SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                   FORM 10-Q/A
                                 Amendment No. 2

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

                             SECURITIES ACT OF 1934


For the Quarterly Period Ended June 30, 2002
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 Blvd., Building One, 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:
9,593,605.


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                                EXPLANATORY NOTE

This Form 10-Q/A amends the Registrant's  quarterly on Form 10-Q for the quarter
ended June 30,  2002 as filed on August 26,  2002 and is being  filed to reflect
the restatement of the Registrant's interim consolidated  financial  statements.
The reasons for and effects of this  restatement  are  presented in the Notes to
the consolidated  financial  statements.  Except for Items 1 and 2 of Part I, no
other  information  included in the  original  report on Form 10-Q is amended by
this Form  10-Q/A.  Other than with  respect to the  restated  information,  the
Registrant has not updated  disclosures in this Form 10-Q/A to reflect any event
subsequent to the  Registrant's  initial filing of its quarterly  report on Form
10-Q on  August  26,  2002.  For the  most  recent  information  concerning  the
Registrant,  please see the  Registrant's  quarterly Report on Form 10-Q for the
quarter ended September 30, 2002.


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Forward-Looking Statements

Except for  historical  factual  information  set forth in this Form  10-Q,  the
statements, analyses, and other information contained in this report relating to
trends in the Company's  operations and financial  results,  the markets for the
Company's products,  the future development of the Company's  business,  and the
contingencies and uncertainties to which the Company may be subject,  as well as
other  statements  including  words  such as  "anticipate,"  "believe,"  "path,"
"estimate,"   "expect,"  "intend"  and  other  similar  expressions   constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. Such statements are made based upon management's  current expectations and
beliefs concerning the financial results, economic conditions and are subject to
known and unknown risks,  uncertainties  and other factors  contemplated  by the
forward-looking  statements.  Such  factors  include,  among other  things:  (1)
general economic  conditions and other factors,  including  prevailing  interest
rate levels and stock market performance, which may affect the ability of FIC to
sell its products,  the market value of FIC's investments and the lapse rate and
profitability of policies;  (2) FIC's ability to achieve  anticipated  levels of
operational efficiencies and cost-saving  initiatives;  (3) customer response to
new products,  distribution channels and marketing  initiatives;  (4) mortality,
morbidity  and  other  factors  which  may  affect  the  profitability  of FIC's
insurance  products;  (5) changes in the Federal income tax laws and regulations
which may affect the  relative tax  advantages  of some of FIC's  products;  (6)
increasing  competition in the sale of insurance and  annuities;  (7) regulatory
changes or actions, including those relating to regulation of insurance products
and insurance companies; (8) ratings assigned to FIC's insurance subsidiaries by
independent rating  organizations such as A.M. Best Company,  which FIC believes
are  particularly  important  to the  sale of  annuity  and  other  accumulation
products; and (9) unanticipated litigation. There can be no assurance that other
factors not currently  anticipated  by management  will not also  materially and
adversely affect FIC.


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                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES


                                      INDEX

                                                                       Page No.

Part I - Financial Information

Item 1. Financial Statements
Consolidated Balance Sheets
         June 30, 2002 (as RESTATED) and December 31, 2001................... 5

Consolidated Statements of Income
         For the three and six month periods ended
         June 30, 2002 (as RESTATED) and June 30, 2001....................... 7

Consolidated Statements of Cash Flows
         For the three and six month periods ended
         June 30, 2002 (as RESTATED) and June 30, 2001...................... 11

Notes to Consolidated Financial Statements (as RESTATED).................... 15

Item 2. Management's Discussion and Analysis of
         Financial Conditions and Results of Operations..................... 19

Item 3. Quantitative and Qualitative Disclosures
            About Market Risk .............................................. 31

Item 4. Controls and Procedures ............................................ 32


Part II

Other  Information.......................................................... 33

Signature  Page............................................................. 37

Certifications.............................................................. 38


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                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                 June 30,          December 31,
                                                  2002                 2001
                                               (unaudited)
ASSETS                                         (RESTATED)

Investments:

Fixed maturities held to maturity, at
 amortized cost (market value approximates
 $1,042 and $1,028  at June 30, 2002
 and December 31, 2001, respectively)           $     1,042       $      1,029

Fixed maturities available for sale at
 market value (amortized cost of $488,031
 and $496,704 at June 30, 2002 and
 December 31, 2001, respectively)                   497,041            501,395

Equity securities, at market
 (cost approximates $59 at June 30,
 2002 and December 31, 2001)                             35                 56

