SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-Q

                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

                             SECURITIES ACT OF 1934


For the Quarterly Period Ended June 30, 2000
Commission File Number 0-4690



                        FINANCIAL INDUSTRIES CORPORATION

             (Exact Name of Registrant as specified in its charter)

         Texas                                 74-2126975
(State of Incorporation)   (I.R.S. Employer Identification Number)



6500 River Place Boulevard, Building I

Austin, Texas                                                 78730
(Address of principal executive offices)       (Zip Code)

Registrant's telephone number, including area code (512) 404-5000


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

                                           YES  X    NO

Number of common shares outstanding ($.20 par value) at end of period:5,054,661.

                                      - 1 -


<PAGE>




                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES

                                      INDEX

                                                                        Page No.

Part I - Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets

        June 30, 2000 and December 31, 1999....................................3

Consolidated Statements of Income
         For the three and six month periods ended
         June 30, 2000 and June 30, 1999.......................................5

Consolidated Statements of Cash Flows
         For the three and six month periods ended
         June 30, 2000 and June 30, 1999.......................................9

Notes to Consolidated Financial Statements....................................13

Item 2. Management's Discussion and Analysis of

         Financial Conditions and Results of Operations.......................15

Item 3. Quantitative and Qualitative Disclosures

            About Market Risk ......   .......................................20

Part II

Other  Information............................................................23

Signature  Page...............................................................24






                                      - 2 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>                                                    June 30,               December 31,
                                                               2000                    1999
                                                            -----------              ---------
                                                            (unaudited)
<S>                                                             <C>                      <C>
ASSETS

Investments other than investments
 in affiliate:

Fixed maturities available for sale
 at market value (amortized cost of
 $81,571 and $78,252 at June 30,
 2000 and December 31, 1999, respectively)               $       80,851        $         77,515

Equity securities at market (cost
 approximates $11
 at June 30, 2000 and December 31, 1999)                              4                       4

Policy loans                                                      3,603                   3,595

Short-term investments                                           16,290                  24,839
                                                      -----------------        ----------------
     Total investments                                          100,748                 105,953

Cash                                                              1,181                     692

Investment in affiliate                                          73,503                  70,013

Accrued investment income                                         1,244                   1,180

Agency advances and other receivables                             6,873                   6,885

Reinsurance receivables                                          16,369                  14,848

Due and deferred premiums                                        12,515                  12,392

Property and equipment, net                                       1,318                   1,355

Deferred policy acquisition costs                                54,240                  52,490

Present value of future profits
of acquired businesses                                           21,237                  23,109

Other assets                                                      4,791                   4,758

Separate account assets                                               0                     379
                                                   --------------------      ------------------
     Total Assets                                        $      294,019          $      294,054
                                                         ==============          ==============
</TABLE>

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

                                      - 3 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                            June 30,               December31,
                                                              2000                    1999
                                                          ------------             ----------
                                                          (unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                           <C>                <C>

Liabilities:
Policy liabilities and contract holder
 deposit funds:

Future policy benefits                               $          61,394      $          59,783

Contract holder deposit funds                                   43,527                  44,681

Unearned premiums                                                   14                      14

Other policy claims and benefits payable                         3,734                   4,282
                                                    ------------------       -----------------
                                                               108,669                 108,760
Subordinated notes payable to affiliate                         38,423                  41,497

Deferred federal income taxes                                   23,098                  23,222

Other liabilities                                                3,750                   4,079

Separate account liabilities                                         0                     379
                                                   -------------------     ------------------
Total Liabilities                                              173,940                 177,937
                                                        --------------        ---------------
Commitments and Contingencies

Shareholders' equity:

Common stock, $.20 par value, 10,000,000
 shares authorized; 5,845,300 shares
 issued, 5,054,661 outstanding
 in 2000 and 1999                                               1,169                   1,169

Additional paid-in capital                                      7,225                   7,225

Accumulated other comprehensive income                         (2,006)                 (2,454)

Retained earnings                                             121,066                 117,552
                                                      ---------------         ---------------
                                                              127,454                 123,492
Common treasury stock, at cost, 790,639
 at 2000 and 1999.                                             (7,375)                 (7,375)
                                                    -----------------        ----------------
Total Shareholders' Equity                                    120,079                 116,117
                                                      ---------------          --------------
Total Liabilities and Shareholders' Equity             $      294,019          $      294,054
                                                       ==============          ==============
</TABLE>

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


                                      - 4 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands except per share data)
<TABLE>
<CAPTION>
                                               Three Months Ended June 30,
                                                  2000                   1999
                                             ------------             --------
                                              (unaudited)
<S>                                               <C>                    <C>

Revenues:
 Premiums                                 $        8,443       $        9,101

