<PAGE>   1

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                  Quarterly Report Under Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                    FOR THE THREE MONTHS ENDED MARCH 31, 2001

Commission File Number 2-39729

                      COTTON STATES LIFE INSURANCE COMPANY
                      -------------------------------------
             (Exact name of registrant as specified in its charter)

            GEORGIA                                     58-0830929
-------------------------------          ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

244 Perimeter Center Parkway, N.E., Atlanta, Georgia      30346
----------------------------------------------------    ---------
      (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code: (770) 391-8600
                                                    --------------

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 twelve months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days.

YES [X] NO [ ]

The Registrant as of March 31, 2001, has 6,345,428 shares of common stock
outstanding.


<PAGE>   2

                      COTTON STATES LIFE INSURANCE COMPANY

                                    FORM 10Q

                    FOR THE THREE MONTHS ENDED MARCH 31, 2001

                                      INDEX

<TABLE>
<CAPTION>
                                                                                        PAGE
<S>                                                                                     <C>

PART  1 - FINANCIAL INFORMATION

Item 1.       Financial Statements
              Independent Auditors' Review Report.........................................1
              Consolidated Condensed Balance Sheets as of
              March 31, 2001 and December 31, 2000........................................2
              Consolidated Summary of Earnings for the
              Three Months Ended March 31, 2001 and 2000..................................3
              Consolidated Statements of Cash Flows for the
              Three Months Ended March 31, 2001 and 2000 .................................4
              Consolidated Statements of Comprehensive Income
              For the Three Months Ended March 31, 2001 and 2000..........................5
              Notes to Unaudited Consolidated Financial Statements........................6

Item 2.       Management's Discussion and Analysis of Consolidated Financial
              Condition and Results of Operations.........................................8

Item 3.       Quantitative and Qualitative Disclosures about Market Risk.................13

PART II - OTHER INFORMATION

Item 1.       Legal Proceedings..........................................................13
Item 2.       Changes in Securities and Use of Proceeds..................................13
Item 3.       Defaults Upon Senior Securities............................................13
Item 4.       Submission of Matters to a Vote of Security Holders........................13
Item 5.       Other Information..........................................................13
Item 6.       Exhibits and Reports on Form 8-K...........................................13

SIGNATURES...............................................................................13
</TABLE>


<PAGE>   3

                          INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
COTTON STATES LIFE INSURANCE COMPANY, INC.:

We have reviewed the consolidated balance sheet of Cotton States Life Insurance
Company, Inc. as of March 31, 2001, and the related consolidated summary of
earnings and statements of cash flows and comprehensive income for the
three-month periods ended March 31, 2001 and 2000. These consolidated financial
statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the accompanying consolidated
condensed balance sheet of Cotton States Life Insurance Company, Inc. as of
December 31, 2000, and the related consolidated statements of earnings,
shareholders' equity, cash flows and comprehensive income for the year then
ended (not presented herein); and in our report dated February 21, 2001, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 2000, is fairly stated in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.


                                             /S/  KPMG  LLP

May 9, 2001
Atlanta, Georgia


                                       1
<PAGE>   4

                   ITEM I - CONSOLIDATED FINANCIAL STATEMENTS

         The following consolidated statements have been prepared by management.
         In management's opinion, all adjustments and reclassifications
         necessary for a fair statement of financial position at March 31, 2001
         and December 31, 2000 and the results of operations for the three
         months ended March 31, 2001 and 2000 have been made.

                      COTTON STATES LIFE INSURANCE COMPANY
                           Consolidated Balance Sheets
                      March 31, 2001 and December 31, 2000
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                                            2001              2000
                                                                         ----------        ----------
                                                                         (unaudited)

<S>                                                                      <C>               <C>
ASSETS
Investments
      Fixed maturities, held for investment, at amortized
           cost (fair value $15,414 in 2001 and
           $15,214 in 2000)                                              $   15,055            15,057
      Fixed maturities, available for sale, at fair value
           (amortized cost $124,119 in 2001 and
           $119,813 in 2000)                                                123,796           116,584
      Equity securities, at fair value (cost $3,673 in 2001
            and $3,671 in 2000)                                               3,272             3,776
      First mortgage loans on real estate                                     1,988             2,098
      Policy loans                                                            9,071             8,841
      Short-term investments                                                  5,044             3,539
      Other invested assets                                                   1,000             1,000
                                                                         ----------        ----------
                    TOTAL INVESTMENTS                                       159,226           150,895
                                                                         ----------        ----------

