<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 quarter ended September 30, 1999
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 September 30, 1999, has 6,321,405 shares of common stock
outstanding.


<PAGE>   2

                   PART I - CONSOLIDATED FINANCIAL STATEMENTS

The following consolidated statements have been prepared by management. In
management's opinion, all adjustments and certain reclassifications necessary
for a fair statement of financial position at September 30, 1999 and December
31, 1998 and the results of operations for the three months and nine months
ended September 30, 1999 and 1998 have been made.


                      COTTON STATES LIFE INSURANCE COMPANY
                 UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
                    SEPTEMBER 30, 1999 AND DECEMBER 31, 1998

<TABLE>
<CAPTION>


ASSETS                                                                1999               1998
                                                                 -------------       ------------
<S>                                                              <C>                 <C>
Investments
      Fixed maturities, held for investment, at amortized
           cost (market value $16,206,003 in 1999 and
           $17,435,055 in 1998)                                  $  16,080,220         16,590,028
      Fixed maturities, available for sale, at market
           (amortized cost $105,375,546 in 1999 and
           $97,652,673 in 1998)                                    101,779,560        100,853,776
      Equity securities, at market (cost $1,986,483)                 1,905,289                 --
      First mortgage loans on real estate                            2,986,713          3,531,728
      Policy loans                                                   8,555,602          8,155,752
      Short-term investments                                         6,311,077          7,196,901
      Other invested assets                                          1,000,000          1,000,000
                                                                 -------------       ------------
                    TOTAL INVESTMENTS                              138,618,461        137,328,185

      Cash                                                             168,799            938,728
      Accrued investment income                                      1,843,235          1,913,456
      Accounts receivable, principally premiums                      2,075,726          2,547,510
      Amount due from reinsurers                                     3,611,691          2,492,493
      Deferred policy acquisition costs                             39,284,773         34,950,104
      Other assets                                                   1,115,415            602,813
                                                                 -------------       ------------
                                                                 $ 186,718,100        180,773,289
                                                                 =============       ============

LIABILITIES AND STOCKHOLDERS' EQUITY

      Policy liabilities and accruals:
           Future policy benefits                                $ 119,838,204        112,423,878
           Policy and contract claims                                2,081,294          1,053,061
      Federal income taxes                                           4,483,116          5,702,553
      Other liabilities                                              6,229,242          7,102,945
                                                                 -------------       ------------
                    TOTAL LIABILITIES                              132,631,856        126,282,437
                                                                 -------------       ------------

      Stockholders' equity:
           Common Stock                                              6,754,504          6,754,504
           Additional paid-in capital                                1,528,178          1,478,639
           Accumulated other comprehensive income (loss)            (2,007,447)         1,779,920
           Retained earnings                                        51,649,831         47,420,827
           Unearned compensation-restricted stock                     (439,561)          (317,860)
           Less treasury stock, at cost, (433,099 shares in
                1999 and 392,716 in 1998)                           (3,399,261)        (2,625,178)
                                                                 -------------       ------------
                    TOTAL STOCKHOLDERS' EQUITY                      54,086,244         54,490,852
                                                                 -------------       ------------

                                                                 $ 186,718,100        180,773,289
                                                                 =============       ============
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>   3

                      COTTON STATES LIFE INSURANCE COMPANY
                   UNAUDITED CONSOLIDATED SUMMARY OF EARNINGS


<TABLE>
<CAPTION>

                                                     ---------------------------      ------------------------
                                                          Nine months ended              Three months ended
                                                             September 30,                 September 30,
                                                         1999            1998           1999           1998
                                                     -----------      ----------      ---------      ---------
<S>                                                  <C>              <C>             <C>            <C>
Income:
     Premium income                                  $ 8,734,090       7,012,057      3,059,654      2,495,269
     Mortality and expense charges                     8,068,226       7,658,206      2,753,853      2,670,654
     Investment income                                 6,849,518       6,522,867      2,345,162      2,185,666
     Realized investment gains                           306,375         378,288         98,759        201,833
     Brokerage income                                  2,672,768       2,190,924      1,016,784        825,672
                                                     -----------      ----------      ---------      ---------