 Net investment income                             1,700                1,701

 Earned insurance charges                          1,225                1,209

 Other                                                 3                  297
                                        -----------------     -----------------
                                                  11,371               12,308
Benefits and expenses:

 Policyholder benefits and expenses                3,870                4,192

 Interest expense on contract holders
 deposit funds                                       469                  467

 Amortization of present value of future
 profits of acquired businesses                      856                1,402

 Amortization of deferred policy
  acquisition costs                                1,094                1,180

 Operating expenses                                2,991                2,806

 Interest expense                                    484                  552
                                       -----------------     ------------------
                                                   9,764               10,599
                                        ----------------       ----------------
Income before federal income tax and
 equity in net earnings of affiliates              1,607                1,709

Provision for federal income taxes                   319                  434
                                        ----------------         --------------
Income before equity in net earnings
 of affiliates                                     1,288                1,275
Equity in net earnings of affiliate,
 net of tax                                          917                  526
                                         ---------------     ------------------
Net Income                                 $       2,205       $        1,801

                                           =============       ================
</TABLE>



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


                                      - 5 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands except per share data)

  <TABLE>
<CAPTION>
                                                  Three Months Ended June 30,
                                                   2000                  1999
                                                 ----------            ---------
                                                 (unaudited)
<S>                                                 <C>                    <C>
Net Income Per Share

Basic:
Average weighted shares
outstanding                                        5,055                   5,055
                                     ===================      ==================
Basic earnings per share             $              0.44      $             0.36
                                     ===================      ==================
Diluted:
Common stock and common stock equivalents          5,168                   5,194
                                     ===================      ==================
Diluted earnings per share           $              0.43      $             0.35
                                     ===================      ==================


</TABLE>


















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


                                      - 6 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands except per share data)
<TABLE>
<CAPTION>

                                                 Six  Months Ended June 30,
                                                    2000               1999
                                                 ------------        --------
                                                       (unaudited)
<S>                                               <C>                     <C>


Revenues:
 Premiums                             $           16,844       $          17,682
 Net investment income                             3,440                   3,454
 Earned insurance charges                          2,372                   2,585
 Other                                                 3                     702
                                  ----------------------    --------------------
                                                  22,659                  24,423
Benefits and expenses:
 Policyholder benefits and
 expenses                                          7,221                   7,933
 Interest expense on contract
  holders deposit funds                            1,059                     972

 Amortization of present value of
 future profits of acquired
 businesses                                        1,872                   2,612

 Amortization of deferred policy
  acquisition costs                                2,443                   2,383

 Operating expenses                                5,938                   5,722

 Interest expense                                  1,012                   1,250
                                       -----------------      ------------------
   Total                                          19,545                  20,872
                                        ----------------       -----------------
Income before federal income tax
 and equity in net earnings
 of affiliates                                     3,114                   3,551

Provision for federal income taxes                   578                     773
                                      ------------------     -------------------
Income before equity in net
 earnings of affiliates                            2,536                   2,778

Equity in net earnings of affiliate,
net of tax                                         1,883                   1,291
                                      ------------------      ------------------
Net Income                             $           4,419       $           4,069
                                       =================       =================
</TABLE>

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


                                      - 7 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands except per share data)

<TABLE>
<CAPTION>

                                   Six Months Ended June 30,
                                                 2000                 1999
                                              ------------          ---------
<S>                                               <C>                  <C>


                                             (unaudited)
Net Income Per Share

Basic:
Average weighted shares outstanding                5,055                   5,055
                                      ==================       =================
Basic earnings per share              $             0.87       $            0.81
                                      ==================       =================
Diluted:
Common stock and common
 stock equivalents                                 5,167                   5,201
                                      ==================       =================
Diluted earnings per share            $             0.86       $            0.78
                                      ==================       =================


</TABLE>



















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


                                      - 8 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                               Three Months Ended June 30,
                                                  2000                  1999
                                              -------------          ---------
                                               (unaudited)
<S>                                                <C>               <C>


CASH FLOWS FROM OPERATING
ACTIVITIES

Net Income                                          2,205     $            1,801
Adjustments to reconcile net income to
 net cash provided by operating activities:

Amortization of present value of future
 profits of acquired business                         856                  1,402

Amortization of deferred policy
 acquisition costs                                  1,094                  1,180

Equity in undistributed earnings of
 affiliate                                         (1,505)                (1,164)

Changes in assets and liabilities:

Increase in accrued investment income                (113)                  (186)
(Increase) Decrease in agent advances
 and other  receivables                           (1 ,252)                   142

Increase in due and deferred premiums                (260)                  (458)

Increase in deferred policy
 acquisition costs                                 (2,222)                (2,451)

(Increase)Decrease in other assets                   (133)                   180

(Increase)Decrease in policy liabilities
 and accruals                                         129                   (927)