      Cash                                                                       --             2,899
      Accrued investment income                                               2,148             2,466
      Premiums receivable                                                     2,605             3,316
      Reinsurance receivable                                                  4,560             4,377
      Deferred policy acquisition costs                                      48,088            46,857
      Other assets                                                              487               491
                                                                         ----------        ----------
                                                                         $  217,114           211,301
                                                                         ==========        ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

      Policy liabilities and accruals:
           Future policy benefits                                           135,666           132,655
           Policy and contract claims                                         2,861             2,298
      Federal income taxes                                                    6,945             6,266
      Other liabilities                                                       6,839             7,348
                                                                         ----------        ----------
                    TOTAL LIABILITIES                                       152,311           148,567
                                                                         ----------        ----------

      Shareholders' equity:
           Common Stock                                                       6,755             6,755
           Additional paid-in capital                                         1,496             1,496
           Accumulated other comprehensive loss                                (397)           (1,716)
           Retained earnings                                                 61,086            60,320
           Less:
                Unearned compensation-restricted stock                         (810)             (794)
                Treasury stock, at cost, (409 shares in
                2001 and 2000)                                               (3,327)           (3,327)
                                                                         ----------        ----------
                    TOTAL SHAREHOLDERS' EQUITY                               64,803            62,734
                                                                         ----------        ----------

                                                                         $  217,114           211,301
                                                                         ==========        ==========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       2
<PAGE>   5

                      COTTON STATES LIFE INSURANCE COMPANY
                   Unaudited Consolidated Summary of Earnings
                  Three months ending March 31, 2001 and 2000
                  (Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                March 31,
                                                           2001           2000
                                                          -------        -------

<S>                                                       <C>            <C>
Revenue:
     Premiums                                             $ 7,031          6,126
     Investment income                                      2,549          2,402
     Realized investment gains                                  9            117
     Brokerage commissions                                    903            907
                                                          -------        -------

            TOTAL REVENUE                                  10,492          9,552
                                                          -------        -------

Benefits and expenses:
     Benefits and claims                                    4,718          3,118
     Interest credited                                      1,217          1,268
     Amortization of policy acquisition costs                 928            853
     Operating expenses                                     2,032          1,889
                                                          -------        -------

            TOTAL BENEFITS AND EXPENSES                     8,895          7,128
                                                          -------        -------

     Income before income tax expense                       1,597          2,424

     Income tax expense                                       576            901
                                                          -------        -------

NET INCOME                                                $ 1,021          1,523
                                                          =======        =======

 Basic income per share of common stock
          Operating income                                $  0.16           0.23
                                                          =======        =======
          Net Income                                      $  0.16           0.24
                                                          =======        =======

Diluted income per share of common stock
          Operating income                                $  0.16           0.23
                                                          =======        =======
          Net income                                      $  0.16           0.24
                                                          =======        =======

Weighted average number of shares
     used in computing income per share

          Basic                                             6,345          6,346
                                                          =======        =======
          Diluted                                           6,520          6,467
                                                          =======        =======
</TABLE>

Operating income excludes realized gains, net of tax
See accompanying notes to unaudited consolidated financial statements.


                                       3
<PAGE>   6

                      COTTON STATES LIFE INSURANCE COMPANY
                 Unaudited Consolidated Statements of Cash Flows
                   Three months ending March 31, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                2001            2000
                                                                              --------        --------

<S>                                                                           <C>             <C>
Cash flows from operating activities:
      Net income                                                              $  1,021           1,523
      Adjustments to reconcile net income to net
         cash provided from operating activities:
            Increase in policy liabilities and accruals                          3,574           2,319
            (Increase) in deferred policy acquisition costs                     (1,535)         (1,400)
            Increase (decrease) in liability for income taxes                     (137)            533
            Increase (decrease) in amounts receivable and
               amounts due from reinsurers                                         528             (95)
            (Decrease) increase in amounts payable to affiliates                  (254)            694
            Other, net                                                             160            (109)
                                                                              --------        --------

      Net cash provided from operating activities                                3,357           3,465
                                                                              --------        --------

