (in thousands of dollars)


                                                    Percentage
                                        Net         Of Amount
          1996                          Amount      Assumed    

          Life insurance in-force        5,916,156         .31%

          Premium:
           Life insurance               $    8,799        1.15%
           Accident-health insurance         1,181        2.71%

          Total                         $    9,980        1.33%

          1995

          Life insurance in-force       $6,836,886        .12%

          Premium:
           Life insurance               $    9,915       1.24%
           Accident-health insurance         1,179       3.22%

          Total                         $   11,694       6.84%

          1994

          Life insurance in-force       $6,652,898        .36%

          Premium:
           Life insurance               $   11,390       5.94%
           Accident-health insurance         2,927       4.54%

          Total                         $   14,317       5.65%


                                    Exhibit Index

          Exhibit        Page                     Description
          Number        Number

           4(a)                    Certificate    of    Incorporation    of
                                   Registrant filed  May  22,   1969  and 
                                   Amendments thereto (2)

                                   (i)  Amendment filed July 16, 1973

                                   (ii) Amendment filed August 4, 1977

                                   (iii)Amendment filed February 10, 1983

                                   (iv) Amendment filed December 14, 1988

                                   (v)  Amendment filed February 9, 1990

           4(b)                    By-laws of Registrant.  (3)

          10(a)                    Registrant's   Incentive  Stock   Option
          Plan.                         (1)

          10(m)                    Lease  dated  December 20,  1085 between
                                   Registrant  and  Parker Road  Associates
                                   for  the  rental   of  40  Parker  Road,
                                   Elizabeth, New Jersey. (4)

          10(o)                    (i)  Grid Note dated  December 18,  1985
                                        in  the amount of  $800,000 made by
                                        the   Registrant  and   payable  to
                                        Midlantic National Bank.  (4)

                                   (ii) Demand Note dated December 18, 1985
                                        in the amount  of $491,165.03  made
                                        by   Registrant   and  payable   to
                                        Midlantic National Bank.  (4)

          10(ah)                   Credit Agreement  for $125,000,000 dated
          as                       of  December  28, 1988  among Registrant
          and                      certain banks identified therein.  (5)

          10(ai)                   Note  Purchase  Agreement  dated  as  of
                                   December 31, 1988 between Registrant and
                                   a Rhode Island based insurance/financial
                                   services  company.    A   Note  Purchase
                                   Agreement  in   substantially  identical
                                   form  was  executed  with   seven  other
                                   entities  identified  in these  exhibit.
                                   (5)

          10(aj)                   Class   A   Preferred   Stock   Purchase
                                   Agreement dated as  of December 1,  1988
                                   between Registrant and Insurance Company
                                   of North America.  (5)

          10(ak)                   Class   B   Preferred   Stock   Purchase
                                   Agreement  dated as of  December 1, 1988
                                   between  Registrant  and a  Rhode Island
                                   based    insurance/financial    services
                                   company.    A  Class  B  Preferred Stock
                                   Purchase   Agreement   in  substantially
                                   identical form was  executed with  seven
                                   other   entities   identified  in   this
                                   exhibit.  (5)

          10(al)                   Pledge  Agreement  dated as  of December
                                   28,  1988  between  Registrant  and  The
                                   First  National  Bank  of   Chicago,  as
                                   Agent.  (5)

          10(am)                   Surplus Debenture dated  as of  December
                                   28,  1988 in the  amount of $140,000,000
                                   made by Standard to Registrant.  (5)

          10(an)                   Warrant Agreement dated  as of  December
                                   29,  1988  between   Registrant  and   a
                                   Connecticut   based  insurance/financial
                                   services company.   A Warrant  Agreement
                                   in  substantially   identical  form  was
                                   executed with seven other entities.  (5)

          10(aq)                   Registrant's  Defined  Benefit   Pension
                                   Plan, effective as of January 1, 1988.

          10(ar)                   Registrant's  Employee  Stock   Purchase
                                   Plan, effective  as of August  25, 1989.
                                   (6)

          10(as)                   Registrant's Non-Qualified  Stock Option
                                   Plan.  (6)

          10(at)                   Exchange  and Amendment  Agreement dated
                                   July 30, 1990 between Registrant and the
                                   holders of its  Class A Preferred  Stock
                                   and its Class B Preferred Stock.  (7)

          10(au)                   Amendment  dated July 30, 1990 to Senior
                                   Loan Agreement among the  Registrant and
                                   certain banks identified therein.  (7)

          10(av)                   InterCreditor  Agreement dated  June 12,
                                   1991,  among  Investors  Life  Insurance
                                   Company of North America, Investors Life
                                   Insurance Company of California, Merrill
                                   Lynch Insurance Group, Inc.  and Merrill
                                   Lynch & Co., Inc.  (8)


          10(aw)                   Note dated  June 12, 1991  in the amount
                                   of  $22.5  million made  by  Family Life
                                   Corporation in favor  of Investors  Life
                                   Insurance Company of North America.  (8)

          10(ax)                   Note  dated June 12,  1991 in the amount
                                   of  $2.5  million   made  by   Financial
                                   Industries   Corporation  in   favor  of
                                   Investors  Life   Insurance  Company  of
                                   California.  (8)

          10(ay)                   InterCreditor Agreement  among Investors
                                   Life Insurance Company of North America,
                                   Investors  Life   Insurance  Company  of
                                   California  and  the  Agent   under  the
                                   Credit  Agreement dated  as of  June 12,
                                   1991.  (8)

          10(az)                   Option Agreement by Financial Industries
                                   Corporation in favor  of Investors  Life
                                   Insurance Company of  North America  and
                                   Investors  Life   Insurance  Company  of
                                   California.  (8)

          10(aaa)                  Hotel Lease Agreement dated as of August
                                   22,   1991    between   Investors   Life
                                   Insurance Company of  North America  and
                                   FIC Realty Services, Inc.  (9)

          10(aab)                  Management   Agreement   dated   as   of
                                   September 4, 1991 between Investors Life
                                   Insurance Company of  North America  and
                                   FIC Property Management, Inc.  (9)

          10(aac)                  Amended  and  Restated Credit  Agreement
                                   dated   January   29,  1993   among  the
                                   Registrant and  certain banks identified
                                   therein.  (10)

          10(aad)                  Amended  and  Restated Pledge  Agreement
                                   dated  January  29,  1993   between  the
                                   Registrant  and  the  agent  bank  named
                                   therein.  (10)

          10(aae)                  Stock  Option  Agreement dated  March 8,
                                   1986  between  Registrant and  Financial
                                   Industries Corporation.  (10)

          10(aaf)                  Surplus Debenture dated  as of  November
                                   13,  1986 in  the amount  of $15,000,000
                                   made  by  New  Standard  to  Registrant.
                                   (10)

          10(aag)                  Terms   and  Conditions   of  Employment
                                   Contracts of  James M. Grace,  Eugene E.
                                   Payne  and Joseph  F. Crowe  approved by
                                   Registrant's Board of  Directors on  May
                                   16, 1991,  ((10)

          10(aah)                  Letter agreement and addendum dated July
                                   23,   1992    between   Investors   Life
                                   Insurance Company of  North America  and
                                   Mr. and Mrs. Theodore A. Fleron.  (10)

          10(aai)                  Letter agreement dated October  15, 1992
                                   between  Roy  F.  Mitte  and  Registrant
                                   evidencing surrender and cancellation of
                                   stock options.  (10)

          10(aaj)                  Note dated July  30, 1993 in the  amount
                                   of  $30  million  made  by  Family  Life
                                   Corporation in favor  of Investors  Life
                                   Insurance  Company   of  North  America.
                                   (11)

          10(aak)                  Note dated July  30, 1993 in  the amount
                                   of  $4.5  million  made  by  Family Life
                                   Insurance Investment Company in favor of
                                   Investors  Life   Insurance  Company  of
                                   North America.  (11)

          10(aal)                  Amendment  No.  1  dated July  30,  1993
                                   between  Family   Life  Corporation  and
                                   Investors  Life   Insurance  Company  of
                                   North  America  amending  $22.5  million
                                   note.  (11)

          10(aam)                  Cancellation  of Stock  Option Agreement
                                   dated      October   21,  1993   between
                                   Registrant and Roy F. Mitte.  (11)