            TOTAL INCOME                              26,630,977      23,762,342      9,274,212      8,379,094
                                                     -----------      ----------      ---------      ---------


Benefits and expenses:
     Life benefits and claims                         11,819,618       9,295,037      3,822,926      3,238,981
     A & H benefits and claims                           206,676         268,652         43,978         24,288
     Amortization of policy acquisition costs          2,253,412       2,171,365        709,827        925,249
     Operating expenses                                5,421,869       4,860,931      1,978,346      1,446,940
                                                     -----------      ----------      ---------      ---------

            TOTAL BENEFITS AND EXPENSES               19,701,575      16,595,985      6,555,077      5,635,458
                                                     -----------      ----------      ---------      ---------


Earnings before income tax expense                     6,929,402       7,166,357      2,719,135      2,743,636

Federal income taxes:
     Current                                           1,131,042       1,112,655        360,920        491,691
     Deferred                                            806,047         901,973        254,829        228,564
                                                     -----------      ----------      ---------      ---------

            TOTAL FEDERAL INCOME TAXES                 1,937,089       2,014,628        615,749        720,255
                                                     -----------      ----------      ---------      ---------

NET EARNINGS                                         $ 4,992,313       5,151,729      2,103,386      2,023,381
                                                     ===========      ==========      =========      =========

Basic earnings per share of common stock             $      0.79            0.80           0.33           0.31
                                                     ===========      ==========      =========      =========

Diluted earnings per share of common stock           $      0.77            0.78           0.32           0.30
                                                     ===========      ==========      =========      =========

Weighted average number of shares
     used in computing basic earnings per share        6,347,410       6,414,751      6,326,780      6,427,599
                                                     ===========      ==========      =========      =========

Weighted average number of shares used in
     computing diluted earnings per share              6,458,005       6,582,619      6,432,292      6,589,068
                                                     ===========      ==========      =========      =========
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>   4



                      COTTON STATES LIFE INSURANCE COMPANY
                 Unaudited Consolidated Statements of Cash Flows
                 Nine Months Ending September 30, 1999 and 1998


<TABLE>
<CAPTION>


                                                                   1999              1998
                                                               ------------       -----------
<S>                                                            <C>                <C>
Cash flows from operating activities:
      Net earnings                                             $  4,992,313         5,151,729
      Adjustments to reconcile net earnings to net
         cash provided from operating activities:
            Increase in policy liabilities and accruals           8,442,559         5,610,581
            Increase in deferred policy acquisition costs        (3,582,361)       (2,898,450)
            Change in Federal income taxes                        1,232,398         1,327,970
            Decrease in accounts receivable and
                amounts due from reinsurers                        (647,414)         (252,902)
            Other, net                                             (699,198)        1,301,343
                                                               ------------       -----------

      Net cash provided from operating activities                 9,738,297        10,240,271
                                                               ------------       -----------

Cash flows from investing activities:
      Purchase of fixed maturities available for sale           (16,457,894)      (23,797,400)
      Purchase of equity securities                              (2,239,285)               --
      Sale of fixed maturities available for sale                 5,073,065        12,998,633
      Purchase of other invested assets                                            (1,000,000)
      Sale of equity securities                                     252,802                --
      Proceeds from maturities of fixed
         maturities held for investment                             500,000         1,000,000
      Proceeds from maturity and redemption of fixed
         maturities held for sale                                 3,599,899         4,318,409
      Principal collected on first mortgage loans                   545,015           489,312
      Net increase in policy loans                                 (399,850)         (170,381)
      Other, net                                                   (639,135)         (172,255)
                                                               ------------       -----------

      Net cash used in investing activities                      (9,765,383)       (6,333,682)
                                                               ------------       -----------

Cash flows from financing activities:
      Cash dividends paid                                          (763,300)         (770,246)
      Purchase of treasury stock                                 (1,007,157)         (253,064)
      Sale of treasury stock                                        141,790            97,593
                                                               ------------       -----------