Cash flows from investing activities:
      Purchase of fixed maturities available for sale                          (15,470)         (7,859)
      Purchase of equity securities                                             (1,214)         (1,107)
      Sale of equity securities                                                  1,212             514
      Proceeds from maturities of fixed
         maturities held for investment                                             --             500
      Proceeds from maturity and redemption of fixed
         maturities available for sale                                          11,149           2,059
      Principal collected on first mortgage loans                                  110             254
      Net increase in policy loans                                                (230)            (27)
      Other, net                                                                   (53)            (59)
                                                                              --------        --------

      Net cash used in investing activities                                     (4,496)         (5,725)
                                                                              --------        --------

Cash flows from financing activities:
      Cash dividends paid                                                         (255)           (255)
      Purchase of Treasury Stock                                                    --            (146)
      Stock issued under executive compensation plans                               --             135
                                                                              --------        --------

      Net cash used by financing activities                                       (255)           (266)
                                                                              --------        --------

Net (decrease) in cash and cash equivalents:                                    (1,394)         (2,526)

Cash and cash equivalents:
      Beginning of period                                                        6,438           6,106
                                                                              --------        --------

      END OF PERIOD                                                           $  5,044           3,580
                                                                              ========        ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       4
<PAGE>   7

                      COTTON STATES LIFE INSURANCE COMPANY
            Unaudited Consolidated Statements of Comprehensive Income
                   Three Months ending March 31, 2001 and 2000
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                  March 31,

                                                            2001            2000
                                                          --------        --------

<S>                                                       <C>             <C>
Net income:                                               $  1,021           1,523
      Other comprehensive income (loss),
         before tax:
      Unrealized gains on securities
         available for sale                                  2,144             538
      Reclassification adjustment for realized
         (gains) included in net income                         (9)           (117)
                                                          --------        --------

            TOTAL OTHER COMPREHENSIVE INCOME
                BEFORE TAX                                   2,135             421
                                                          --------        --------

      Income tax expense related to
         items of other comprehensive income                   816             135
                                                          --------        --------

      Other comprehensive income
         net of tax                                          1,319             286
                                                          --------        --------

            TOTAL COMPREHENSIVE INCOME                    $  2,340           1,809
                                                          ========        ========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.


                                       5
<PAGE>   8

                      COTTON STATES LIFE INSURANCE COMPANY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                      MARCH 31, 2001 AND DECEMBER 31, 2000

NOTE 1 - BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
Cotton States Life Insurance Company and its wholly owned subsidiaries CSI
Brokerage Services, Inc., and CS Marketing Resources, Inc. Significant
inter-company transactions and balances are eliminated in the consolidation.

The consolidated financial statements for the three months ended March 31, 2001
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's annual
report on Form 10-K for the year ended December 31, 2000.

In the opinion of management, all adjustments, and reclassifications necessary
to present fairly the financial position and the results of operations and cash
flows for the interim period have been made. All such adjustments are of a
normal and recurring nature. The results of operations are not necessarily
indicative of the results of operations that the Company may achieve for the
entire year.

NOTE 2 - ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards Board ("FASB") SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and
138, is effective for years beginning January 1, 2001. The standard requires
that all derivatives be recorded as an asset or liability, at fair value,
regardless of the purpose or intent for holding the derivative. If a derivative
is not utilized as a hedge, all gains and losses from the change in the
derivative's estimated fair value are recognized in earnings. All gains and
losses from the change in estimated fair value of certain derivatives utilized
as hedges are recognized in earnings or other comprehensive income depending on
the type of hedge relationship. Due to the Company's limited use of derivative
financial instruments, the adoption of SFAS No. 133, as amended, did not have a
material impact on the Company's consolidated financial position, results of
operations or cash flows.

NOTE 3 - BUSINESS SEGMENTS

The Company's operations include the following three major segments,
differentiated primarily by their respective methods of distribution and the
nature of related products: individual life insurance, guaranteed and simplified
issue life insurance, and brokerage operations. The Company's operations in each
segment are concentrated within its southeastern state geographic market.
Individual life insurance products are distributed through the Company's
multi-line exclusive agents, guaranteed and simplified issue products are
distributed through independent agents as well as exclusive agents, and
brokerage operations all involve third party products distributed through the
Company's exclusive and independent agents.