          10(aan)                  Waiver and Amendment Agreement  dated as
                                   of  July 23,  1993 among  the Registrant
                                   and  certain  banks identified  therein.
                                   (12)

          10(aao)                  Amendment Agreement dated as of December
                                   20,  1993  among   the  Registrant   and
                                   certain banks identified therein.  (12)

          10(aap)                  Amendment  Agreement  dated as  of March
                                   12,  1994  among   the  Registrant   and
                                   certain banks identified therein. (12)

          10(aaq)                  Amendment Agreement dated as of December
                                   22,  1994  among   the  Registrant   and
                                   certain banks identified therein.   (12)

          10(aar)                  Amendment Agreement dated as of February
                                   10,  1995  among   the  Registrant   and
                                   certain banks identified therein. (12)


          10(aas)                  Data  Processing  Agreement dated  as of
                                   November      30,      1994      between
                                   InterContinental Life  Insurance Company
                                   and FIC Computer Services, Inc.  (12)

          10(aat)                  Data  Processing  Agreement dated  as of
                                   November 30, 1994 between Investors Life
                                   Insurance Company of  North America  and
                                   FIC Computer Services, Inc.  (12)

          10(aau)                  Data  Processing  Agreement dated  as of
                                   November  30,  1994 between  Family Life
                                   Insurance   Company  and   FIC  Computer
                                   Services, Inc.  (12)

          10(aav)                  Lease  Agreement  dated as  of September
                                   30,  1994  between FIC  Realty Services,
                                   Inc.  and  Atrium Beverage  Corporation.
                                   (12)

          10(aaw)                  Management   Agreement   dated   as   of
                                   September  30,  1994 between  HCD Austin
                                   Corporation  as  agent  for  FIC  Realty
                                   Services,   Inc.  and   Atrium  Beverage
                                   Corporation. (12)

          10(aax)                  Amendment Agreement dated  as of  August
                                   8, 1995  among  the Registrant  and certain
                                   banks identified therein. (13)

          10(aay)                  Amendment Agreement dated as of December
                                   15,  1995  among   the  Registrant   and
                                   certain banks identified therein.  (13)

          10(aaz)                  Agreement  of Sale dated as of September
                                   5,  1995  between  Omni  Congress  Joint
                                   venture  as  Buyer  and  Investors  Life
                                   Insurance  Company  of North  America as
                                   Seller,  with  exhibits, amendments  and
                                   assignment.  (13)

          10(aaaa)       121       Amendment No. 2 dated December 12, 1996,
                                   effective  June  12,  1996 to  the  note
                                   dated  June 12,  1991  in the  amount of
                                   $22.5  million  made   by  Family   Life
                                   Corporation in favor  of Investors  Life
                                   Insurance Company of North America.

          10(aaab)       125       (i)  Amendment No. 1 dated  December 12,
                                        1996,  effective  June 12,  1996 to
                                        the note dated June 12, 1991 in the
                                        amount  of  $2.5  million  made  by
                                        Financial Industries Corporation in
                                        favor  of Investors  Life Insurance
                                        Company of California.

                         128       (ii) Amendment No. 1 dated  December 12,
                                        1996,  effective  June 12,  1996 to
                                        the "payment in kind" provisions of
                                        the note dated June 12, 1991 in the
                                        amount  of  $2.5  million  made  by
                                        Financial Industries Corporation in
                                        favor  of Investors  Life Insurance
                                        Company of North America.  

          10(aaac)       131       Amendment No. 1 dated December 12, 1996,
                                   effective  June  12,  1996 to  the  note
                                   dated July 30, 1993 in the amount of $30
                                   million made by Family  Life Corporation
                                   in  favor  of  Investors Life  Insurance
                                   Company of North America.

          10(aaad)       136       Amendment No. 1 dated December 12, 1996,
                                   effective  June  12,  1996  to  the note
                                   dated  July  30, 1993  in the  amount of
                                   $4.5   million   made  by   Family  Life
                                   Insurance Investment Company in favor of
                                   Investors  Life   Insurance  Company  of
                                   North America.

          10(aaae)       140       Amendment  Agreement  dated as  of April
                                   24, 1996 between Registrant  and certain
                                   banks identified therein.

          10(aaaf)       144       Waiver  Agreement  dated as  of December
                                   12, 1996 between Registrant  and certain
                                   banks identified therein.

          10(aaag)       149       Amendment  Agreement dated  December 12,
                                   1996   to   the   Option  Agreement   by
                                   Financial   Industries  Corporation   in
                                   favor   of   Investors  Life   Insurance
                                   Company of North  America and  Investors
                                   Life Insurance Company of California

          21             151       Subsidiaries of the Registrant.

          23             152       Consent of Price Waterhouse, LLP.

                                                            

           (1) Filed  with the Registrant's Annual Report  of Form 10-K for
               the fiscal year ended December 31, 1983, Commission File No.
               0-7290, and incorporated herein by reference.

           (2) Filed with the  Registrant's Registration Statement  on Form
               S-8 (Registration No.  2085333) and  incorporated herein  by
               reference; except  Amendment filed  December 14, 1988  (item
               (iv)), which  was filed with Registrant's  Current Report of
               Form 8-K dated January 12, 1989,  and incorporated herein by
               reference; and  Amendment filed February 9,  1990, which was
               filed with Registrant's  Annual Report on Form 10-K  for the
               fiscal year ended December 31, 1989, and incorporated herein
               by reference.


           (3) Filed with the Registrant's  Annual Report on Form 10-K  for
               the  fiscal year  ended December  31, 1984  and incorporated
               herein by reference.

           (4) Filed with the  Registrant's Annual Report of Form  10-K for
               the  fiscal year  ended December  31, 1985  and incorporated
               herein by reference.

           (5) Filed with  Registrant's Annual Report of Form  10_k for the
               fiscal year ended December 31, 1988, and incorporated herein
               by reference,

           (6) Filed  with Registrant;s Annual Report on  Form 10-K for the
               fiscal year ended December 31, 1989, and incorporated herein
               by reference.

           (7) Filed with Registrant's Annual Report  on Form 10-K for  the
               fiscal year ended December 31, 1990, and incorporated herein
               by reference.

           (8) Filed with Financial Industries Corporation's Current Report
               on  Form 8-K dated June 25, 1991, and incorporated herein by
               reference.

           (9) Filed with  Registrant's Annual Report on Form  10-K for the
               fiscal year ended 
               December 31, 1991, and incorporated herein by reference.

          (10) Filed  with Registrant's Annual Report on  Form 10-K for the
               fiscal year ended December 31, 1992, and incorporated herein
               by reference.

          (11) Filed with Registrant's Annual Report  on Form 10-K for  the
               fiscal year ended December 31, 1993, and incorporated herein
               by reference.

          (12) Filed with Registrant's Annual  Report on Form 10-K  for the
               fiscal year ended December 31, 1994, and incorporated herein
               by reference.

          (13) Filed with Registrant's  Annual Report on Form  10-K for the
               fiscal year ended December 31, 1995, and incorporated herein
               by reference.

                                  Exhibit 10 (aaaa)
                               FAMILY LIFE CORPORATION

                                   AMENDMENT NO. 2 

                                         TO 

                  11% SUBORDINATED SENIOR NOTE DATED JUNE 12, 1991 

          This Waiver and Amendment  Agreement (the "Agreement") is entered
          into effective  as of June 12,  1996, by and between  Family Life
          Corporation  (the "Company") and Investors Life Insurance Company
          of North America (the "Payee").


                                     WITNESSETH:

          WHEREAS,  the Company is the obligor and Payee is the payee under
          that certain  11% Subordinated Senior  Note dated June  12, 1991,
          due  June 12, 1998, in  the principal amount  of $22,500,000 (the
          "1991 Note"); and

          WHEREAS the Company is also the obligor under that certain Senior
          Subordinated Note dated July 30, 1993, due July 30,  2003, in the
          principal amount of $30,000,000 (the "1993 Note"); and 

          WHEREAS,   the Company has proposed a modification of the payment
          schedule and  the due dates under  each of the 1991  Note and the
          1993 Note; and 
           
          WHEREAS,  the  Company  has  requested  Payee  to  waive  certain
          provisions of the 1991 Note, as and to the extent hereinafter set
          forth; and

          WHEREAS,  the Company and Payee desire to  amend the 1991 Note as
          hereinafter set forth.