      Net cash used by financing activities                      (1,628,667)         (925,717)
                                                               ------------       -----------

Net increase (decrease) in cash and cash equivalents:            (1,655,753)        2,980,872

Cash and cash equivalents:
      Beginning of period                                         8,135,629         5,059,083
                                                               ------------       -----------

      END OF PERIOD                                            $  6,479,876         8,039,955
                                                               ============       ===========

</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>   5

                      COTTON STATES LIFE INSURANCE COMPANY
            Unaudited Consolidated Statements of Comprehensive Income




<TABLE>
<CAPTION>
                                                    -----------------------------       -----------------------------
                                                        Nine months ended                  Three months ended
                                                           September 30,                       September 30,
                                                       1999              1998              1999              1998
                                                    -----------       -----------       -----------       -----------
<S>                                                <C>               <C>               <C>               <C>
Net earnings:                                       $ 4,992,313       $ 5,151,729       $ 2,103,386       $ 2,023,381
      Other comprehensive income (loss),
         before tax

      Unrealized gains (losses) on securities
         available for sale                          (5,792,002)        2,202,941        (1,545,688)        1,753,678
      Reclassification adjustment for realized
         (gains) included in net earnings              (306,375)         (378,288)          (98,759)         (201,833)
                                                    -----------       -----------       -----------       -----------

            TOTAL OTHER COMPREHENSIVE INCOME
                (LOSS), BEFORE TAX                   (6,098,377)        1,824,653        (1,644,447)        1,551,845

      Income tax expense (benefit) related to
         items of other comprehensive income         (2,311,010)          688,586          (601,096)          579,051
                                                    -----------       -----------       -----------       -----------

      Other comprehensive income (loss),
         net of tax                                  (3,787,367)        1,136,067        (1,043,351)          972,794
                                                    -----------       -----------       -----------       -----------

            TOTAL COMPREHENSIVE INCOME              $ 1,204,946       $ 6,287,796       $ 1,060,035       $ 2,996,175
                                                    ===========       ===========       ===========       ===========

</TABLE>


See accompanying notes to consolidated financial statements.


<PAGE>   6

                      COTTON STATES LIFE INSURANCE COMPANY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                    SEPTEMBER 30, 1999 AND DECEMBER 31, 1998



NOTE 1 - BASIS OF PRESENTATION

The accompanying 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 accounts are eliminated in the consolidation.

The financial statements for the nine months and three months ended September
30, 1999 and 1998 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 generally accepted accounting principles 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, 1998.

The Company's operations can be grouped into three major segments, individual
life insurance, guaranteed issue and simplified issue life insurance, and
brokerage operations. These segments are differentiated primarily by their
respective methods of distribution and the nature of related products, as 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 issue 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.

In the opinion of management, all adjustments 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 which the Company may achieve for the entire year.

NOTE 2 - ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" (Statement
133). In June 1999, the FASB issued Statement 137 which changed the effective
date of Statement 133. As a result, the effective date of Statement 133 was
deferred for financial statements for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company does not believe the provisions of
Statement 133 will have a significant impact on the financial statements upon
adoption.


<PAGE>   7



In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise,
an amendment of FASB statements No. 65" (Statement No. 134). Statement 134 is
effective for the first quarter beginning after December 15, 1998. The Company
adopted Statement 134, effective January 1, 1999 and there was no impact on the
Company's financial statements.

In December 1997, the AICPA Accounting Standards Executive Committee issued
Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises
for Insurance Related Assessments" (SOP 97-3). SOP 97-3 is effective for all
fiscal years beginning after December 15, 1998. The Company has adopted SOP
97-3, effective January 1, 1999 and there was no impact on the Company's
financial statements.

In March, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". SOP 98-1 is effective for all fiscal
years beginning after December 15, 1998. The Company has adopted SOP 98-1,
effective January 1, 1999 and there was no impact on the Company's financial
statements.