                                       6
<PAGE>   9

Total revenue and operating income by business segment are as follows:

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                               March 31,
                                                         (Dollars in thousands)

                                                           2001          2000
                                                          ------        ------

<S>                                                       <C>            <C>
Individual life insurance:
       Premiums                                           $4,571         4,322
       Other revenue                                       2,365         2,254
                                                          ------        ------
            Total revenue                                 $6,936         6,576
                                                          ======        ======

       Operating income                                   $  489           967
                                                          ======        ======

Guaranteed and simplified issue life insurance:
       Premiums                                           $2,460         1,804
       Other revenue                                         172           107
                                                          ------        ------
            Total revenue                                 $2,632         1,911
                                                          ======        ======

       Operating income                                   $   88            53
                                                          ======        ======

Brokerage:
       Commission income                                  $  903           907
       Other revenue                                          21           158
                                                          ------        ------
            Total revenue                                 $  924         1,065
                                                          ======        ======

       Operating income                                   $  438           426
                                                          ======        ======

Total operating income                                    $1,015         1,446
Realized gains, net of tax                                     6            77
                                                          ------        ------
      Net income
                                                          $1,021        $1,523
                                                          ======        ======
</TABLE>


                                       7
<PAGE>   10

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

                           FORWARD-LOOKING STATEMENTS

Statements made in the following discussion that states the Company's or
management's intentions, hopes, beliefs, expectations or predictions of the
future are forward-looking statements. Without limiting the foregoing,
forward-looking statements include statements which represent the Company's
beliefs concerning future levels of sales and redemption of the Company's
products, investment spreads and yields, or the earnings and profitability of
the Company's activities.

Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which are subject to change. These uncertainties and contingencies
could cause actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. Whether or not
actual results differ materially from forward-looking statements may depend on
numerous foreseeable and unforeseeable developments. Some may be national in
scope, such as general economic conditions, changes in tax law and changes in
interest rates. Some may be related to the insurance industry generally, such as
pricing competition, regulatory developments and industry consolidation. Others
may relate to the Company specifically, such as credit, volatility and other
risks associated with the Company's investment portfolio. Investors are also
directed to consider other risks and uncertainties discussed in documents filed
by the Company with the Securities and Exchange Commission. If the Company's
assumptions and estimates are incorrect or do not come to fruition, or if the
Company does not achieve all of these key factors, then the Company's actual
performance could vary materially from the forward-looking statements made
herein. The Company disclaims any obligation to update forward-looking
information.

                              RESULTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                          MARCH 31,
                                                            -------------------------------------
PREMIUMS                                                     2001            2000        INCREASE
                                                            ------          ------       --------
<S>                                                         <C>             <C>          <C>
Guaranteed and simplified
       issue life insurance                                 $2,460           1,804          36%

Individual life insurance:
       Traditional life                                      1,590           1,424
                                                                                            12%
       Universal life                                        2,981           2,898           3%
                                                            ------          ------
              Total individual life insurance                4,571           4,322           6%
                                                            ------          ------

              TOTAL PREMIUMS                                $7,031           6,126          15%
                                                            ======          ======
</TABLE>

Guaranteed and simplified issue life insurance premiums continued to show
significant growth as a result of higher production by the Company's independent
agency force which increased 11% to 3,900 agents under contract at March 31,
2001 compared to 3,500 at March 31, 2000. This product is also distributed by
the


                                       8
<PAGE>   11

Company's multi-line exclusive agents and is available for purchase over the
Internet at the Company's home page.

Individual life insurance products are principally sold by the Company's
exclusive agent producers. Individual life premiums have increased 6% for the
three month period, principally influenced by the customer's preference for
whole life insurance. The exclusive agency force of 297 as of March 31, 2001 is
three fewer than at the same date last year.

INVESTMENT INCOME

Investment income increased 6% compared to the first three months of 2001
reflecting growth in the average investment portfolio. The annualized average
yield decreased slightly to 6.6% compared to 6.8% for the first quarter of 2000.

BROKERAGE

Exclusive agents also sell products that the Cotton States Group does not
underwrite (both life and property and casualty). Growth in brokerage income for
the first quarter was flat due to lower override commissions with selected life
insurance carriers. Other property and casualty business lines continue to show
growth with commissions increasing 5%.