          NOW THEREFORE,  for good and valuable  consideration, the receipt
          and  sufficiency of  which  is hereby  acknowledged, the  parties
          hereto hereby agree as follows:


          1.   Defined  Terms.     Capitalized terms  used  herein and  not
               otherwise defined in this  Agreement shall have the meanings
               attributed to such  terms in  the 1991  Note, as  previously
               amended.


          2.   Waiver.   Payee hereby waives any provision of the 1991 Note
               and  any Event of Default  created thereby by  reason of the
               amendment of the 1993 Note as set forth in Exhibit A hereto.

          3.   Amendment to 1991 Note.  The 1991  Note is hereby amended as
               follows:

                    a.   The description of the  1991 Note which appears on
                         the   first   page   thereof   is   changed   from
                         "Subordinated Senior Note  due June  12, 1998"  to
                         "Subordinated Senior Note due September 12, 2001".


                    b.   The Payment Schedule attached  to the 1991 Note is
                         revised in its entirety to read as follows:


                                                            Unpaid
                                                            Principal
                                             Principal      Balance
                         Date of Payment     Amount Paid    Outstanding

                         06/12/96                           $22,500,000
                         12/12/96            $1,125,000     $21,375,000
                         03/12/97            $1,125,000     $20,250,000
                         06/12/97            $1,125,000     $19,125,000
                         09/12/97            $1,125,000     $18,000,000
                         12/12/97            $1,125,000     $16,875,000
                         03/12/98            $1,125,000     $15,750,000
                         06/12/98            $1,125,000     $14,624,000
                         09/12/98            $1,125,000     $13,500,000
                         12/12/98            $1,125,000     $12,375,000
                         03/12/99            $1,125,000     $11,250,000
                         06/12/99            $1,125,000     $10,125,000
                         09/12/99            $1,125,000     $ 9,000,000
                         12/12/99            $1,125,000     $ 7,875,000
                         03/12/00            $1,125,000     $ 6,750,000
                         06/12/00            $1,125,000     $ 5,625,000
                         09/12/00            $1,125,000     $ 4,500,000
                         12/12/00            $1,125,000     $ 3,375,000
                         03/12/01            $1,125,000     $ 2,250,000
                         06/12/01            $1,125,000     $ 1,125,000
                         09/12/01            $1,125,000     $       -0-


          4.   Representations and Warranty.  The Company hereby represents
               and warrants to Payee that after giving effect to the waiver
               and   amendment   herein   contained   (i)    all   of   the
               representations and  warranties contained  in the 1991  Note
               are true and correct as of the date hereof, (ii) no Event of
               Default  exists or is  continuing and (iii)  the Company has
               performed  all of the agreements on its part to be performed
               prior to the date hereof as set forth in the 1991 Note.

          5.   Reference to and Effect on the 1991 Note.

                    a.   On  or  after the  date  of  this Agreement,  each
                         reference  in   the  1991  Note,  as   amended  by
                         Amendment  No. 1  dated  July 30,  1993, to  "this
                         Note", "hereof", or words  of like import and each
                         reference  to  the 1991  Note  in other  documents
                         shall  mean and be a reference to the 1991 Note as
                         amended hereby.

                    b.   Except as  specifically amended and  waived above,
                         all of the terms,  conditions and covenants of the
                         1991 Note shall remain unaltered and in full force
                         and effect  and shall continue to  be binding upon
                         the  Company  in  all  respects   and  are  hereby
                         ratified and confirmed.

                    c.   The execution, delivery and effectiveness  of this
                         Agreement  shall not, except as expressly provided
                         herein,  operate as  a  waiver of  (i) any  right,
                         power or remedy  of the Payee under  the 1991 Note
                         or (ii) any Event of Default under the 1991 Note.


          IN WITNESS WHEREOF,   the  Company and Payee  have executed  this
          Agreement as of the 12th day of December, 1996.


          FAMILY LIFE CORPORATION

          By:                           

          Title:                        

          INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA

          By:                           

          Title:                        


                                 Consent of Guarantor



          Financial Industries Corporation, as guarantor under the Guaranty
          Agreement  dated  June  12,  1991,  in favor  of  Investors  Life
          Insurance Company of North America ("Investors-NA"), with respect
          to  a  loan in  the amount  of  $22,500,000 from  Investors-NA to
          Family   Life  Corporation,   which  loan   is  evidenced   by  a
          Subordinated Senior Note dated June 12, 1991 (the 1991 Guaranty")
          hereby consents to the  Amendment Agreement dated as of  June 12,
          1996  and hereby confirms and  agrees that the  1991 Guaranty is,
          and shall continue to be, in  full force and effect and is hereby
          confirmed and ratified in all respects.

          This Consent is executed and delivered as of December 12, 1996.




                                   FINANCIAL INDUSTRIES CORPORATION


                                   By:                              

                                   Title:                           

                                 Exhibit 10 (aaab)(i)

                           FINANCIAL INDUSTRIES CORPORATION

                                   AMENDMENT NO. 1 

                                         TO 

                      12% SUBORDINATED NOTE DATED JUNE 12, 1991 


          This Waiver and Amendment  Agreement (the "Agreement") is entered
          into  effective as  of June  12, 1996,  by and  between Financial
          Industries   Corporation  (the  "Company")   and  Investors  Life
          Insurance Company of North America, as successor to the interests
          of Investors Life Insurance Company of California (the "Payee").

                                     WITNESSETH:

          WHEREAS,  the Company is the obligor and Payee is the payee under
          that  certain 12% Subordinated Note dated June 12, 1991, due June
          12,  1998,  in the  principal  amount  of $2,500,000  (the  "1991
          Note"); and

          WHEREAS the Company is also the obligor under that certain Master
          Subordinated PIK Note dated June 12, 1991, due June 12, 1998 (the
          "PIK Note"); and 

          WHEREAS,   the Company has proposed a modification of the payment
          schedule and  the due dates under  each of the 1991  Note and the
          PIK Note; and 
           
          WHEREAS,  the  Company  has  requested  Payee  to  waive  certain
          provisions of the 1991 Note, as and to the extent hereinafter set
          forth; and

          WHEREAS, the Company and  Payee desire to amend the  1991 Note as
          hereinafter set forth.

          NOW THEREFORE,  for good and valuable  consideration, the receipt
          and  sufficiency of  which  is hereby  acknowledged, the  parties
          hereto hereby agree as follows:

          1.   Defined  Terms.     Capitalized  terms used  herein  and not
               otherwise defined in this  Agreement shall have the meanings
               attributed  to such terms  in the  1991 Note,  as previously
               amended.

          2.   Waiver.   Payee hereby waives any provision of the 1991 Note
               and  any Event of Default  created thereby by  reason of the
               amendment of the PIK Note as set forth in Exhibit A hereto.

          3.   Amendment to 1991 Note.  The 1991 Note is hereby amended  as
               follows:

                    a.   The description of the  1991 Note which appears on
                         the   first   page   thereof   is   changed   from
                         "Subordinated  Note   due   June  12,   1998"   to
                         "Subordinated Note due September 12, 2001".


                    b.   The Payment Schedule attached  to the 1991 Note is
                         revised in its entirety to read as follows:


                                                            Unpaid
                                                            Principal
                                             Principal      Balance
                         Date of Payment     Amount Paid    Outstanding

                         06/12/96                           $ 2,500,000
                         12/12/96            $  125,000     $ 2,375,000
                         03/12/97            $  125,000     $ 2,250,000
                         06/12/97            $  125,000     $ 2,125,000
                         09/12/97            $  125,000     $ 2,000,000
                         12/12/97            $  125,000     $ 1,875,000
                         03/12/98            $  125,000     $ 1,750,000
                         06/12/98            $  125,000     $ 1,625,000
                         09/12/98            $  125,000     $ 1,500,000
                         12/12/98            $  125,000     $ 1,375,000
                         03/12/99            $  125,000     $ 1,250,000
                         06/12/99            $  125,000     $ 1,125,000
                         09/12/99            $  125,000     $ 1,000,000
                         12/12/99            $  125,000     $   875,000
                         03/12/00            $  125,000     $   750,000
                         06/12/00            $  125,000     $   625,000
                         09/12/00            $  125,000     $   500,000
                         12/12/00            $  125,000     $   375,000
                         03/12/01            $  125,000     $   250,000
                         06/12/01            $  125,000     $   125,000
                         09/12/01            $  125,000     $       -0-


          4.   Representations and Warranty.  The Company hereby represents
               and warrants to Payee that after giving effect to the waiver
               and   amendment   herein   contained   (i)   all   of    the
               representations and  warranties contained  in the  1991 Note
               are true and correct as of the date hereof, (ii) no Event of
               Default exists  or is continuing  and (iii) the  Company has
               performed  all of the agreements on its part to be performed
               prior to the date hereof as set forth in the 1991 Note.