<PAGE>   8





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

                         LIQUIDITY AND CAPITAL RESOURCES

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

The Company's 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 and cash equivalents. The Company does not
anticipate that it will become necessary to sell long-term investments to meet
short-term obligations.

The Company's principal long-term obligations are fixed contractual obligations
incurred in the sale of its life insurance products. The premiums and mortality
and expense charges 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, 1998, 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 95% of the holdings at September 30,1999
and December 31, 1998 are rated "A" or better. Due to the general decline in
bond market conditions, the Company experienced a decrease in gross unrealized
gains of approximately $6.8 million year to date and $1.8 million for the
quarter. During the nine month period ended September 30, 1999, one of the
Company's subsidiaries purchased approximately $2.2 million of equity securities
and sold approximately $250,000.

MORTGAGE LOANS

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

The geographic distribution of the loan portfolio as of September 30, 1999 and
December 31, 1998 is:
<TABLE>
<CAPTION>

                NO OF LOANS                   STATE                            BOOK VALUE
                -----------                   -----                            ----------
       09/30/99             12/31/98                                   09/30/99              12/31/98
       --------             --------                                 -----------            ----------
       <S>                  <C>              <C>                     <C>                    <C>
           3                    4            Alabama                 $   149,255               181,053
           6                    7            Florida                     392,283               478,450
          49                   61            Georgia                   2,445,175             2,872,225
          --                   --                                    -----------             ---------
          58                   72                                    $ 2,986,713             3,531,728
          ==                   ==                                    ===========             =========
</TABLE>

<PAGE>   9

The Company has a large concentration of loans in Georgia. Because the
loan-to-value ratio on delinquent loans is 40%, the Company does not anticipate
any loss should it choose to foreclose.


                              RESULTS OF OPERATIONS


The Company's operations can be grouped into three major segments: individual
life insurance, guaranteed issue and simplified issue whole life insurance, and
brokerage operations. These segments are differentiated primarily by their
respective methods of distribution and the nature of related products, as 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 issue 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.

PREMIUM INCOME AND MORTALITY AND EXPENSE CHARGES

INDIVIDUAL LIFE INSURANCE

Premium income and mortality and expense charges produced by the Company's
multi-line exclusive agency force are as follows:


<TABLE>
<CAPTION>

                                 Nine Months Ended            Three Months Ended
                                   September 30                   September 30
                               1999            1998            1999           1998
                           -----------      ----------      ---------      ---------

<S>                        <C>               <C>            <C>            <C>
Premium income             $ 4,525,489       4,316,223      1,519,131      1,440,753
Mortality and expense
      charges                8,068,226       7,658,208      2,753,853      2,670,656
                           -----------      ----------      ---------      ---------
                           $12,593,715      11,974,431      4,272,984      4,111,409
                           ===========      ==========      =========      =========
</TABLE>

The total income for these products increased 5% year to date and 4% for the
third quarter of 1999 over 1998. The Company anticipates growth in these lines
during 1999 as a result of competitive improvements made in the Universal Life
products in late 1998 and early 1999.

GUARANTEED ISSUE AND SIMPLIFIED ISSUE LIFE INSURANCE

Guaranteed issue and simplified issue whole life products are distributed by
approximately 1,900 independent agents and the Company's multi-line exclusive
agents. The guaranteed issue product is also available for purchase over the
internet at the Company's home page. Premium income for the nine months ended
September 30,1999 and 1998 was $4,208,601 and $2,695,834 respectively. For the
quarter ended September 30, 1999 and 1998, premium income was $1,540,523 and
$1,054,516, respectively. This represents a 56% increase year to date and a 46%
increase for the third quarter. The Company expects continued substantial growth
in this line of business.




<PAGE>   10



INVESTMENT INCOME

Investment income increased 5% when compared to the first nine months of 1998.
Core investment income from the Company's bond portfolio increased 6% year to
date. One of the Company's subsidiaries committed approximately $2.0 million to
investments in equity securities year to date. The Company expects to benefit
from realized gains generated by this investment should general market
conditions permit.