Increase (Decrease) in other liabilities              136                   (761)

(Decrease) in deferred federal
income taxes                                          (77)                  (298)

Other, net                                            445                     (2)
                                        ----------------   ---------------------
Net cash used in operating activities    $           (697)       $         (1,542)
                                          ---------------        ----------------
</TABLE>

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




                                      - 9 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
                                 (in thousands)

<TABLE>
<CAPTION>


                                            Three  Months Ended June 30,
                                                 2000                  1999
                                               ------------          --------
                                               (unaudited)
<S>                                                <C>                  <C>

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed maturities purchased                     $      (8,826)     $       (2,996)
Proceeds from sales and maturities of
 fixed maturities                                      6,406               3,486
Increase in policy loans                                  (5)                (44)
Net change in short-term investments                   5,837               1,877
Purchase & retirement of property
 and equipment                                            37                   0
                                            ----------------    ----------------
Net cash provided by
  investing activities                                 3,449               2,323
                                              --------------       -------------
CASH FLOW FROM FINANCING
 ACTIVITIES

Dividends Paid                                          (907)                  0
Repayment of subordinated notes payable               (1,537)             (1,537)
                                              --------------      --------------
Net cash used in financing activities                 (2,444)             (1,537)
                                              --------------      --------------
Net  Increase (Decrease) in cash                         308                (756)
Cash, beginning of period                                873               1,758
                                               -------------      --------------
Cash, end of period                            $       1,181       $       1,002
                                               =============       =============
</TABLE>







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



                                     - 10 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                 Six Months Ended June 30,
                                               2000                        1999

                                                         (unaudited)
<S>                                             <C>                         <C>
CASH FLOWS FROM OPERATING
ACTIVITIES

Net Income                             $          4,419       $            4,069

Adjustments to reconcile net income to
 net cash provided
 by operating activities:

Amortization of present value of future
 profits of acquired business                     1,872                    2,612

Amortization of deferred policy
 acquisition costs                                2,443                    2,383

Equity in undistributed earnings of
  affiliate                                      (3,031)                  (2,478)

Changes in assets and liabilities:
(Increase) Decrease in accrued
 investment income                                 (64)                       42

Increase in agent advances and
 other  receivables                              (1,509)                    (827)

Increase in due and deferred premiums              (123)                    (261)

Increase in deferred policy
 acquisition costs                               (4,193)                  (4,508)

(Increase)Decrease in other assets                 (33)                      521

Decrease in policy liabilities
 and accruals                                       (91)                    (845)

(Decrease) in other
 liabilities                                       (329)                  (1,413)

(Decrease) in deferred
 federal income taxes                              (124)                    (160)

Other, net                                           305                     (71)
                                       ----------------     --------------------
Net cash used in operating activities    $         (458)        $           (936)
                                        --------------         -----------------
</TABLE>






                                     - 11 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
                                 (in thousands)


<TABLE>
<CAPTION>
                                                    Six Months Ended June 30,
                                                    2000               1999
                                               --------------        --------
                                                (unaudited)
<S>                                                 <C>                 <C>

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed maturities purchased                     $     (10,288)        $    (9,996)
Proceeds from sales and maturities
 of fixed maturities                                   6,638              13,255
Increase in policy loans                                  (8)               (122)
Net change in short-term investments                    8,549               (726)
Purchase & retirement of property
 and equipment                                            37                   0
                                            ----------------    ----------------
Net cash provided by
  investing activities                                 4,928               2,411
                                              --------------       -------------
CASH FLOW FROM FINANCING
 ACTIVITIES

Dividends Paid                                         (907)                   0
Repayment of subordinated
 notes payable                                        (3,074)             (3,074)
                                            ---------------        -------------
Net cash used in
 financing activities                                 (3,981)             (3,074)
                                              -------------        -------------
Net Increase (Decrease) in cash                          489              (1,599)
Cash, beginning of year                                  692               2,601
                                              --------------      --------------
Cash, end of period                            $       1,181       $       1,002
                                               =============       =============


</TABLE>







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


                                     - 12 -


<PAGE>



                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The financial  statements  included herein reflect all adjustments which are, in
the opinion of management,  necessary to present a fair statement of the interim
results.  The statements  have been prepared to conform to the  requirements  of
Form 10-Q and do not necessarily  include all disclosures  required by generally
accepted accounting  principles (GAAP). The reader should refer to Form 10-K for
the year ended  December  31, 1999,  previously  filed with the  Commission  for
financial  statements  prepared  in  accordance  with GAAP.  Certain  prior year
amounts have been reclassified to conform with current year presentation.

The  consolidated   financial  statements  include  the  accounts  of  Financial
Industries Corporation ("FIC") and its wholly-owned subsidiaries. The investment
of FIC in  InterContinental  Life  Corporation  ("ILCO") is presented  using the
equity method.  All significant  intercompany  items and transactions  have been
eliminated.