          5.   Reference to and Effect on the 1991 Note.

                    a.   On  or  after the  date  of  this Agreement,  each
                         reference   in  the  1991  Note  to  "this  Note",
                         "hereof",  or  words  of  like   import  and  each
                         reference  to  the  1991 Note  in  other documents
                         shall  mean and be a reference to the 1991 Note as
                         amended hereby.

                    b.   Except as specifically  amended and waived  above,
                         all of the terms,  conditions and covenants of the
                         1991 Note shall remain unaltered and in full force
                         and effect  and shall continue to  be binding upon
                         the  Company  in  all  respects  and   are  hereby
                         ratified and confirmed.

                    c.   The execution, delivery  and effectiveness of this
                         Agreement shall not, except as  expressly provided
                         herein,  operate as  a  waiver of  (i) any  right,
                         power or remedy of  the Payee under the 1991  Note
                         or (ii) any Event of Default under the 1991 Note.


          IN WITNESS WHEREOF,   the  Company and Payee  have executed  this
          Agreement as of the 12th day of December, 1996.


          FINANCIAL INDUSTRIES CORPORATION


          By:                           

          Title:                        


          INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA

          By:                           

          Title:                        

                                Exhibit 10 (aaab) (ii)

                           FINANCIAL INDUSTRIES CORPORATION

                                   AMENDMENT NO. 1 

                                         TO 

                  MASTER SUBORDINATED PIK NOTE DATED JUNE 12, 1991 


          This Waiver and Amendment  Agreement (the "Agreement") is entered
          into  effective as  of June  12, 1996,  by and  between Financial
          Industries   Corporation  (the  "Company")   and  Investors  Life
          Insurance Company of North America, as successor to the interests
          of Investors Life Insurance Company of California (the "Payee").

                                     WITNESSETH:

          WHEREAS,  the Company is the obligor and Payee is the payee under
          that certain Master  Subordinated PIK Note  dated June 12,  1991,
          due June 12, 1998 (the "PIK Note"); and

          WHEREAS  the Company is also  the obligor under  that certain 12%
          Subordinated Note dated June  12, 1991, due June 12, 1998, in the
          principal amount of $2,500,000 (the "1991 Note"); and 

          WHEREAS,   the Company has proposed a modification of the payment
          schedule  and the due  dates under each  of the PIK  Note and the
          1991 Note; and 
           
          WHEREAS,  the  Company  has  requested  Payee  to  waive  certain
          provisions of the PIK Note, as and to the  extent hereinafter set
          forth; and

          WHEREAS, the Company and  Payee desire to amend  the PIK Note  as
          hereinafter set forth.

          NOW THEREFORE,  for good and valuable  consideration, the receipt
          and  sufficiency of  which  is hereby  acknowledged, the  parties
          hereto hereby agree as follows:


          1.   Defined Terms.     Capitalized  terms  used herein  and  not
               otherwise defined in this  Agreement shall have the meanings
               attributed  to such  terms in  the PIK  Note, as  previously
               amended.

          2.   Waiver.  Payee hereby  waives any provision of the  PIK Note
               and  any Event of Default  created thereby by  reason of the
               amendment of the 1991 Note as set forth in Exhibit A hereto.

          3.   Amendment to  PIK Note.  The  PIK Note is hereby  amended as
               follows:

                    a.   The description  of the PIK Note  which appears on
                         the first  page thereof  is  changed from  "Master
                         Subordinated  PIK  Note  due  June  12,  1998"  to
                         "Master  Subordinated PIK  Note due  September 12,
                         2001".


                    b.   The Payment  Schedule attached to the  PIK Note is
                         revised in its entirety to read as follows:


                                                            Unpaid
                                                            Principal
                                             Principal      Balance
                         Date of Payment     Amount Paid    Outstanding

                         06/12/96                           $ 1,977,119.00
                         12/12/96            $ 98,855.95    $ 1,878,263.05
                         03/12/97            $ 98,855.95    $ 1,779,407.10
                         06/12/97            $ 98,855.95    $ 1,680,551.15
                         09/12/97            $ 98,855.95    $ 1,581,695.20
                         12/12/97            $ 98,855.95    $ 1,482,839.25
                         03/12/98            $ 98,855.95    $ 1,383,983.30
                         06/12/98            $ 98,855.95    $ 1,285,127.35
                         09/12/98            $ 98,855.95    $ 1,186,271.40
                         12/12/98            $ 98,855.95    $ 1,087,415.45
                         03/12/99            $ 98,855.95    $   988,559.50
                         06/12/99            $ 98,855.95    $   889,703.55
                         09/12/99            $ 98,855.95    $   790,847.60
                         12/12/99            $ 98,855.95    $   691,991.65
                         03/12/00            $ 98,855.95    $   593,135.70
                         06/12/00            $ 98,855.95    $   494,279.75
                         09/12/00            $ 98,855.95    $   395,423.80
                         12/12/00            $ 98,855.95    $   296,567.85
                         03/12/01            $ 98,855.95    $   197,711.90
                         06/12/01            $ 98,855.95    $    98,855.95 
                         09/12/01            $ 98,855.95    $       -0-


          4.   Representations and Warranty.  The Company hereby represents
               and warrants to Payee that after giving effect to the waiver
               and   amendment    herein   contained   (i)   all   of   the
               representations and warranties contained in the PIK Note are
               true and correct  as of  the date hereof,  (ii) no Event  of
               Default exists or  is continuing and  (iii) the Company  has
               performed  all of the agreements on its part to be performed
               prior to the date hereof as set forth in the PIK Note.

          5.   Reference to and Effect on the PIK Note.

                    a.   On  or  after the  date  of  this Agreement,  each
                         reference  in  the   PIK  Note  to   "this  Note",
                         "hereof",  or  words  of  like   import  and  each
                         reference to the PIK Note in other documents shall
                         mean and be a reference to the PIK Note as amended
                         hereby.

                    b.   Except as specifically  amended and waived  above,
                         all of the terms,  conditions and covenants of the
                         PIK Note shall remain  unaltered and in full force
                         and effect  and shall continue to  be binding upon
                         the  Company  in  all  respects  and   are  hereby
                         ratified and confirmed.

                    c.   The execution, delivery  and effectiveness of this
                         Agreement shall not, except as  expressly provided
                         herein,  operate as  a  waiver of  (i) any  right,
                         power or remedy of the Payee under the PIK Note or
                         (ii) any Event of Default under the PIK Note.


          IN WITNESS WHEREOF,   the  Company and Payee  have executed  this
          Agreement as of the 12th day of December, 1996.


          FINANCIAL INDUSTRIES CORPORATION


          By:                           

          Title:                        



          INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA

          By:                           

          Title:                        


                                   Exhibit 10(aaac)
                               FAMILY LIFE CORPORATION

                                   AMENDMENT NO. 1 

                                         TO 

                   9% SUBORDINATED SENIOR NOTE DATED JULY 30, 1993 


          This Waiver and Amendment  Agreement (the "Agreement") is entered
          into effective  as of June 12,  1996, by and  between Family Life
          Corporation (the "Company") and  Investors Life Insurance Company
          of North America (the "Payee").