REALIZED INVESTMENT GAINS

Realized investment gains resulted from the sale of bonds by the Company and the
sale of equity securities by one of the Company's subsidiaries as discussed
above.

BROKERAGE INCOME

CSI Brokerage Services, Inc. (CSI) provides the Company with commission income
from brokerage agreements with other property and casualty insurance carriers.
These carriers provide the Company's multi-line agents with products that the
Company's affiliated property and casualty companies do not underwrite. CSI had
net earnings of $1,140,000 in 1999 versus $870,000 for the comparable nine month
period in 1998. During the second quarter of 1998, CSI entered into an agreement
with a non-standard insurance carrier. CSI earned approximately $317,000 in
gross commissions under this agreement in the first nine months of 1999 compared
to $227,000 through three quarters of 1998.

During the third quarter of 1999, CSI reached production levels with one of its
brokerage affiliated property and casualty companies which resulted in
approximately $100,000 of additional brokerage income. Production levels are
determined annually for the period October 1 to September 30 of each agreement
year and it is not guaranteed that CSI will achieve the stated goals each year.
Hence brokerage income under this arrangement may fluctuate.

Another subsidiary, Cotton States Marketing Resources, Inc. (CSMR) provides the
Company with commission income from brokerage agreements with other life and
health insurance companies. These companies provide the Company's multi-line
agents with life and health products the Company does not underwrite. CSMR had
net earnings of $262,000 for the first nine months of 1999 compared to $215,000
for the comparable period of 1998. CSMR's gross commission income increased 8%
in 1999 which is in line with Company expectations.

BENEFITS

Benefits, including reserve increases on individual life insurance and
guaranteed issue and simplified issue products are as follows:

<TABLE>
<CAPTION>

                                Nine Months Ended              Three Months Ended
                                    September 30                  September 30
                                1999            1998           1999           1998
                            -----------      ---------      ---------      ---------

<S>                         <C>              <C>            <C>            <C>
Individual                  $ 9,388,025      7,625,001      2,941,412      2,492,564
Guaranteed Issue and
      Simplified Issue        2,431,593      1,670,036        881,514        746,417
                            -----------      ---------      ---------      ---------
                            $11,819,618      9,295,037      3,822,926      3,238,981
                            ===========      =========      =========      =========
</TABLE>

<PAGE>   11


Benefits for individual life and guaranteed issue and simplified issue as a
percentage of premium and mortality and expense charges for these products was
71% for the first nine months of 1999 compared to 64% for the comparable period
of 1998. For the third quarter, the percentage is 66% in 1999 versus 63% in
1998. Death claims for guaranteed issue and simplified issue were $219,000
higher than the comparable nine month period of 1998. The premiums on this line
of business have, however, increased significantly during this time period.
Death benefits on individual life insurance are approximately $500,000 higher
per quarter when compared to the 1998 average per quarter. The Company
understands that it can and will experience fluctuation in mortality. Mortality
increases are not concentrated in any one particular product, product line or
age group but have occurred throughout the Company's book of business. The
Company is insulated from abnormal mortality fluctuations having routinely
purchased "stop loss" reinsurance coverage to limit its exposure. During the
third quarter of 1999, the Company reached the attachment point of the coverage
and recorded a pretax reinsurance recovery of approximately $500,000. The
Company anticipates additional recoveries in the fourth quarter dependent upon
actual claim experience.

OPERATING EXPENSES

Operating expenses and amortization of policy acquisition costs as a percentage
of total premium income, mortality and expense charges and brokerage income were
39% for the first nine months of 1999 and 42% for the comparable period of 1998.
The Company continues to emphasize cost controls, which enables this ratio to
remain relatively stable.

FEDERAL INCOME TAX

Current taxes are provided based on estimates of the projected effective annual
tax rates. Deferred taxes are provided on the basis of SFAS 109. The effective
tax rates for first nine months of 1999 and 1998 was 28%. The Company
anticipates its future tax rates to fluctuate between 30%-34%.