Other Comprehensive Income (Loss)

The following is a reconciliation of accumulated other comprehensive income
(loss)from December 31, 1999 to June 30, 2000 (in thousands):
<TABLE>
<CAPTION>

                                                                       Net                       Total
                                            Net unrealized             appreciation              accumulated
                                            gain on investments        (depreciation)            other
                                            in fixed maturities        of equity                 comprehensive
                                            available for sale          securities               income (loss)
                                            ------------------         -----------               ------
<S>                                                <C>                      <C>                     <C>

Balance at December 31, 1999                     $ (2,454)              $     (0)                 $ (2,454)
Current Period Change                                 451                     (3)                      448
                                               -----------             ----------               -----------
Balance at June 30, 2000                         $ (2,003)              $     (3)                 $ (2,006)
                                                 =========              =========                 =========

</TABLE>















                                     - 13 -


<PAGE>



New Accounting Pronouncements

In  June  1998,  the  FASB  issued  FAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities",  which establishes accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  (collectively  referred to as derivatives) and for
hedging activities. FAS 133 is applicable to financial statements for all fiscal
quarters of fiscal years  beginning  after June 15, 2000,  as amended by FAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the  Effective  Date of FAS  No.133." As the Company  does not have  significant
investments in derivative financial instruments,  the adoption of FAS No. 133 is
not  anticipated  to  have  a  material  impact  on  the  Company's  results  of
operations, liquidity or financial position.

Dividends Declared

On January 17, 2000,  FIC's Board of Directors  approved an annual cash dividend
in the amount of $.18 per common share.  The dividend was paid on April 12, 2000
to shareholders of record on April 5, 2000.

                                     - 14 -


<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Conditions and
         Results of Operation
         -----------------------------------------------------------------------

The  following  discussion  addresses  the results of  operations  of  Financial
Industries  Corporation  ("FIC") for the six months ended June 30, 2000 compared
with the same six-month  period last year, and the financial  condition as of
June 30, 2000, compared with December 31, 1999.

For the six-month  period ended June 30, 2000,  FIC's net income was  $4,419,000
(basic  earnings  of $0.87 per common  share,  or diluted  earnings of $0.86 per
common  share) as compared  to  $4,069,000  (basic  earnings of $0.81 per common
share, or diluted earnings of $0.78 per common share) in the first six months of
1999.  Earnings per share are stated in accordance with the  requirements of FAS
No. 128, which  establishes  two measures of earnings per share:  basic earnings
per share and diluted  earnings per share.  Basic earnings per share is computed
by dividing  income  available to common  shareholders  by the weighted  average
number of common  shares  outstanding  during the period.  Diluted  earnings per
share  reflect the  potential  dilution  that would occur if securities or other
contracts to issue common stock were converted or exercised.

On January 17, 2000,  FIC's Board of Directors  approved an annual cash dividend
in the amount of $.18 per common share. The dividend was paid on April 12, 2000,
to record holders as of the close of business on April 5, 2000. The dividend was
paid with  respect to each share of common  stock  which is issued on the record
date, except for shares owned directly by FIC.

                              Results of Operations

FIC's  income from  operations - as  determined  before  federal  income tax and
equity in net earnings of its affiliate, InterContinental Life Corporation - for
the  six-month  period  ended June 30,  2000,  was  $3,114,000  (on  revenues of
$22,659,000),  as compared to  $3,551,000  (on revenues of  $24,423,000)  in the
first six months of 1999.

Premiums for the first six months of 2000, net of reinsurance  ceded, were $16.8
million,  as  compared  to  $17.7  million  in the  first  six  months  of 1999.
Policyholder  benefits and expenses  were $7.2 million in the second  quarter of
2000, as compared to $7.9 million in the first six months of 1999.

As of June 30, 2000, the market value of the fixed maturities available for sale
segment was $80.9 million as compared to an amortized cost of $81.6 million,  or
an unrealized loss of $0.7 million.  The decrease reflects  unrealized losses on
such investments related to changes in interest rates subsequent to the purchase
of such  investments.  The net of tax effect of this decrease  ($0.46 million at
June 30,  2000) has been  recorded as an decrease in  shareholders'  equity.  As
required under the provisions of FAS No. 130, the  determination of "Accumulated
other  comprehensive  loss" includes  separate  identification  of the change in
values which occurred during the current period.

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

                                     - 15 -


<PAGE>



            Equity in Net Income of InterContinental Life Corporation

General

For the six-month  period ended June 30, 2000,  the Company's  equity in the net
earnings of InterContinental  Life Corporation  ("ILCO"),  net of federal income
tax, was $1,883,000, as compared to $1,291,000 for the first six months of 1999.