                                     WITNESSETH:

          WHEREAS,  the Company is the obligor and Payee is the payee under
          that certain 9% Subordinated Senior Note dated July 30, 1993, due
          July  30, 2003, in the principal amount of $30,000,000 (the "1993
          Note"); and

          WHEREAS  the Company is also  the obligor under  that certain 11%
          Senior  Subordinated Note dated June 12, 1991, due June 12, 1998,
          in the principal amount of $22,500,000 (the "1991 Note"); and 

          WHEREAS,   the Company has proposed a modification of the payment
          schedule and  the due dates under  each of the 1993  Note and the
          1991 Note; and 
           
          WHEREAS,  the  Company  has  requested  Payee  to  waive  certain
          provisions of the 1993 Note, as and to the extent hereinafter set
          forth; and

          WHEREAS, the Company  and Payee desire to amend the  1993 Note as
          hereinafter set forth.

          NOW THEREFORE,  for good and valuable  consideration, the receipt
          and  sufficiency of  which  is hereby  acknowledged, the  parties
          hereto hereby agree as follows:


          1.   Defined  Terms.     Capitalized  terms used  herein  and not
               otherwise defined in this  Agreement shall have the meanings
               attributed  to such terms  in the  1993 Note,  as previously
               amended.

          2.   Waiver.   Payee hereby waives any provision of the 1993 Note
               and  any Event of Default  created thereby by  reason of the
               amendment of the 1991 Note as set forth in Exhibit A hereto.

          3.   Amendment to 1993 Note.  The 1993 Note is hereby amended  as
               follows:

                    a.   The description of the  1993 Note which appears on
                         the   first   page   thereof   is   changed   from
                         "Subordinated Senior  Note due  July 30, 2003"  to
                         "Subordinated Senior Note due September 12, 2006".

                    b.   The Payment Schedule attached  to the 1993 Note is
                         revised in its entirety to read as follows:


                                                            Unpaid
                                                            Principal
                                             Principal      Balance
                         Date of Payment     Amount Paid    Outstanding

                         06/12/96                           $30,000,000
                         12/12/96            $  163,540     $29,836,460
                         03/12/97            $  163,540     $29,672,920
                         06/12/97            $  163,540     $29,509,380
                         09/12/97            $  163,540     $29,345,840
                         12/12/97            $  163,540     $29,182,300
                         03/12/98            $  163,540     $29,018,760
                         06/12/98            $  163,540     $28,855,220
                         09/12/98            $  163,540     $28,691,680
                         12/12/98            $  163,540     $28,528,140
                         03/12/99            $  163,540     $28,364,600
                         06/12/99            $  163,540     $28,201,060
                         09/12/99            $  163,540     $28,037,520
                         12/12/99            $  163,540     $27,873,980
                         03/12/00            $  163,540     $27,710,440
                         06/12/00            $  163,540     $27,546,900
                         09/12/00            $  163,540     $27,383,360
                         12/12/00            $  163,540     $27,219,820
                         03/12/01            $  163,540     $27,056,280
                         06/12/01            $  163,540     $26,892,740
                         09/12/01            $  163,540     $26,729,200
                         12/12/01            $1,336,458     $25,392,742
                         03/12/02            $1,336,458     $24,056,284
                         06/12/02            $1,336,458     $22,719,826
                         09/12/02            $1,336,458     $21,383,368
                         12/12/02            $1,336,458     $20,046,910
                         03/12/03            $1,336,458     $18,710,452
                         06/12/03            $1,336,458     $17,373,994
                         09/12/03            $1,336,458     $16,037,536
                         12/12/03            $1,336,458     $14,701,078
                         03/12/04            $1,336,458     $13,364,620
                         06/12/04            $1,336,458     $12,028,162
                         09/12/04            $1,336,458     $10,691,704
                         12/12/04            $1,336,458     $ 9,355,246


                                                            Unpaid
                                                            Principal
                                             Principal      Balance
                         Date of Payment     Amount Paid    Outstanding



                         03/12/05            $1,336,458     $ 8,018,788
                         06/12/05            $1,336,458     $ 6,682,330
                         09/12/05            $1,336,458     $ 5,345,872
                         12/12/05            $1,336,458     $ 4,009,414
                         03/12/06            $1,336,458     $ 2,672,956
                         06/12/06            $1,336,458     $ 1,336,498
                         09/12/06            $1,336,498     $       -0-


          4.   Representations and Warranty.  The Company hereby represents
               and warrants to Payee that after giving effect to the waiver
               and   amendment   herein   contained   (i)    all   of   the
               representations and  warranties contained  in the 1993  Note
               are true and correct as of the date hereof, (ii) no Event of
               Default exists or  is continuing and  (iii) the Company  has
               performed  all of the agreements on its part to be performed
               prior to the date hereof as set forth in the 1993 Note.


          5.   Reference to and Effect on the 1993 Note.

                    a.   On  or  after the  date  of  this Agreement,  each
                         reference  in  the  1993  Note  to  "this   Note",
                         "hereof",  or  words  of   like  import  and  each
                         reference  to  the 1993  Note  in other  documents
                         shall  mean and be a reference to the 1993 Note as
                         amended hereby.

                    b.   Except  as specifically amended  and waived above,
                         all of the terms,  conditions and covenants of the
                         1993 Note shall remain unaltered and in full force
                         and effect  and shall continue to  be binding upon
                         the  Company  in  all  respects   and  are  hereby
                         ratified and confirmed.

                    c.   The  execution, delivery and effectiveness of this
                         Agreement shall not,  except as expressly provided
                         herein,  operate as  a  waiver of  (i) any  right,
                         power or  remedy of the Payee under  the 1993 Note
                         or (ii) any Event of Default under the 1993 Note.

          IN WITNESS WHEREOF,   the  Company and Payee  have executed  this
          Agreement as of the 12th day of December 1996.




          FAMILY LIFE CORPORATION

          By:                           

          Title:                        




          INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA

          By:                           

          Title:                        



                                 Consent of Guarantor



          Financial Industries Corporation, as guarantor under the Guaranty
          Agreement  dated  July  30,  1993, in  favor  of  Investors  Life
          Insurance Company of North America ("Investors-NA"), with respect
          to  a  loan in  the amount  of  $30,000,000 from  Investors-NA to
          Family   Life  Corporation,   which  loan   is  evidenced   by  a
          Subordinated Senior Note dated July 30, 1993 (the 1993 Guaranty")
          hereby consents to the  Amendment Agreement dated as of  June 12,
          1996,  and hereby  confirms and agrees that the 1993 Guaranty is,
          and shall continue to be, in full force and effect  and is hereby
          confirmed and ratified in all respects.

          This Consent is executed and delivered as of December 12, 1996.




                                   FINANCIAL INDUSTRIES CORPORATION


                                   By:                              

                                   Title:                           



                                  Exhibit 10 (aaad)

                       FAMILY LIFE INSURANCE INVESTMENT COMPANY

                                   AMENDMENT NO. 1 

                                         TO 

                   9% SUBORDINATED SENIOR NOTE DATED JULY 30, 1993 


          This  Amendment  Agreement  (the  "Agreement")  is  entered  into
          effective  as  of  June 12,  1996,  by  and  between Family  Life
          Insurance  Investment Company (the  "Company") and Investors Life
          Insurance Company of North America (the "Payee").

                                     WITNESSETH:

          WHEREAS,  the Company is the obligor and Payee is the payee under
          that certain 9% Subordinated Senior Note dated July 30, 1993, due
          July 30, 2003, in  the principal amount of $4,500,000  (the "1993
          Note"); and

          WHEREAS,   the Company has proposed a modification of the payment
          schedule and the due dates under the 1993 Note; and 

          WHEREAS, the Company and Payee  desire to amend the 1993 Note  as
          hereinafter set forth.

          NOW THEREFORE,  for good and valuable  consideration, the receipt
          and  sufficiency of  which  is hereby  acknowledged, the  parties
          hereto hereby agree as follows:


          1.   Defined  Terms.     Capitalized terms  used  herein and  not
               otherwise defined in this  Agreement shall have the meanings
               attributed  to such  terms in the  1993 Note,  as previously
               amended.