BENEFITS AND CLAIMS

Life benefits and claims, including reserve increases on traditional life and
guaranteed and simplified issue products are as follows:

<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                           MARCH 31,
                                                                    (DOLLARS IN THOUSANDS)

                                                         2001                         2000
                                                     ------------                 ------------
                                                     BENEFITS AND      % OF       BENEFITS AND     % OF
         BENEFITS AND CLAIMS                            CLAIMS        PREMIUM        CLAIMS       PREMIUM

         <S>                                         <C>              <C>         <C>             <C>
         Guaranteed and
               simplified issue                         $1,807          73%           1,321          73%

         Individual life insurance
             Traditional life                            1,375          86%             813          57%
             Universal life                              1,536          52%             984          34%
                                                        ------                       ------
               Total individual life insurance           2,911          64%           1,797          42%
                                                        ------                       ------

                     TOTAL BENEFITS AND CLAIMS          $4,718          67%           3,118          51%
                                                        ======                       ======
</TABLE>

Individual life benefits as a percentage of premium reflects increased mortality
for the quarter. With $5 billion of in-force life insurance, a one percent
variance in projected mortality, which was experienced during the quarter, will
occur periodically. The Company offsets effects of mortality in excess of $10
million with stop loss reinsurance which, for accounting purposes, can only be
considered on an annual basis.


                                       9
<PAGE>   12

INTEREST CREDITED TO POLICYHOLDERS

Interest credited to universal life contracts decreased 4% reflecting a small
decline in universal life policy accumulations. The annual interest rate
credited to universal life contract accumulations was 6.2% for both three month
periods of 2001 and 2000.

AMORTIZATION OF POLICY ACQUISITION COSTS AND OPERATING EXPENSES

The amortization of policy acquisition costs as a percentage of premiums was 13%
and is within the Company's expected range of 12-14%.

Operating expense as a percentage of premiums continued to decrease dropping to
29% for the first three months compared to 31% for the same period last year.
The Company continues to realize increasing cost efficiencies from recently
implemented digital imaging and automated policy processing technologies. This
allows the Company to increase production without increasing costs.

INCOME TAX EXPENSE

The effective tax rate for the first three months of 2001 was 36% compared to
37% for the same period last year. The tax rates reflect the increase in
deferred policy acquisition costs and other temporary differences which are
taxed at 34% and do not reflect the impact of the small company deduction.

NET INCOME

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                                  MARCH 31,
                                                           (DOLLARS IN THOUSANDS)

NET INCOME                                         2001            2000          INCREASE
                                                  ------          ------         --------

<S>                                               <C>             <C>            <C>
Operating income:
Guaranteed and
      simplified issue                            $   88              53            66%
                                                  ------          ------

Individual life insurance:
     Traditional                                      69             304           (77)%
     Universal life                                  420             663           (37)%
                                                  ------          ------
  Total individual life insurance                    489             967           (49)%
                                                  ------          ------

Brokerage operations                                 438             426             3%
                                                  ------          ------

       Total operating income                      1,015           1,446           (30)%

Realized gains                                         6              77           (92)%
                                                  ------          ------

      Net Income                                  $1,021           1,523           (33)%
                                                  ======          ======
</TABLE>

Despite continued growth in premiums and cost efficiencies, the increase in
mortality, which is expected to return to normal levels, accounted for the
decrease in operating income for the first quarter.


                                       10
<PAGE>   13

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CREDIT RISK

Credit Risk is the risk that issuers of securities owned by the Company will
default, or other parties, including reinsurers, which owe the Company money,
will not pay. The Company attempts to minimize these risks by following a
conservative investment strategy and by contracting with reinsuring companies
that meet high standards for rating criteria and other qualifications. The
Company invests in government, governmental agency and high quality corporate
bonds having an A rating or better. The fixed maturity portfolio had an average
rating of AA- at March 31, 2001.

INTEREST RATE RISK

The Company's fixed maturity investments are subject to interest rate risk. The
Company manages the impact of interest rate fluctuation through cash flow
modeling. Liabilities for interest sensitive products are carried at full
account value. The fixed maturity portfolio at March 31, 2001 and December 31,
2000 had an effective duration of 4.8 years.