As of June 30, 2000,  FIC owned  3,590,292  shares of ILCO's  common  stock.  In
addition,  FIC's wholly- owned life insurance subsidiary,  Family Life Insurance
Company ("Family Life"), owned 342,400 shares of ILCO common stock. As a result,
as of June 30, 2000,  FIC owned,  directly and  indirectly  through Family Life,
3,932,692 shares (approximately 47.9 %) of ILCO's common stock.

As of June 30, 2000, the market value of ILCO's fixed  maturities  available for
sale  segment  was $443.4  million as compared  to an  amortized  cost of $451.7
million, or an unrealized loss of $8.3 million. The decrease reflects unrealized
losses on such  investments  related to changes in interest rates  subsequent to
the purchase of such  investments.  Since FIC owns  approximately  47.9 % of the
common stock of ILCO,  the net of tax effect of this  decrease  ($2.6 million at
June 30,  2000) is included in  "Accumulated  other  comprehensive  loss" on the
Consolidated   Balance   Sheets  and  has  been   recorded  as  a decrease  in
shareholders' equity.

Liquidity and Capital Resources of ILCO

ILCO is a holding company whose principal  assets consist of the common stock of
Investors  Life  Insurance  Company of North  America  ("Investors-NA")  and its
subsidiary, Investors Life Insurance Company of Indiana ("Investors-IN").  Prior
to June 30, 2000, ILCO's primary source of funds consisted of payments under the
surplus debentures from Investors-NA.

Prior to June 30, 2000,  ILCO's principal  source of liquidity  consisted of the
periodic  payment of principal and interest to it by  Investors-NA,  pursuant to
the terms of two surplus  debentures  (the  "Surplus  Debentures").  The Surplus
Debentures were originally  issued by Standard Life Insurance  Company and their
terms were previously  approved by the Mississippi  Insurance  Commissioner.  In
connection  with the  1993  merger  of  Standard  Life  into  Investors-NA,  the
obligations of the Surplus  Debentures were assumed by Investors-NA.  As of June
30,  2000,  the  outstanding  principal  balance of the Surplus  Debentures  was
completely paid off.

For periods  subsequent to June 30, 2000,  ILCO's  available source of liquidity
would be from  dividends  paid to it from  its  subsidiaries,  Investors-NA  and
Investors-IN.  Applicable  state  insurance  laws may limit the  ability of such
subsidiaries to pay dividends to ILCO. Investors-NA is domiciled in the State of
Washington.  The Washington insurance law includes the "greater of" standard for
payment  of  dividends  to  shareholders,  but  has  a  requirement  that  prior
notification  of a  proposed  dividend  be  given  to the  Washington  Insurance
Commissioner and that cash dividends may be paid only from earned surplus. Under
the "greater of"  standard,  an insurer may pay a dividend in an amount equal to
the greater of (i) 10% of the  policyholder  surplus or (ii) the  insurer's  net
gain from operations for the previous year. As of June 30,

                                     - 16 -


<PAGE>



2000, Investors-NA had earned surplus of  $ 55.3 million.

Investors-IN is domiciled in the State of Indiana.  Under the Indiana  insurance
law, a domestic  insurer may make dividend  distributions  upon proper notice to
the  Department  of  Insurance,  as long as the  distribution  is  reasonable in
relation to adequate  levels of  policyholder  surplus and quality of  earnings.
Under Indiana law the dividend must be paid from earned  surplus.  Extraordinary
dividend  approval would be required where a dividend exceeds the greater of 10%
of  surplus  or the  net  gain  from  operations  for  the  prior  fiscal  year.
Investors-IN  had earned  surplus of $19.0  million at June 30,  2000.  In June,
1999,  Investors-IN  paid a  dividend  in the  amount of $3  million to its sole
shareholder, Investors-NA. The amount of the dividend was less than the net gain
from  operations for the prior fiscal year;  accordingly,  no prior approval was
required  for the  payment of the  dividend.  Advance  notice of the payment was
provided  to the  Indiana  Department  of  Insurance,  in  accordance  with  the
provisions of the Indiana Insurance Code.

The Form 10-Qs of ILCO for the  six-month  periods  ended June 30, 2000 and June
30,1999, set forth the business operations and financial results of ILCO and its
life insurance subsidiaries. Such 10-Q reports of ILCO, including the discussion
by ILCO's management under the caption "Management's  Discussion and Analysis of
Financial  Conditions  and Results of  Operations"  are  incorporated  herein by
reference.

                         Liquidity and Capital Resources

FIC is a holding company whose  principal  assets consist of the common stock of
Family Life and its equity  ownership in ILCO.  FIC's primary sources of capital
consists of cash flow from operations of its subsidiaries.