          2.   Amendment to 1993  Note.  The 1993 Note is hereby amended as
               follows:

                    a.   The description of the  1993 Note which appears on
                         the   first   page   thereof   is   changed   from
                         "Subordinated  Senior Note  due July 30,  2003" to
                         "Subordinated Senior Note due September 12, 2006".


                    b.   The Payment Schedule attached  to the 1993 Note is
                         revised in its entirety to read as follows:

                                                            Unpaid
                                                            Principal
                                             Principal      Balance
                         Date of Payment     Amount Paid    Outstanding

                         06/12/96                           $ 4,500,000
                         12/12/96            $   24,531     $ 4,475,469
                         03/12/97            $   24,531     $ 4,450,938
                         06/12/97            $   24,531     $ 4,426,407
                         09/12/97            $   24,531     $ 4,401,876
                         12/12/97            $   24,531     $ 4,377,345
                         03/12/98            $   24,531     $ 4,352,814
                         06/12/98            $   24,531     $ 4,328,283
                         09/12/98            $   24,531     $ 4,303,752
                         12/12/98            $   24,531     $ 4,279,221
                         03/12/99            $   24,531     $ 4,254,690
                         06/12/99            $   24,531     $ 4,230,159
                         09/12/99            $   24,531     $ 4,205,628
                         12/12/99            $   24,531     $ 4,181,097
                         03/12/00            $   24,531     $ 4,156,566
                         06/12/00            $   24,531     $ 4,132,035
                         09/12/00            $   24,531     $ 4,107,504
                         12/12/00            $   24,531     $ 4,082,973
                         03/12/01            $   24,531     $ 4,058,442
                         06/12/01            $   24,531     $ 4,033,911
                         09/12/01            $   24,531     $ 4,009,380
                         12/12/01            $  200,469     $ 3,808,911
                         03/12/02            $  200,469     $ 3,608,442
                         06/12/02            $  200,469     $ 3,407,973
                         09/12/02            $  200,469     $ 3,207,504
                         12/12/02            $  200,469     $ 3,007,035
                         03/12/03            $  200,469     $ 2,806,566
                         06/12/03            $  200,469     $ 2,606,097
                         09/12/03            $  200,469     $ 2,405,628
                         12/12/03            $  200,469     $ 2,205,159
                         03/12/04            $  200,469     $ 2,004,690
                         06/12/04            $  200,469     $ 1,804,221
                         09/12/04            $  200,469     $ 1,603,752
                         12/12/04            $  200,469     $ 1,403,283
                         03/12/05            $  200,469     $ 1,202,814
                         06/12/05            $  200,469     $ 1,002,345
                         09/12/05            $  200,469     $   801,876
                         12/12/05            $  200,469     $   601,407
                         03/12/06            $  200,469     $   400,938
                         06/12/06            $  200,469     $   200,469
                         09/12/06            $  200,469     $       -0-


          3.   Representations and Warranty.  The Company hereby represents
               and  warrants  to Payee  that  after  giving  effect to  the
               amendment herein  contained (i)  all of  the representations
               and  warranties  contained in  the  1993 Note  are  true and
               correct  as of  the date  hereof, (ii)  no Event  of Default
               exists or is continuing and  (iii) the Company has performed
               all of the  agreements on its part to be  performed prior to
               the date hereof as set forth in the 1993 Note.


          4.   Reference to and Effect on the 1993 Note.

                    a.   On  or  after the  date  of  this Agreement,  each
                         reference   in  the  1993  Note  to  "this  Note",
                         "hereof",  or  words  of  like   import  and  each
                         reference  to  the  1993 Note  in  other documents
                         shall  mean and be a reference to the 1993 Note as
                         amended hereby.

                    b.   Except as  specifically amended and  waived above,
                         all of the terms,  conditions and covenants of the
                         1993 Note shall remain unaltered and in full force
                         and effect  and shall continue to  be binding upon
                         the  Company  in  all  respects  and   are  hereby
                         ratified and confirmed.

                    c.   The execution, delivery and effectiveness  of this
                         Agreement  shall not, except as expressly provided
                         herein,  operate as  a  waiver of  (i) any  right,
                         power or remedy of the  Payee under the 1993  Note
                         or (ii) any Event of Default under the 1993 Note.


          IN WITNESS WHEREOF,   the  Company and Payee  have executed  this
          Agreement as of the 12th day of December 1996.


          FAMILY LIFE INSURANCE INVESTMENT COMPANY

          By:                           

          Title:                        


          INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA

          By:                           

          Title:                        



                                 Consent of Guarantor

          Financial Industries Corporation, as guarantor under the Guaranty
          Agreement  dated July  30,  1993,  in  favor  of  Investors  Life
          Insurance Company of North America ("Investors-NA"), with respect
          to a loan in the amount of $4,500,000 from Investors-NA to Family
          Life  Insurance Investment Company, which loan  is evidenced by a
          Subordinated Senior Note dated July 30, 1993 (the 1993 Guaranty")
          hereby consents to the  Amendment Agreement dated as of  June 12,
          1996  and hereby confirms and  agrees that the  1993 Guaranty is,
          and shall  continue to be, in full force and effect and is hereby
          confirmed and ratified in all respects.

          This Consent is executed and delivered as of December 12, 1996.




                                   FINANCIAL INDUSTRIES CORPORATION


                                   By:                              

                                   Title:                           


                                  Exhibit 10 (aaae)
                          INTERCONTINENTAL LIFE CORPORATION

                                 AMENDMENT AGREEMENT

               This Amendment  Agreement (the "Agreement")  is entered into
          as  of  April  24,  1996  by   and  among  InterContinental  Life
          Corporation  (the   "Company"),  the  undersigned   lenders  (the
          "Lenders") and The First  National Bank of Chicago, as  agent for
          the Lenders (the "Agent").

                                W I T N E S S E T H :

               WHEREAS, the  Company, the Lenders and the Agent are parties
          to that certain Amended and Restated Credit Agreement dated as of
          January 29, 1993 (as amended, the "Credit Agreement");

               Whereas,  the Company, the  Lenders and the  Agent desire to
          amend the Credit Agreement as hereinafter set forth.

               NOW,  THEREFORE, for  good and  valuable consideration,  the
          receipt  and sufficiency  of  which is  hereby acknowledged,  the
          parties hereto hereby agree as follows:

          1.   Defined  Terms.    Capitalized  terms used  herein  and  not
          otherwise defined  herein shall  have the meanings  attributed to
          such terms in the Credit Agreement.


          2.  Amendment  to Credit  Agreement.  Section  6.16(b)(v) of  the
          Credit Agreement is hereby  amended by deleting the reference  to
          "$24,000,000"  contained  in  Section  6.16(b)(v)  and  inserting
          "$46,000,000" in lieu thereof.

          3.   Conditions Precedent.  Section 2 of this Agreement shall not
          become  effective unless and until  the Company has furnished, or
          caused  to be furnished, to the Agent, with sufficient copies for
          each Lender, the following:

                    (i)   A consent from FIC,  in the form of  Exhibit A to
          this Amendment.

                    (ii)  Copies, certified by  the Secretary  or Assistant
          Secretary of the  Company, of its Board of  Directors resolutions
          authorizing the execution of this Agreement.

                    (iii)  An  incumbency  certificate,  executed   by  the
          Secretary  or Assistant  Secretary  of the  Company, which  shall
          identify by name and title and bear the signature of the officers
          of  the Company  authorized to  sign this  Agreement, upon  which
          certificate each Lender shall be entitled  to rely until informed
          of any change in writing by the Company.

          4.   Representation  and Warranty.  The Company hereby represents
          and  warrants  to the  Lenders that  after  giving effect  to the
          amendment  herein contained  (i) all  of the  representations and
          warranties contained in the Credit Agreement are true and correct
          as  of  the date  hereof, (ii)  no  Default or  Unmatured Default
          exists or is continuing  and (iii) the Company has  performed all
          the agreements  on its  part to  be performed  prior to  the date
          hereof as set forth in the Credit Agreement.

          5.   Effectiveness  of Amendment.   This  Agreement  shall become
          effective as of the date first above written provided that all of
          the conditions precedent set forth in Section 3 of this Agreement
          are  satisfied and upon receipt  by the Agent  of counterparts of
          this Agreement  duly executed  by the  Company  and the  Required
          Lenders.