Policy loans                                         48,197             49,794

Mortgage loans                                        3,722              4,715

Invested real estate                                 70,435             61,049

Short-term investments                              126,451            138,291

     Total investments                              746,923            756,329

Cash                                                  7,416              7,094

Accrued investment income                             8,307              8,483

Agency advances and other receivables                36,251             30,324

Reinsurance receivables                              15,396             14,709

Due and deferred premiums                            12,552             13,411

Real estate occupied by the Company                  19,913             20,054

Property and equipment, net                           3,573              3,546

Deferred policy acquisition costs                    81,232             80,290

Present value of future profits of
 acquired businesses                                 28,735             31,251

Other assets                                         16,564             14,074

Separate account assets                             364,060            399,264

     Total Assets                               $ 1,340,922        $ 1,378,829

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


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                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                 June 30,          December 31,
                                                   2002               2001
                                               (unaudited)
                                                (RESTATED)

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

Policy liabilities and contract holder
 deposit funds:

Contract holder deposit funds                   $   554,025        $   556,117

Future policy benefits                              175,810            180,953

Other policy claims and benefits payable             13,932             13,985
                                                    743,767            751,055

Deferred federal income taxes                        31,857             31,920

Excess of net assets acquired over cost                  -0-            15,847

Other liabilities                                    11,365              8,938

Separate account liabilities                        356,261            391,593

Total Liabilities                                 1,143,250          1,199,353

Commitments and Contingencies

Shareholders' equity:

Common stock, $.20 par value, 25,000
 shares authorized in 2002 and 2001,
 11,855 and 11,736 shares issued in 2002
 and 2001, 9,594 and 9,499 shares out-
 standing in 2002 and 2001.                           2,372              2,348

Additional paid-in capital                           66,523             65,558

Accumulated other comprehensive income                5,044              2,297

Deferred compensation                                  (263)              (292)

Retained earnings                                   146,353            131,462
                                                    220,029            201,373
Common treasury stock, at cost, 2,261
 and 2,237 shares in 2002 and 2001,
 respectively.                                      (22,357)           (21,897)

Total Shareholders' Equity                          197,672            179,476

Total Liabilities and Shareholders' Equity      $ 1,340,922        $ 1,378,829

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


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


                                                    Three Months Ended June 30,
                                                     2002             2001
                                                    (RESTATED)
Revenues:

 Premiums                                       $     8,996        $     9,061

 Net investment income                               10,092              7,141

 Earned insurance charges                            10,676              5,658

 Other                                                  238                254
                                                     30,002             22,114
Benefits and expenses:

Policyholder benefits and expenses                   11,121              6,703

Interest expense on contract holders
 deposit funds                                        7,109              4,126

Amortization of present value of future
 profits of acquired businesses                       1,260                938

Amortization of deferred policy acquisition
 costs                                                2,224              1,494

Operating expenses                                    7,697              5,376

Interest expense                                         -0-               189
                                                     29,411             18,826

Income before federal income tax and equity
 in net earnings of  affiliates                         591              3,288

Provision for federal income taxes                      376                994

Income before equity in net earnings of
 affiliates                                             215              2,294

Equity in net earnings of affiliate,
 net of tax                                              -0-               472

Net Income                                      $       215        $     2,766

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


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<PAGE>



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


                                                    Three Months Ended June 30,
                                                     2002              2001
                                                    (RESTATED)

Net Income Per Share

Basic:

Average weighted shares outstanding                   9,541              7,193

Basic earnings per share                        $      0.02        $      0.38

Diluted:

Common stock and common stock equivalents             9,619              7,250

Diluted earnings per share                      $      0.02        $      0.38

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


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<PAGE>



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


                                                     Six  Months Ended June 30,
                                                      2002             2001
                                                     (RESTATED)

Revenues:

Premiums                                        $    18,910        $    17,099

Net investment income                                21,140              8,772

Earned insurance charges                             21,501              6,592

Other                                                   690                254
                                                     62,241             32,717
Benefits and expenses:

Policyholder benefits and expenses                   21,405              9,294

Interest expense on contract holders
 deposit funds                                       15,094              4,696

Amortization of present value of future
 profits of acquired businesses                       2,330              1,776

Amortization of deferred policy acquisition costs     4,147              2,933

Operating expenses                                   16,585              8,516

Interest expense                                         -0-               616

Total                                                59,561             27,831

Income before federal income tax, equity
 in net earnings of affiliates and cumulative
 effect of change in accounting principle             2,680              4,886

Provision for federal income taxes                    1,309              1,354

Income before equity in net earnings of
 affiliates and cumulative effect of change
 in accounting principle                              1,371              3,532

Equity in net earnings of affiliate,
 net of tax                                              -0-             1,317

Net income before cumulative effect of
 change in accounting principle                       1,371              4,849

Cumulative effect of change in accounting
 principle                                           15,727                 -0-

Net Income                                      $    17,098        $     4,849

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


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



                                                      Six Months Ended June 30,
                                                       2002             2001

Net Income Per Share

Basic:                                                (RESTATED)