The cash  requirements  of FIC and its  subsidiaries  consist  primarily  of its
service of the  indebtedness  created in connection with its ownership of Family
Life. As of June 30, 2000,  the  outstanding  balance of such  indebtedness  was
$38.4 million on the Subordinated Notes granted by Investors-NA.

The  principal  source of  liquidity  for  FIC's  subsidiaries  consists  of the
periodic  payment of principal and interest by Family Life pursuant to the terms
of a Surplus  Debenture.  The terms of the  Surplus  Debenture  were  previously
approved by the Washington Insurance  Commissioner.  Under the provisions of the
Surplus Debenture and current law, no prior approval of the Washington Insurance
Department  is required  for Family Life to pay  interest  or  principal  on the
Surplus  Debenture;  provided that,  after giving effect to such  payments,  the
statutory  surplus  of Family  Life is in excess of 6% of assets  (the  "surplus
floor").  However,  Family  Life has  voluntarily  agreed  with  the  Washington
Insurance Commissioner that it will provide at least five days advance notice of
payments  which it will make under the surplus  debenture.  As of June 30, 2000,
the statutory  capital and surplus of Family Life was $24.2  million,  an amount
substantially in excess of the surplus floor. As of June 30, 2000, the principal
balance of the Surplus Debenture was $9.88 million. The funds required by Family
Life to meet its  obligations  under  the  terms of the  Surplus  Debenture  are
generated primarily from premium payments from policyholders,  investment income
and the proceeds from the sale and redemption of portfolio investments.

Washington's insurance code includes the "greater of" standard for dividends but
has requirements that prior  notification of a proposed dividend be given to the
Washington Insurance Commissioner and that cash

                                     - 17 -


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dividends may be paid only from earned  surplus.  Family Life does not presently
have  earned  surplus as defined by the  regulations  adopted by the  Washington
Insurance  Commissioner and, therefore,  is not permitted to pay cash dividends.
However,  since the new law applies  only to dividend  payments,  the ability of
Family Life to make principal and interest  payments under the Surplus Debenture
is not affected.  The Company does not anticipate that Family Life will have any
difficulty in making principal and interest payments on the Surplus Debenture in
the  amounts  necessary  to  enable  Family  Life  Corporation  to  service  its
indebtedness for the foreseeable future.

The  sources  of  funds  for  Family  Life  consist  of  premium  payments  from
policyholders,  investment  income and the proceeds from the sale and redemption
of portfolio  investments.  These funds are applied primarily to provide for the
payment of claims under  insurance  and annuity  policies,  operating  expenses,
taxes,  investments in portfolio securities,  shareholder dividends and payments
under the provisions of the Surplus Debenture.

FIC's net cash flow provided by operating  activities  was $(0.5) million in the
first six months of 2000, as compared to $(0.9)  million in the first six months
of 1999.  Net cash flow used in financing  activities  was $(4.0) million in the
first six months of 2000, as compared to $(3.1)  million in the first six months
of 1999.

The guaranty  commitments of FIC under the loans incurred in connection with the
acquisition  of Family Life (after  taking into account the  repayments  and new
loans which occurred in July, 1993) relate to: (i) the $22.5 million note issued
by Family Life Corporation to Investors Life Insurance  Company of North America
and (ii) the $34.5 million loaned by Investors-NA to two subsidiaries of FIC.

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

There are no trends, commitments or capital asset requirements that are expected
to have an adverse effect on the liquidity of FIC.

                                   Investments

As of June 30, 2000, the Company's investment assets totaled $100.75 million, as
compared to $105.95 million as of December 31, 1999.

The level of  short-term  investments  at June 30,  2000 was $16.3  million,  as
compared  to $24.8  million  as of  December  31,  1999.  The  fixed  maturities
available for sale portion  represents $80.9 million of investment  assets as of
June 30, 2000, as compared to $77.5 million at December 31, 1999.  The amortized
cost of  fixed  maturities  available  for sale as of June  30,  2000 was  $81.6
million representing a net unrealized loss of $0.7 million. This unrealized loss
principally  reflects  changes in  interest  rates from the date the  respective
investments  were  purchased.  To reduce the exposure to interest  rate changes,
portfolio  investments  are selected so that  diversity,  maturity and liquidity
factors approximate the duration of associated policyholder liabilities.

                                     - 18 -


<PAGE>



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

The fixed  maturities  portfolio of Family Life, as of June 30, 2000,  consisted
solely of fixed maturities  investments  which, in the annual  statements of the
companies, as filed with state insurance departments,  were designated under the
National Association of Insurance  Commissioners ("NAIC") rating system as a "1"
(highest quality).