          6.   Reference to and Effect on the Credit Agreement.

                    a. Upon the  effectiveness of Section  2 hereof, on  or
                    after  the date  hereof  each reference  in the  Credit
                    Agreement to "this  Agreement," "hereunder,"  "hereof,"
                    "herein" or words of like import and each reference  to
                    the  Credit  Agreement  in  the  Notes  and  all  other
                    documents   (the   "Loan   Documents")   delivered   in
                    connection with the Credit  Agreement shall mean and be
                    a reference to the Credit Agreement as amended hereby.

                    b.  Except as  specifically amended  above, all  of the
                    terms, conditions and covenants of the Credit Agreement
                    and all other Loan Documents shall remain unaltered and
                    in  full force  and  effect and  shall  continue to  be
                    binding upon the Company in all respects and are hereby
                    ratified and confirmed.

                    c.  The execution, delivery  and effectiveness  of this
                    Agreement  shall  not,  except  as  expressly  provided
                    herein,  operate as a waiver of (i) any right, power or
                    remedy  of the  Lenders or the  Agent under  the Credit
                    Agreement  or any  of the  Loan Documents, or  (ii) any
                    Default  or   Unmatured   Default  under   the   Credit
                    Agreement.

          7.   Costs, Expenses and  Taxes.   The Company agrees  to pay  on
          demand all costs and expenses of the Agent in connection with the
          preparation, execution and delivery  of this Agreement, including
          the reasonable fees and out-of-pocket expenses of counsel for the
          Agent with respect thereto.

          8.   CHOICE  OF  LAW.    THIS AGREEMENT  SHALL  BE  CONSTRUED  IN
          ACCORDANCE  WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
          OF  THE  STATE OF  ILLINOIS, BUT  GIVING  EFFECT TO  FEDERAL LAWS
          APPLICABLE TO NATIONAL BANKS.

          9.   Execution in  Counterparts.  This Agreement  may be executed
          in  any number of counterparts and by different parties hereto in
          separate counterparts, each  of which when  so executed shall  be
          deemed  to be an original  and all of  which taken together shall
          constitute one and the same agreement.

               IN WITNESS WHEREOF, the Company, the undersigned Lenders and
          the Agent have executed this Agreement as of the date first above
          written.

                                        INTERCONTINENTAL LIFE CORPORATION

                                        By:                              

                                        Title:                           

                                        THE FIRST NATIONAL BANK OF CHICAGO,
                                        Individually and as Agent

                                        By:                              

                                        Title:                           

                                        BARCLAYS BANK, PLC

                                        By:                              

                                        Title:                           

                                        FIRST UNION NATIONAL BANK OF NORTH
                                        CAROLINA

                                        By:                              

                                        Title:                           

                                        FLEET NATIONAL BANK OF CONNECTICUT

                                        By:                              

                                        Title:                           

                                        CORESTATES PHILADELPHIA NATIONAL
                                        BANK N.A.

                                        By:                              

                                        Title:                           

                                      EXHIBIT A


                                 CONSENT OF GUARANTOR

               Financial Industries  Corporation,  as guarantor  under  the
          Amended  and  Restated  Guaranty  dated  January  29,  1993  (the
          "Guaranty")  in favor  of the  Lenders party  to the  Amended and
          Restated  Credit  Agreement  dated  as of  January  29,  1993 (as
          amended, the "Credit Agreement") hereby consents to the Amendment
          Agreement  dated as  of April  24, 1996  and hereby  confirms and
          agrees that the Guaranty  is, and shall  continue to be, in  full
          force  and effect  and is  hereby confirmed  and ratified  in all
          respects.

               This Consent is executed and delivered as of April 24, 1996.

                                        FINANCIAL INDUSTRIES CORPORATION

                                        By:                              

                                        Title:                           

                                  Exhibit 10 (aaaf)
                          INTERCONTINENTAL LIFE CORPORATION

                                   WAIVER AGREEMENT

          This Consent  and Waiver  Agreement (the "Agreement")  is entered
          into as of December  12, 1996 by and among  InterContinental Life
          Corporation   (the  "Company")   the  undersigned   lenders  (the
          "Lenders") and The First  National Bank of Chicago, as  agent for
          the Lenders (the "Agent").

                                W I T N E S S E T H :

               WHEREAS,  the Company, the Lenders and the Agent are parties
          to that certain Amended and Restated Credit Agreement dated as of
          January 29, 1993, (as amended, the "Credit Agreement"); and

               WHEREAS, Family  Life Corporation ("Family") and Investors -
          North America have proposed to amend the $22,500,000 Subordinated
          Senior  Note  dated  June  12,  1991  and  issued  by  Family  to
          Investors-North America (as amended, the ""$22.5 Million  Note"),
          the form of which amendment is attached hereto as Exhibit A  (the
          "$22.5 Million Note Amendment"); and

               WHEREAS, Family and Investors-North America have proposed to
          amend  the $30,000,000  Subordinated Senior  Note dated  July 30,
          1993 and  issued by Family  to Investors-North America  (the "$30
          Million Note"), the form of which amendment is attached hereto as
          Exhibit B (the "$30 Million Note Amendment"); and 

               WHEREAS,   Family   Life   Insurance    Investment   Company
          ("Holdings") and  Investors-North America have  proposed to amend
          the $4,500,000 Subordinated  Senior Note dated July  30, 1993 and
          issued by  Holdings to Investors-North America  (the "4.5 Million
          Note"), the form of which amendment is attached hereto as Exhibit
          C  (the "$4.5 Million Note Amendment"); and

               WHEREAS, FIC  and Investors-North  America have  proposed to
          amend  the $2,500,000 Subordinated  Note dated June  12, 1991 and
          issued by  FIC to Investors Life Insurance  Company of California
          ("Investors-CA"),  and acquired  by  Investors-North America  the
          merger of Investors-CA with and into Investors-North America (the
          "2.5  Million  Note"), the  form of  which amendment  is attached
          hereto as Exhibit D (the "$2.5 Million Note Amendment"); and

               WHEREAS, FIC  and Investors-North America  have proposed  to
          amend  the Master Subordinated PIK  Note dated June  12, 1991 and
          issued by  FIC to  Investors-CA, and acquired  by Investors-North
          America upon the merger of Investors-CA with and into  Investors-
          North  America (the "PIK Note"),  the form of  which amendment is
          attached hereto as Exhibit E (the "PIK Note Amendment");and

               WHEREAS,  the Company  has  requested the  Lenders to  waive
          certain provisions of the Credit Agreement in connection with the
          above  described amendments,  as  and to  the extent  hereinafter
          described.

               NOW, THEREFORE,  for  good and  valuable consideration,  the
          receipt  and sufficiency  of  which is  hereby acknowledged,  the
          parties hereto hereby agree as follows:

          1.    Defined  Terms.   Capitalized  terms  used  herein and  not
          otherwise  defined  in this  Agreement  shall  have the  meanings
          attributed to such terms in the Credit Agreement.

          2.  Waiver.  The Lenders hereby waive any violation of the Credit
          Agreement and any Default  created thereby attributable solely to
          the Company's breach of the covenant set forth in Section 6.21 of
          the Credit Agreement  by reason of the  execution by Investors-NA
          of (a) the $22.5 Million Note Amendment, (b) the $30 Million Note
          Amendment,  (c) the  $4.5  Million Note  Amendment, (d)  the $2.5
          Million  Note Amendment  and (e)  the PIK  Note Amendment.   This
          waiver is only  applicable and  shall only be  effective in  this
          specific  instance and for the specific purpose for which made or
          given.

          3.  Conditions Precedent.   Section 2 of this Agreement shall not
          become effective unless  and until the Company  has furnished, or
          caused  to be furnished, to the Agent, with sufficient copies for
          each Lender, the following:

                    (i)   A consent from FIC,  in the form of  Exhibit F to
                    this Agreement;

                    (ii)   Copies, certified by the  Secretary or Assistant
                    Secretary  of the  Company, of  its Board  of Directors
                    resolutions   authorizing   the   execution   of   this
                    Agreement;

                    (iii)    An  incumbency certificate,  executed  by  the
                    Secretary or Assistant Secretary of the Company,  which
                    shall identify by name and title and bear the signature
                    of the  officers of the Company authorized to sign this
                    Agreement, upon which certificate each  Lender shall be
                    entitled  to  rely  until  informed of  any  change  in
                    writing by the Company;

                    (iii)    Evidence  satisfactory  to the  Agent  of  the
                    execution  and  delivery by  (1)  Family  of the  $22.5
                    Million   Note  Amendment  and  the  $30  Million  Note
                    Amendment, together with  FIC's consent  as grantor  of
                    the $22.5  Million Note and  the $30 Million  Note, (2)
                    Holdings of the $4.5 Million Note Amendment and (3) FIC
                    of the $2.5  Million Note  Amendment and  the PIK  Note
                    Amendment.

