<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 June 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 June 30, 1999, has 6,330,205 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 June 30, 1999 and December 31,
1998 and the results of operations for the three months and six months ended
June 30, 1999 and 1998 have been made.

                      COTTON STATES LIFE INSURANCE COMPANY
                UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
                      JUNE 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 $16,289,490 in 1999 and
           $17,435,055 in 1998)                                         $  16,083,509           16,590,028
      Fixed maturities, available for sale, at market
           (amortized cost $105,662,362 in 1999 and
           $97,652,673 in 1998)                                           103,834,307          100,853,776
      Equity securities, at market (cost $1,461,432)                        1,503,233                   --
      First mortgage loans on real estate                                   3,009,382            3,531,728
      Policy loans                                                          8,339,674            8,155,752
      Short-term investments                                                3,408,643            7,196,901
      Other invested assets                                                 1,000,000            1,000,000
                                                                        -------------         ------------
                    TOTAL INVESTMENTS                                     137,178,748          137,328,185

      Cash                                                                    535,669              938,728
      Accrued investment income                                             1,978,791            1,913,456
      Accounts receivable, principally premiums                             2,060,754            2,547,510
      Amount due from reinsurers                                            2,439,414            2,492,493
      Deferred policy acquisition costs                                    37,853,625           34,950,104
      Other assets                                                            912,951              602,813
                                                                        -------------         ------------
                                                                        $ 182,959,952          180,773,289
                                                                        =============         ============

LIABILITIES AND STOCKHOLDERS' EQUITY

      Policy liabilities and accruals:
           Future policy benefits                                       $ 117,452,033          112,423,878
           Policy and contract claims                                       1,198,559            1,053,061
      Federal income taxes                                                  4,711,463            5,702,553
      Other liabilities                                                     6,299,888            7,102,945
                                                                        -------------         ------------
                    TOTAL LIABILITIES                                     129,661,943          126,282,437
                                                                        -------------         ------------

      Stockholders' equity:
           Common Stock                                                     6,754,504            6,754,504
           Additional paid-in capital                                       1,531,693            1,478,639
           Accumulated other comprehensive income (loss)                     (964,096)           1,779,920
           Retained earnings                                               49,799,717           47,420,827
           Unearned compensation-restricted stock                            (516,662)            (317,860)
           Less treasury stock, at cost, (424,299 shares in
                1999 and 392,716 in 1998)                                  (3,307,147)          (2,625,178)
                                                                        -------------         ------------
                    TOTAL STOCKHOLDERS' EQUITY                             53,298,009           54,490,852
                                                                        -------------         ------------

                                                                        $ 182,959,952          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>
                                                            ------------------------   ---------------------
                                                                Six months ended        Three months ended
                                                                     June 30,                June 30,
                                                                1999         1998         1999       1998
                                                            ------------------------   ---------------------

<S>                                                         <C>            <C>         <C>         <C>
Income:
     Premium income                                         $ 5,674,436    4,516,788   2,947,335   2,349,560
     Mortality and expense charges                            5,314,373    4,987,552   2,685,147   2,522,743
     Investment income                                        4,504,356    4,337,201   2,202,681   2,216,357
     Realized investment gains                                  207,616      176,455      85,064     111,940
     Brokerage income                                         1,655,984    1,365,252     790,678     640,957
                                                            -----------   ----------   ---------   ---------

            TOTAL INCOME                                     17,356,765   15,383,248   8,710,905   7,841,557
                                                            -----------   ----------   ---------   ---------


Benefits and expenses:
     Life benefits and claims                                 7,996,692    6,056,056   3,966,171   3,198,983
     A & H benefits and claims                                  162,698      244,364      57,778      82,252
     Amortization of policy acquisition costs                 1,543,585    1,246,116     777,726     666,633
     Operating expenses                                       3,443,522    3,413,991   1,514,823   1,707,601
                                                            -----------   ----------   ---------   ---------

            TOTAL BENEFITS AND EXPENSES                      13,146,497   10,960,527   6,316,498   5,655,469
                                                            -----------   ----------   ---------   ---------


Earnings before income tax expense                            4,210,268    4,422,721   2,394,407   2,186,088

Federal income taxes:
     Current                                                    770,122      620,964     430,621     237,906
     Deferred                                                   551,218      673,409     282,280     376,085
                                                            -----------   ----------   ---------   ---------

            TOTAL FEDERAL INCOME TAXES                        1,321,340    1,294,373     712,901     613,991
                                                            -----------   ----------   ---------   ---------

NET EARNINGS                                                $ 2,888,928    3,128,348   1,681,506   1,572,097
                                                            ===========   ==========   =========   =========

Basic earnings per share of common stock                    $      0.45         0.49        0.26        0.25
                                                            ===========   ==========   =========   =========

Diluted earnings per share of common stock                  $      0.45         0.48        0.26        0.24
                                                            ===========   ==========   =========   =========