The   investments  of  Family  Life  and  ILCO's   insurance   subsidiaries   in
mortgage-backed securities included collateralized mortgage obligations ("CMOs")
of  $22.10  million  and  $179.1  million,   respectively,  and  mortgage-backed
pass-through securities of $9.3 million and $46.7 million, respectively, at June
30, 2000. Mortgage-backed pass-through securities,  sequential CMO's and support
bonds,  which  comprised  approximately  50.8  % of  the  book  value  of  FIC's
mortgage-backed   securities   and   55.9  %  of  the  book   value  of   ILCO's
mortgage-backed  securities at June 30, 2000,  are  sensitive to prepayment  and
extension  risks.  ILCO and FIC have reduced the risk of  prepayment  associated
with  mortgage-backed  securities  by  investing in planned  amortization  class
("PAC"),  target  amortization  class ("TAC")  instruments and scheduled  bonds.
These  investments are designed to amortize in a predictable  manner by shifting
the risk of prepayment of the underlying  collateral to other investors in other
tranches  ("support  classes")  of the  CMO.  At  June  30,  2000,  PAC  and TAC
instruments and scheduled  bonds  represented  approximately  49.2 % of the book
value of FIC's  mortgage-backed  securities and approximately 44.1 % of the book
value of ILCO's  mortgage-backed  securities.  Sequential  and  support  classes
represented  approximately  21.2 % of the book  value  of FIC's  mortgage-backed
securities and approximately 35.2 % of the book value of ILCO's  mortgage-backed
securities  at June  30,  2000.  In  addition,  FIC and ILCO  limit  the risk of
prepayment  of CMOs by not  paying a premium  for any CMOs.  ILCO and FIC do not
invest in  mortgage-backed  securities with increased  prepayment  risk, such as
interest-only  stripped  pass-through  securities  and  inverse  floater  bonds.
Neither FIC nor ILCO had any z-accrual bonds as of June 30, 2000.

 The prepayment risk that certain  mortgage-backed  securities are subject to is
prevalent in periods of declining  interest rates,  when mortgages may be repaid
more rapidly than  scheduled as individuals  refinance  higher rate mortgages to
take  advantage of the lower current  rates.  As a result,  holders of mortgage-
backed  securities  may receive large  prepayments  on their  investments  which
cannot be reinvested at an interest rate comparable to the rate on the prepaying
mortgages. Neither FIC nor ILCO made additional investments in CMOs during 1999.
For the year 2000, the investment  objectives of FIC and ILCO include the making
of selected investments in CMOs.

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

                                     - 19 -


<PAGE>



             Cautionary Statements for Purposes of the "Safe Harbor"
       Provisions of the Private Securities Litigation Reform Act of 1995

Except  for  historical  factual  information  set  forth  in this  Management's
Discussion  and  Analysis,  certain  statements  made in this report are forward
looking and contain information about financial results, economic conditions and
other risks and known uncertainties. The Company cautions the reader that actual
results could differ materially from those anticipated by the Company, depending
upon  the  eventual  outcome  of  certain  factors,  including:  (1)  heightened
competition for new business,  (2) significant changes in interest rates and (3)
adverse regulatory changes affecting the business of insurance.

                             Accounting Developments

In  June,  1998,  the  FASB  issued  FAS No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities",  which establishes accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  (collectively  referred to as derivatives) and for
hedging  activities.  FAS No. 133 is applicable to financial  statements for all
fiscal quarters of fiscal years beginning after June 15, 2000, as amended by FAS
No.  137,  "Accounting  for  Derivative  Instruments  and Hedging  Activities  -
Deferral of the  Effective  Date of FAS No.  133".  As the Company does not have
significant investments in derivative financial instruments, the adoption of FAS
No. 133 is not anticipated to have a material impact on the Company's results of
operations, liquidity or financial position.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

General

FIC's principal  assets are financial  instruments,  which are subject to market
risks.  Market risk is the risk of loss arising  from adverse  changes in market
rates, principally interest rates on fixed rate investments.

 For a discussion of the Company's  investment  portfolio and the  management of
that portfolio to reflect the nature of the underlying insurance  obligations of
the Company's insurance subsidiaries,  please refer to the information set forth
in Item 2,  "Management's  Discussion  and Analysis of Financial  Conditions and
Results of Operation - Investments" of this report.

The  following is a discussion of the Company's  primary  market risk  sensitive
instruments.  It should be noted that this  discussion has been developed  using
estimates  and  assumptions.  Actual  results may differ  materially  from those
described below.  Further,  the following  discussion does not take into account
actions which could be taken by management in response to the assumed changes in
market rates. In addition, the discussion does not take into account other types
of risks which may be involved in the business  operations of the Company,  such
as the reinsurance recoveries on reinsurance treaties with third party insurers.

The primary market risk to the Company's  investment  portfolio is interest rate
risk.  Since the Company own  approximately  47.9 % of the common stock of ILCO,
the interest  rate risk of ILCO's fixed  income  portfolio  has an effect on the
value of FIC's  "investment in  affiliate".  The Company does not use derivative
financial instruments.