Average weighted shares outstanding             $     9,515              6,130

Basic earnings per share

Income per share before cumulative
 effect of change in accounting principle       $      0.14        $      0.79

Cumulative effect of change in accounting
 principle                                             1.65               0.00

Basic earnings per share                        $      1.80        $      0.79

Diluted:

Common stock and common stock equivalents             9,594              6,160

Diluted earnings per share

Income per share before cumulative effect
 of change in accounting principle              $      0.14        $      0.79

Cumulative effect of change in accounting
 principle                                             1.64               0.00

Diluted earnings per share                      $      1.78        $      0.79

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


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<PAGE>



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


                                                    Three Months Ended June 30,
                                                       2002              2001
                                                    (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES                (RESTATED)

Net Income                                      $       215       $      2,766

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

Amortization of present value of future
 profits of acquired business                         1,260                938

Depreciation                                            641                249

Equity in undistributed earnings of
 affiliate                                               -0-              (776)

Changes in assets and liabilities:

Decrease in accrued investment income                 2,428                 72

(Increase) decrease in agent advances
 and other receivables                               (6,599)             2,917

Decrease (increase) in due and deferred
 premiums                                               309               (101)

Net change in deferred policy acquisition
 costs                                                  (41)            (1,089)

Decrease in other assets                                989                381

Decrease in policy liabilities and accruals          (5,202)            (2,263)

Increase (decrease) in other liabilities              2,082             (1,620)

(Decrease) increase in deferred federal
 income taxes                                          (145)               114

Other, net                                              499              1,369

Net cash (used in) provided by operating
 activities                                     $    (3,564)      $      2,957

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


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<PAGE>



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

                                                    Three Months Ended June 30,
                                                      2002              2001
                                                    (unaudited)
CASH FLOWS FROM INVESTING ACTIVITIES                (RESTATED)

Fixed maturities purchased                      $   (79,192)      $    (28,785)

Real estate capitalized                              (7,010)                -0-

Proceeds from sales and maturities of
 fixed maturities                                    84,038             34,069

Net change in policy loans                              729                (61)

Net change in short-term investments                  1,820             (3,757)

Net change in property and equipment                      3               (259)

Net cash provided by  investing activities              388              1,207

CASH FLOW FROM FINANCING ACTIVITIES

Dividends paid                                       (2,207)            (1,931)

Net cash from acquisition of insurance
 holding company                                         -0-             6,979

Contractholder fund deposits                         13,110              7,435

Contractholder fund withdrawals                     (10,925)            (6,125)

Issuance of common capital stock                        795                 -0-

Purchase of treasury stock                               -0-            (2,298)

Net cash provided by financing activities               773              4,060

Net (decrease) increase in cash                      (2,403)             8,224

Cash, beginning of period                             9,819              3,855

Cash, end of period                             $     7,416        $    12,079

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


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<PAGE>



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


                                                     Six Months Ended June 30,
                                                       2002             2001
                                                     (unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES                 (RESTATED)

Net Income                                      $    17,098        $     4,849

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

Amortization of present value of future
 profits of acquired business                         2,330              2,056

Depreciation                                          1,281                274

Cumulative change in accounting principle           (15,727)                -0-

Equity in undistributed earnings of
 affiliate                                               -0-            (2,137)

Changes in assets and liabilities:

Decrease (increase) in accrued  investment
 income                                                 176               (104)

Increase in agent advances and other
 receivables                                         (6,614)                (3)

Decrease (increase) in due and deferred
 premiums                                               859               (427)

Net change in deferred policy acquisition
 costs                                                 (942)            (1,623)

Increase) decrease in other assets                   (2,489)                45

Decrease in policy liabilities and accruals          (9,445)            (1,967)

Increase in other liabilities                         2,427                137

Decrease in deferred federal income taxes            (1,569)              (150)

Other, net                                              954                728

Net cash (used in) provided by operating
 activities                                     $   (11,661)       $     1,678


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<PAGE>



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


                                                     Six Months Ended June 30,
                                                      2002              2001
                                                    (unaudited)

CASH FLOWS FROM INVESTING ACTIVITIES                (RESTATED)

Fixed maturities purchased                       $ (106,587)       $   (33,985)

Real estate capitalized                             (10,630)                -0-

Proceeds from sales and maturities of
 fixed maturities                                   115,313             42,565

Net change in policy loans                            1,597               (108)

Net change in short-term investments                 11,840             (2,995)

Net change in property and equipment                    (27)              (284)

Net cash provided by investing activities            11,506              5,193

CASH FLOW FROM FINANCING ACTIVITIES

Dividends Paid                                       (2,207)            (1,931)

Net cash from acquisition of insurance
 holding company                                         -0-             6,979

Contractholder fund deposits                         25,628              8,498

Contractholder fund withdrawals                     (23,473)            (7,236)