Weighted average number of shares
     used in computing basic earnings per share               6,357,835    6,408,198   6,347,464   6,414,947
                                                            ===========   ==========   =========   =========

Weighted average number of shares used in
     computing diluted earnings per share                     6,490,283    6,581,819   6,476,530   6,581,819
                                                            ===========   ==========   =========   =========
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>   4

                      COTTON STATES LIFE INSURANCE COMPANY
                   Unaudited Consolidated Statements of Cash
                 Flows Six months ended June 30, 1999 and 1998


<TABLE>
<CAPTION>
                                                                             1999                 1998
                                                                        -------------         ------------
<S>                                                                     <C>                   <C>
Cash flows from operating activities:
      Net earnings                                                      $   2,888,928            3,128,348
      Adjustments to reconcile net earnings to net
         cash provided from operating activities:
            Increase in policy liabilities and accruals                     5,173,653            3,094,039
            Increase in deferred policy acquisition costs                  (2,319,372)          (1,952,669)
            Change in Federal income taxes                                    859,649            1,163,715
            Decrease in accounts receivable and
                amounts due from reinsurers                                    36,866              301,078
            Other, net                                                       (473,078)             277,081
                                                                        -------------         ------------

      Net cash provided from operating activities                           6,166,646            6,011,592
                                                                        -------------         ------------

Cash flows from investing activities:
      Purchase of fixed maturities available for sale                     (12,435,723)         (17,260,166)
      Purchase of equity securities                                        (1,646,806)                  --
      Sale of fixed maturities available for sale                           1,983,219           10,006,376
      Sale of equity securities                                               185,372                   --
      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                                           2,400,651            2,337,657
      Principal collected on first mortgage loans                             522,346              393,667
      Net increase in policy loans                                           (183,922)            (109,362)
      Other, net                                                             (403,331)            (101,146)
                                                                        -------------         ------------

      Net cash used in investing activities                                (9,078,194)          (3,732,974)
                                                                        -------------         ------------

Cash flows from financing activities:
      Cash dividends paid                                                    (510,030)            (513,141)
      Purchase of treasury stock                                             (909,457)            (253,064)
      Sale of treasury stock                                                  139,718               91,673
                                                                        -------------         ------------

      Net cash used by financing activities                                (1,279,769)            (674,532)
                                                                        -------------         ------------

Net increase (decrease) in cash and cash equivalents:                      (4,191,317)           1,604,086

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

      END OF PERIOD                                                     $   3,944,312            6,663,169
                                                                        =============         ============
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>   5

                      COTTON STATES LIFE INSURANCE COMPANY
           Unaudited Consolidated Statements of Comprehensive Income

<TABLE>
<CAPTION>

                                                            ------------------------   ----------------------
                                                                Six months ended         Three months ended
                                                                    June 30,                  June 30,
                                                                1999         1998         1999        1998
                                                            ------------------------   ----------------------

<S>                                                         <C>           <C>          <C>         <C>
Net earnings:                                               $  2,888,928  $3,128,348   $1,681,506  $1,572,097
      Other comprehensive income (loss),
         before tax

      Unrealized gains (losses) on securities
         available for sale                                   (4,246,314)    449,263   (2,651,675)    723,675
      Reclassification adjustment for realized
         (gains) included in net earnings                       (207,616)   (176,455)     (85,064)   (111,940)
                                                            ------------  ----------   ----------  ----------

            TOTAL OTHER COMPREHENSIVE INCOME
                (LOSS), BEFORE TAX                            (4,453,930)    272,808   (2,736,739)    611,735

      Income tax expense (benefit) related to
         items of other comprehensive income                  (1,709,914)    109,535   (1,064,223)    158,173
                                                            ------------  ----------   ----------  ----------

      Other comprehensive income (loss),
         net of tax                                           (2,744,016)    163,273   (1,672,516)    453,562
                                                            ------------  ----------   ----------  ----------

            TOTAL COMPREHENSIVE INCOME                      $    144,912  $3,291,621   $    8,990  $2,025,659
                                                            ============  ==========   ==========  ==========
</TABLE>





See accompanying notes to consolidated financial statements.
<PAGE>   6

                      COTTON STATES LIFE INSURANCE COMPANY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                      JUNE 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 six months and three months ended June 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
From 10-K for the year ended December 31, 1998.

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.

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.
<PAGE>   7

              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 90% of the holdings at June 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 $5.0 million year to date and $3.1 million for the quarter.
During the quarter, one of the Company's subsidiaries purchased approximately
$1.5 million of equity securities.

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 June 30, 1999 and
December 31, 1998 is:

<TABLE>
<CAPTION>

         No of Loans               State                    Book Value
         -----------               -----                    ----------
   06/30/99       12/31/98                          06/30/99         12/31/98
   --------       --------                        ----------        ---------
   <S>            <C>             <C>             <C>               <C>
       4             4            Alabama         $  170,931          181,053
       6             7            Florida            399,469          478,450
      53            61            Georgia          2,438,982        2,872,225
      --            --                            ----------        ---------
      63            72                            $3,009,382        3,531,728
      ==            ==                            ==========        =========
</TABLE>

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.