YEAR 2000

The Year 2000 issue refers generally to the data structure and processing
problem that may prevent systems from properly processing date-sensitive
information when the year changes to 2000. The Year 2000 issue affects
information technology ("IT") systems, such as computer programs and various
types of electronic equipment that process date information by using only two
digits rather than four digits to define the applicable year, and thus may
recognize a date using "00" as the year 1900 rather than the year 2000. The
issue also affects some non-IT systems, such as devices which rely on a
micro-controller to process date information. The Year 2000 issue could disrupt
a Company's operations by generating erroneous data or causing system failures
or miscalculations. The Company currently utilizes both IT and non-IT systems to
conduct its business. IT systems that the Company utilizes include third party
business application systems, computer hardware, and operating systems. Non-IT
systems that the Company utilizes include embedded technology such as
micro-controllers, which are critical in conducting its business. The Company
also has several material third party relationships that must address the Year
2000 issue of their IT and non-IT systems, including the Company's related
parties, reinsurers and third party administrators.


<PAGE>   12



THE COMPANY'S STATE OF READINESS

In 1995, the Company initiated a three phased project to address the business
issues associated with Year 2000 and its impact on both IT and non-IT systems.
The project was designed to address both internal considerations and external
considerations affecting customers, business relationships, and the resulting
impact on Company operations. Project progress is regularly reviewed by the
Company's senior management and Board of Directors.

       Phase 1:      Business Applications Systems: This phase addresses the
                     evaluation, testing, and upgrading of the Company's
                     mission-critical business application systems, including
                     the Life administration systems, general ledger, accounts
                     payable, and business interfaces to and from these systems.
                     This phase of the project was completed and fully
                     implemented as of December 31, 1998. The costs of testing
                     and replacing non-compliant IT systems totaled
                     approximately $10,000, in 1998 and were expensed as
                     incurred.

       Phase 2:      Information Technology Hardware/Operating Systems. This
                     phase addresses the evaluation, testing and upgrading of
                     the Company's mainframe hardware and operating systems.
                     This phase of the project is 90% complete, with expected
                     completion during the fourth quarter of 1999. The costs
                     associated with this compliance effort have totaled $62,500
                     in 1998, $39,000 in 1999 and have been expensed as
                     incurred. The remaining costs anticipated with this phase
                     of the project total $15,000.

       Phase 3:      External Relationships and Other IT and Non-IT Systems.
                     This phase includes the development of plans to address
                     the Company's embedded technology, such as
                     micro-controllers, secondary infrastructure issues, the
                     assessment of Year 2000 readiness of material third party
                     relationships, and other operational and contingency
                     plans. The Company has completed its inventory of all
                     systems and relationships that fall under this category,
                     and currently is in the process of testing and
                     remediation. This phase of the project is expected to be
                     complete by December 1999 for secondary infrastructure
                     issues, and carry through the first quarter of 2000 for
                     other items. The anticipated costs of this phase for 1999
                     is $350,000. Included in this amount is $300,000 budgeted
                     to implement, if necessary, contingency plans to prevent
                     business interruptions should critical third parties fail
                     to complete their Year 2000 efforts. This amount does not
                     include the costs of reallocating internal resources.

YEAR 2000 ISSUES RELATING TO THIRD PARTIES

The Company does rely on several third party systems whose non-compliance could
materially impact the results of operations. Certain insurance companies process
override commissions for the benefit of the Company's subsidiaries, CSMR and
CSI. Another significant business partner is involved in the administrative,
billing, collection and reporting of financial transactions relating to the
Company's payroll deduction universal

<PAGE>   13

life products. Non-compliance by these third parties could negatively affect the
Company's revenue stream. The Company has surveyed and/or visited these
companies to determine the status of their Year 2000 compliance, and has
developed contingency plans in the event of Year 2000 failures with these
material relationships. The Company will continue to monitor the status of these
relationships as well as other significant relationships, and although the
Company has not received any indication at this time that these third parties
will not be Year 2000 compliant, the Company has not received nor expects to
assume that the third parties will guarantee that their remediation efforts will
result in Year 2000 compliance.