                                     - 20 -


<PAGE>



Interest Rate Risk

(a)      FIC's Fixed Income Investments

         Assuming an immediate  increase of 100 basis points in interest  rates,
         the net hypothetical loss in fair market value related to the financial
         instruments segment of the Company's balance sheet is estimated to be $
         3.7 million at June 30, 2000 and $9.7 million at December 31, 1999. For
         purposes of the foregoing  estimate,  the  following  categories of the
         Company's fixed income  investments were taken into account:  (i) fixed
         maturities,  including  fixed  maturities  available  for sale and (ii)
         short-term  investments.  The  market  value of such  assets was $ 94.9
         million at June 30, 2000 and $102.4 million at December 31, 1999.

         The  fixed  income   investments   of  the  Company   include   certain
         mortgage-backed  securities.  The market value of such securities was $
         31.0  million at June 30, 2000 and $ 27.3 million at December 31, 1999.
         Assuming an immediate  increase of 100 basis points in interest  rates,
         the net  hypothetical  loss in the fair  market  value  related to such
         mortgage-backed securities is estimated to be $ 1.5 million at June 30,
         2000 and $ 1.9 million at December 31, 1999.

(b)      FIC's Investment in Affiliate

         The value of FIC's investment in affiliate is affected by the amount of
         unrealized gains and losses, net of tax, in the investment portfolio of
         its affiliate, ILCO. Assuming an immediate increase of 100 basis points
         in interest  rates,  the net  hypothetical  loss in value,  net of tax,
         related to the  Company's  investment  in  affiliate is estimated to be
         $7.0 million at June 30, 2000 and $6.3 million at December 31, 1999.

 The hypothetical  effect of the interest rate risk on fair values was estimated
by applying a commonly  used model.  The model  projects  the impact of interest
rate changes on a range of factors, including duration and potential prepayment.

Part II. Other Information

Item 1.  Legal Proceedings

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

ILCO and  Investors-NA  are  defendants in a lawsuit which was filed in October,
1996, in Travis County, Texas. CIGNA Corporation,  an unrelated Company, is also
a named  defendant in the lawsuit.  The named  plaintiffs in the suit (a husband
and wife), allege that the universal life insurance policies sold to them by INA
Life Insurance  Company (a company which was merged into  Investors-NA  in 1992)
utilized unfair sales  practices.  The named  plaintiffs seek reformation of the
life  insurance  contracts  and an  unspecified  amount  of  damages.  The named
plaintiffs also seek a class action as to similarly situated individuals. No

                                     - 21 -


<PAGE>



certification  of a class has been  granted as of the date  hereof.  The Company
believes that the suit is without  merit and intends to  vigorously  defend this
matter.

In August,  1997,  another  individual  filed a similar action in Travis County,
Texas against the corporate entities  identified above. The lawsuit involves the
same type of policy and includes  allegations which are substantially  identical
to the  allegations  in the first action.  The named  plaintiff also seeks class
certification.  The  Company  believes  that  the  court  would  consider  class
certification  with  respect  to only one of these  actions.  The  Company  also
believes that this action is without merit and intends to vigorously defend this
matter.

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 Meeting of the Shareholders was held on May 23,
2000. The only matter submitted at the meeting to a vote of
the Shareholders was the election of directors. All of the
nominees were elected as directors. The nominees included one
individual, Charles K. Chacosky, who had not previously served
as a director of the Company.

The voting tabulation as to each nominee was as follows:

          Name                      In Favor                  Withheld

          Barnett, John D.          2,863,282                 473,054
          Chacosky, Charles K.      2,862,832                 473,504
          Crowe, Joseph F.          2,863,682                 472,654
          Demgen, Jeffrey H.        2,863,622                 472,714
          Fleron, Theodore A.       2,863,582                 472,754
          Grace, James M.           2,861,672                 474,664
          Mitte, Dale E.            2,859,322                 477,014
          Mitte, Roy F.             2,857,387                 478,949
          Parker, Frank             2,860,152                 476,184
          Richmond, Thomas C.       2,862,872                 473,464
          Supple, Dr. Jerome H.     2,863,232                 473,104






                                     - 22 -


<PAGE>



Item 5.  Other Information

                  None

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  Form 10-K  Annual  Report  of  Registrant  for the year  ended
                  December  31, 1999  heretofore  filed by  Registrant  with the
                  Securities   and   Exchange   Commission,   which  is   hereby
                  incorporated by reference.

         (b)      Reports on Form 8-K

                  None.



                                     - 23 -


<PAGE>


                       FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES



                                    SIGNATURE

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.

FINANCIAL INDUSTRIES CORPORATION

 /s/ James M. Grace

James M. Grace, Treasurer

Date:   August, 14, 2000




















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