          4.   Representation  and Warranty.  The Company hereby represents
          and  warrants  to the  Lenders that  after  giving effect  to the
          waiver  herein  contained  (i)  all of  the  representations  and
          warranties contained in the Credit Agreement are true and correct
          as the date hereof,  (ii) no Default or Unmatured  Default exists
          or  is continuing  and (iii)  the Company  has performed  all the
          agreements on its  part to be performed prior to  the date hereof
          as set forth in the Credit Agreement.

          5.   Effectiveness  of  Waiver.    This  Agreement  shall  become
          effective  as of the date  first above written  provided that all
          the conditions precedent set forth in Section 3 of this Agreement
          are  satisfied and upon receipt  by the Agent  of counterparts of
          this Agreement  duly executed  by the  Company  and the  Required
          Lenders.

          6.   Reference to and Effect on the Credit Agreement.

                    a.  Upon the  effectiveness of Section 2 hereof,  on or
                    after  the date  hereof  each reference  in the  Credit
                    Agreement to "this  Agreement," "hereunder,"  "hereof,"
                    "herein" or words of like import and each reference  to
                    the  Credit  Agreement  in  the  Notes  and  all  other
                    documents   (the   "Loan   Documents")   delivered   in
                    connection with the Credit  Agreement shall mean and be
                    a reference to the Credit Agreement as affected hereby.

                    b.   Except as  specifically waived  above, all of  the
                    terms, conditions and covenants of the Credit Agreement
                    and all other Loan Documents shall remain unaltered and
                    in  full force  and  effect and  shall  continue to  be
                    binding upon the Company in all respects and are hereby
                    ratified and confirmed.

                    c.   The execution, delivery and  effectiveness of this
                    Agreement  shall  not,  except  as  expressly  provided
                    herein,  operate as a waiver of (i) any right, power or
                    remedy  of the  Lenders or the  Agent under  the Credit
                    Agreement  or any  of the  Loan Documents, or  (ii) any
                    Default  or   Unmatured   Default  under   the   Credit
                    Agreement.

          7.   Costs, Expenses and  Taxes.   The Company agrees  to pay  on
          demand all costs and expenses of the Agent in connection with the
          preparation, execution and delivery  of this Agreement, including
          the reasonable fees and out-of-pocket expenses of counsel for the
          Agent with respect thereto.

          8.   CHOICE  OF  LAW.    THIS AGREEMENT  SHALL  BE  CONSTRUED  IN
          ACCORDANCE  WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS)
          OF  THE  STATE OF  ILLINOIS, BUT  GIVING  EFFECT TO  FEDERAL LAWS
          APPLICABLE TO NATIONAL BANKS.

          9.   Execution in  Counterparts.  This Agreement  may be executed
          in  any number of counterparts and by different parties hereto in
          separate counterparts, each  of which when  so executed shall  be
          deemed  to be an original  and all of  which taken together shall
          constitute one and the same agreement.

               IN WITNESS WHEREOF, the Company, the undersigned Lenders and
          the Agent have executed this Agreement as of the date first above
          written.

                                        INTERCONTINENTAL LIFE CORPORATION

                                        By:                                

                                        Title:                             

                                        THE FIRST NATIONAL BANK OF CHICAGO,
                                        Individually and as Agent

                                        By:                                

                                        Title:                             

                                        BARCLAYS BANK, PLC

                                        By:                                

                                        Title:                             

                                        FIRST UNION NATIONAL BANK OF NORTH
                                        CAROLINA

                                        By:                                

                                        Title:                             

                                        FLEET NATIONAL BANK OF CONNECTICUT

                                        By:                                

                                        Title:                             

                                        CORESTATES PHILADELPHIA NATIONAL
                                        BANK N.A.

                                        By:                                

                                        Title:                             


                                  Exhibit 10 (aaag)

                           FINANCIAL INDUSTRIES CORPORATION

                                  AMENDMENT NUMBER 1

                        TO THE MARCH 21, 1991 OPTION AGREEMENT


          This Amendment Agreement (hereinafter the "Amendment") is made by
          Financial Industries Corporation ("FIC"), effective as of June
          12, 1996, in favor of Investors Life Insurance Company of North
          America, individually and as successor-in-interest to Investors
          Life Insurance Company of California.

          Reference is made to that certain option agreement dated March
          21, 1991 by FIC in favor of Investors Life Insurance Company of
          North America and Investors Life Insurance Company of California
          (the "Option Agreement").

          All capitalized terms not defined herein shall have the meanings
          established in the Option Agreement.

                                     WITNESSETH:

          WHEREAS,  Investors Life Insurance Company of North America and
          Investors Life Insurance Company of California granted loans to
          FIC, or subsidiaries thereof, in the amounts of $22.5 million and
          $2.5 million (the "Loans") in connection with the acquisition of
          Family Life Insurance Company by FIC. As partial consideration
          for said loans, FIC entered into the option agreement referenced
          herein, providing for a grant to Investors Life Insurance Company
          of North America and Investors Life Insurance Company of
          California of certain options to purchase a total of 9.9% of the
          common stock of FIC at a price of $10.50 per share; and

          WHEREAS, Investors Life Insurance Company of California was
          merged into Investors Life Insurance Company of North America,
          and Investors Life Insurance Company of North America thereby
          became the surviving organization and successor-in-interest to
          Investors Life Insurance Company of California; and

          WHEREAS,  upon recommendation of the Board of Directors of FIC
          and the approval of a majority of the shareholders of FIC, the
          common stock of FIC was split on a five-for-one basis with a
          record date of November 12, 1996; and

          WHEREAS, Investors Life Insurance Company of North America
          (hereinafter "Investors-NA) and FIC agreed to amend the payment
          schedules of the Loans; and


          WHEREAS, Investors-NA and FIC wish to extend the period in which
          the options may be exercised and provide a written recognition of
          the effect of the five-for-one split on the per share price for
          the exercise of those options under the original terms of the
          Option Agreement.

          NOW THEREFORE, for good and valuable consideration, the receipt
          and sufficiency of which is hereby acknowledged, FIC agrees as
          follows:

          1.   The expiration date for the exercise of the options as
               provided in paragraph two of the Option Agreement shall be
               changed to June 12, 2006.

          Furthermore, FIC acknowledges that the price per share under the
          Option Agreement ($10.50) has been adjusted to account for the
          five-for-one split of FIC common stock in accordance with the
          dilution provisions in paragraph one of the Option Agreement.
          Therefore, the resulting price per share is $2.10.

          Except as otherwise noted herein, the terms and conditions of the
          Option Agreement will remain in full force and effect.

          Executed this 12th day of December, 1996 by:

          FINANCIAL INDUSTRIES CORPORATION


          By:                      
             Roy F. Mitte
             President


                                      EXHIBIT 21

                              SUBSIDIARIES OF REGISTRANT

                  Investors Life Insurance Company of North America

                              ILG Securities Corporation

                       InterContinental Life Insurance Company

                                ILG Sales Corporation

                         InterContinental Growth Plans, Inc.

                         InterContinental Life Agency, Inc. *

                     Investors Life Insurance Company of Indiana

           *Wholly-owned subsidiary of InterContinental Growth Plans, Inc.


                                      EXHIBIT 23



                          CONSENT OF INDEPENDENT ACCOUNTANTS



          We hereby consent to the incorporation by reference in the
          Registration Statement on Form S-8 (No. 33-71074) of
          InterContinental Life Corporation of our report dated March 25,
          1997 appearing on page F-2 of this Form 10-K.







          PRICE WATERHOUSE LLP
          Dallas, Texas
          March 25, 1997