The table below summarizes the Company's interest rate risk and shows the effect
of a hypothetical 100 basis point (bp) increase in interest rates on the market
values of the fixed investment portfolio. The selection of a 100 basis point
increase in interest rates should not be construed as a prediction by the
Company's management of future market events, but rather, to illustrate the
potential impact of such events. These calculations may not fully capture the
impact of the changes in the ratio of long-term rates to short-term rates.

<TABLE>
<CAPTION>
                                          (AMOUNTS IN THOUSANDS)
                            ESTIMATED                 ESTIMATED FAIR VALUE
                            FAIR VALUE                AFTER 100 BASIS POINT
FIXED MATURITIES            MARCH 31, 2001            CHANGE IN INTEREST RATES
----------------            --------------            ------------------------

<S>                            <C>                     <C>              <C>
Held for investment            $  15,414               100 bp decrease  $ 15,670
                                                       100 bp increase  $ 15,166

Available for sale             $ 123,796               100 bp decrease  $125,259
                                                       100 bp increase  $122,039
</TABLE>

                         LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW

Premiums and investment income are the Company's major sources of cash flow used
to meet its short-term and long-term cash requirements.

Short-term obligations consist primarily of operating expenses and policyholder
benefits. The Company has been able to meet these funding requirements out of
operating cash flow. The Company does not anticipate that it will become
necessary to sell long-term investments to meet short-term obligations.


                                       11
<PAGE>   14

The Company's principal long-term obligations are fixed contractual obligations
incurred in the sale of its life insurance products. The premiums billed for
these products are based on conservative and actuarially sound assumptions as to
mortality, persistency and interest. The Company believes these assumptions will
produce revenues sufficient to meet its future contractual benefit obligations
and operating expenses, and provide an adequate profit margin to finance future
growth without a major entry into the debt or equity markets.

INVESTMENTS

Since December 31, 2000, there has not been a material change in mix or credit
quality of the Company's investment portfolio. All purchases have been fixed
maturities available for sale and over 93% of the holdings at March 31, 2001 and
December 31, 2000 are rated "A" or better. Due to the improvement in bond market
conditions, the Company experienced an increase in the market value of bonds of
approximately $2.9 million for the quarter.

MORTGAGE LOANS

The Company's mortgage loan policy stipulates that the Company will loan no more
than 80% of the value on residential loans and no more than 75% of the value on
commercial loans. The Company grants loans only to employees (excluding officers
and directors) and agents.

The geographic distribution of the loan portfolio is:

<TABLE>
<CAPTION>

                                                       BOOK VALUE
       NO. OF LOANS               STATE                ----------
       ------------               -----          (AMOUNTS IN THOUSANDS)
MARCH 31,      DECEMBER 31,                   MARCH 31,        DECEMBER 31,
----------     ------------                  ---------         ------------
   2001            2000                        2001                2000
   ----            ----                        -----               ----

<S>            <C>               <C>         <C>               <C>
     3               3           Alabama       $  126               130
     6               6           Florida          346               354
    35              36           Georgia        1,516             1,614
    --              --                         ------             -----
    44              45                         $1,988             2,098
    ==              ==                         ======             =====
</TABLE>

Two loans representing $109 thousand in principal are over 30 days delinquent.
The loan-to-value ratio on delinquent loans is 29%.


                                       12
<PAGE>   15

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by item 305 of Regulation S-K is contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in this Form 10-Q.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is a defendant in various actions incidental to the conduct of its
business. The Company intends to vigorously defend the litigation and while the
ultimate outcome of these matters cannot be estimated with certainty, management
does not believe the actions will result in any material loss to the Company.

Item 2. Changes in Securities and Use of Proceeds

NONE

Item 3. Defaults Upon Senior Securities

NONE

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

NONE

Item 5. Other Information

NONE

Item 6. Exhibits and Reports on Form 8-K

Exhibit 11 - Statement re Computation of Per Share Earnings

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

                          COTTON STATES LIFE INSURANCE COMPANY
                          REGISTRANT


Date: 5/10/01             /s/ J. Ridley Howard
      -------                 -------------------------------------------------
                              J. Ridley Howard, Chairman
                              President and Chief Executive Officer

Date: 5/10/01             /s/ Roger W. Fisher
      -------                 -------------------------------------------------
                              Roger W. Fisher
                              Senior Vice  President, Chief Financial Officer
                              and Treasurer


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