<PAGE>   8

                             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>
                                        Six Months Ended                        Three Months Ended
                                            June 30                                   June 30
                                     1999               1998                   1999              1998
                                  ----------          ---------             ---------          ---------

<S>                               <C>                 <C>                   <C>                <C>
Premium income                    $2,935,373          2,812,164             1,511,149          1,420,985
Mortality and expense
      charges                      5,314,373          4,987,552             2,685,147          2,522,743
                                  ----------          ---------             ---------          ---------
                                  $8,249,746          7,799,716             4,196,296          3,943,728
                                  ==========          =========             =========          =========
</TABLE>

The total income for these products for the six months and the second quarter
of 1999 represents a 6% increase 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 1900 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 six months ended
June 30,1999 and 1998 was $2,668,078 and $1,641,318 respectively. For the
quarter ended June 30, 1999, premium income was $1,402,903 and $896,991,
respectively. This represents a 63% increase year to date and a 56% increase
for the second quarter. The Company expects continued substantial growth in
this line of business.

INVESTMENT INCOME
Investment income increased 4% when compared to the first six months of 1998.
Core investment income from the Company's bond portfolio increased 5% during
the second

<PAGE>   9

quarter. The Company expects to benefit from realized gains generated by its
subsidiaries investment in equity securities should general market conditions
permit.

REALIZED INVESTMENT GAINS
Realized investment gains resulted from 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 $710,000 in 1999 versus $539,000 for the comparable six month
period in 1998. During the second quarter of 1998, CSI entered into an
agreement with a non-standard insurance carrier. CSI earned approximately
$200,000 in gross commissions under this agreement in the first six months of
1999 compared to $108,000 in the first half of 1998.

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 $162,000 for the first six months of 1999 compared to $133,000
for the comparable period of 1998. CSMR's gross commission income increased 6%
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>
                                          Six Months Ended                       Three Months Ended
                                              June 30                                 June 30
                                      1999              1998                   1999              1998
                                  ----------          ---------             ---------          ---------

<S>                               <C>                 <C>                   <C>                <C>
Individual                        $6,446,613          5,132,437             3,102,949          2,750,630
Guaranteed Issue and
      Simplified Issue             1,550,079            923,619               863,222            448,353
                                  ----------          ---------             ---------          ---------
                                  $7,996,692          6,056,056             3,966,171          3,198,983
                                  ==========          =========             =========          =========
</TABLE>

Benefits for individual life and guaranteed issue and simplified issue as a
percentage of premium and mortality and expense charges for these products was
73% for the first six months of 1999 compared to 64% for the comparable period
of 1998. For the second quarter, the percentage is 70% in 1999 versus 66% in
1998. Death claims for guaranteed issue and simplified issue were $269,000
higher than the comparable six 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 $400,000 higher
per quarter when compared to the 1998 average per quarter. The Company
understands that it can and will experience fluctuation in mortality.
<PAGE>   10

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 six months of 1999 and 43% 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 six months of 1999 and 1998 were 31% and 29%, respectively.
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.

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.
<PAGE>   11

       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 75% complete, with expected
                  completion during the fourth quarter of 1999. The costs
                  associated with this compliance effort have totaled
                  $62,500 in 1998, $29,600 in 1999 and have been expensed as
                  incurred. The remaining costs anticipated with this phase
                  of the project total $10,000. All costs associated with
                  this phase are allocated to the Company from the Company's
                  affiliate, Cotton States Mutual Insurance Company.

       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 September 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 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.
<PAGE>   12

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 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

<PAGE>   13

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 June 30, 1999. Company policy is to have
an effective duration of less than tne 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 liabilities 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.

The table below summarizes the Company's interest rate risk and shows 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                             June 30, 1999           Decrease in Interest Rates
----------------                             -------------           --------------------------

<S>                                          <C>                     <C>
Held for investment                           $ 16,289,490                   $15,475,016

Available for sale                            $103,834,307                   $98,642,592
</TABLE>

<PAGE>   14

                          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

The Annual Shareholders meeting was held April 26, 1999. The following
directors were elected to the Board of Directors for three (3) year terms
expiring in 2002.
       Gaylord O. Coan
       Mathews D. Swift
       E. Jenner Wood, III

ITEM 5. OTHER INFORMATION

NONE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibit 27  Financial Data Schedule.

(b)     None.

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

                                        Gary W. Meader
                                        ----------------------------------------
Date:       08/4/99                     Gary W. Meader
            -------                     Chief Financial Officer/Treasurer


Date:       08/4/99                     William J. Barlow
            -------                     ----------------------------------------
                                        William J. Barlow
                                        Vice President/Controller