The Company has system contingency services contracted through a major third
party provider and is presently refining support related to potential Year 2000
issues. In addition, the Company has plans to develop a Year 2000 operational
support plan for the millennium weekend, including on-site staff and on-call
support. Exposure and risk management will continue through the first quarter of
2000.

RISKS OF YEAR 2000 ISSUES

In light of its compliance efforts, the Company does not believe that the Year
2000 issue will materially adversely affect operations or results of operations,
and does not expect implementation to have a material impact on the Company's
financial statements. However, there can be no assurance that the Company's
systems will be Year 2000 compliant prior to December 31, 1999, or that the
failure of any such system will not have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
to the extent the Year 2000 problem has a material adverse effect on business,
operations and financial condition of third parties with whom the Company has
material relationships, such as customers, distributors, vendors, suppliers and
financial institutions, the Year 2000 problem could have a material adverse
effect on the Company's business, results of operations and financial condition.

The above Year 2000 discussion contains forward-looking statements reflecting
management's current assessment and estimates with respect to the Company's Year
2000 readiness efforts and the impact of Year 2000 issues on the Company's
business, financial condition and results of operations. Various factors, many
of which are beyond the control of the Company, could cause actual plans and
results to differ materially from those contemplated by such assessments,
estimates and forward-looking statements. Some of these factors include, but are
not limited to, the accuracy of the Year 2000 assurances, disclosures or
representations by the Company's customers, distributors, vendors, suppliers,
financial institutions and other third parties with whom it has material
relationships, availability of qualified personnel and other information
technology resources and any actions of third parties with respect to Year 2000
problems.

FORWARD-LOOKING STATEMENTS

The Company has made certain forward-looking statements in the Company's filings
with the Securities and Exchange Commission and its reports to stockholders.
Forward-looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results, or other
developments. Statements using verbs such as "expect," "anticipate," "believe"
or words of similar import generally involve forward-looking statements. Without
limiting the foregoing, forward-looking statements include statements which
represent the Company's beliefs concerning future levels of

<PAGE>   14

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.

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 minimizes this risk by adhering to a conservative
investment strategy and by contracting with reinsuring companies that meet
certain rating criteria and other qualifications.

INTEREST RATE RISK

The Company's fixed maturity investments are subject to interest rate risk.
Increases and decreases in interest rates typically result in decreases and
increases in the fair values of these securities. The changes in fair market
values of the available for sale portfolio are presented as a component of
stockholders equity in accumulated other comprehensive income, net of taxes. The
company invests in government, governmental agency and high quality corporate
bonds. The fixed maturity portfolio had an effective duration of 4.8 years and
an average rating of AA3 at September 30, 1999. Company policy is to have an
effective duration of less than ten years and to not purchase bonds with less
than an A rating. Through cash flow models, the Company works to lessen the
impact of interest rate fluctuations on its available for sale portfolio.

The Company's liability for interest sensitive products are carried at full
account value. The Company has changed the credited interest rate in the past to
reflect change in market interest rates.

<PAGE>   15


The table below summarizes the Company's interest rate risk and show the effect
of a hypothetical 100 basis point 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>

                                         Estimated                        Estimated Fair Value
                                         Fair Value                       After 100 Basis Point
Fixed Maturities                         September 30, 1999               Increase in Interest Rates
----------------                         ------------------               --------------------------
<S>                                      <C>                              <C>
Held for investment                      $ 16,206,003                     $15,778,164

Available for sale                       $101,779,560                     $96,670,226
</TABLE>




<PAGE>   16



                           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

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

Exhibit 27 - Financial Data Schedule (SEC only)

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



                                         J. Ridley Howard
                                         --------------------------------------
Date:   11/10/99                         J. Ridley Howard, Chairman
                                         President and Chief Executive Officer






Date:   11/10/99                         William J. Barlow
                                         --------------------------------------
                                         William J. Barlow
                                         Vice President/Controller