Issuance of common capital stock                        989                 -0-

Purchase of treasury stock                             (460)            (2,298)

Repayment of subordinated notes payable                  -0-            (1,537)

Net cash provided by financing activities               477              2,475

Net increase in cash                                    322              9,346

Cash, beginning of year                               7,094              2,733

Cash, end of period                             $     7,416        $    12,079

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


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                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The financial  statements  included herein have been presented to conform to the
requirements  of Form 10-Q.  This  presentation  includes year end balance sheet
data  that was  derived  from  audited  financial  statements.  The notes to the
financial  statements 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, 2001  previously  filed with the Securities
and Exchange  Commission for financial  statements  prepared in accordance  with
GAAP.  Management  believes the  financial  statements  reflect all  adjustments
necessary to present a fair  statement of interim  results.  Certain  prior year
amounts have been reclassified to conform with the current year presentation.

The  consolidated   financial  statements  include  the  accounts  of  Financial
Industries   Corporation   ("FIC")  and  its  wholly-owned   subsidiaries.   All
significant intercompany items and transactions have been eliminated.

Accumulated Other Comprehensive Income

The following is a reconciliation of accumulated other comprehensive income from
December 31, 2001 to June 30, 2002 (in thousands):

                                Net
                                unrealized
                                gain (loss)                              Total
                                on invest-      Net                      accumu-
                                ments in        appreciation             lated
                                fixed           (depreti-                other
                                maturities      ation)                   compre-
                                available       of equity                hensive
                                for sale        security       Other     income

Balance at December 31,
 2001                           $ 2,527         $  (2)         $(228)    $ 2,297
Current Period Change             2,761           (14)             0       2,747
Balance at June 30, 2002        $ 5,288         $ (16)         $(228)    $ 5,044

Dividends Declared

In March,  2001,  FIC announced that its board approved the payment of an annual
cash  dividend in the amount of $0.41 per share.  The dividend was paid on April
12,  2001,  to  shareholders  of record as of the close of business on March 19,
2001.

In May 2001, FIC announced that its Board of Directors approved the payment of a
semi-annual  cash dividend in the amount of $0.25 per common share. The dividend
was  payable on July 2, 2001,  to record  holders as of the close of business on
June 18, 2001.

A dividend of $0.23 per share was  declared in the second  quarter of 2002.  The
dividend was paid on June 21, 2002 to shareholders of record as of June 7, 2002.


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Related Party Transactions

On January 8, 2001,  the Company  donated  $375,000 to the Roy F. and Joann Cole
Mitte  Foundation  (the  "Foundation").  The  Foundation is a charitable  entity
exempt  from  federal  income  tax  under  section  501(a)  of  the  Code  as an
organization  described  in section  501(c)(3)  of the Code,  and as of March 6,
2002,  owned 16.31% of the  outstanding  shares of FIC's common stock.  The sole
members  of the  Foundation  are Roy F.  Mitte,  Chairman,  President  and Chief
Executive Officer of FIC, ILCO and their insurance  subsidiaries,  and his wife,
Joann Cole Mitte.  On January 2, 2002,  FIC made a donation of $1,000,000 to the
Foundation. For recent events concerning Roy F. Mitte see "Item 2 - Management's
Discussion  and  Analysis of  Financial  Conditions  and Results of  Operation -
Subsequent Events."

New Accounting Pronouncements

During 2001, the FASB issued Statement of Financial Accounting Standards No. 141
(FAS 141), "Business Combinations," which supersedes Accounting Principles Board
Opinion No. 16 (APB 16), "Business  Combinations," and establishes guidelines to
account for all acquisitions of a controlling  interest,  regardless of the form
of consideration.  The most significant changes made by FAS 141 are that it: (1)
requires the purchase method of accounting,  rather than the pooling method,  be
used  for  all  business  combinations   initiated  after  June  30,  2001;  (2)
establishes   specific   criteria  for  the  recognition  of  intangible  assets
separately from goodwill;  and (3) requires unallocated negative goodwill (which
is an excess of net assets  acquired over cost) to be recognized  immediately as
an extraordinary gain (instead of being deferred and amortized).

As of the first quarter of 2002, the amount of any  unamortized  deferred credit
related to negative  goodwill arising from (a) a business  combination for which
the acquisition date was before July 1, 2001, or (b) an investment accounted for
by the equity method acquired before July 1, 2001, is recognized and reported as
the effect of a change in  accounting  principle.  The effect of the  accounting
change and  related  income tax  effects is  presented  in the income  statement
between the  captions  "extraordinary  items" and "net  income".  The  per-share
information  presented in the income statement  includes the per-share effect of
the  accounting  change.  During the first quarter of 2002,  FIC  recognized the
unamortized   balance  of  $15,727,000  of  negative  goodwill.   There  was  no
amortization of negative  goodwill recorded during the first quarter of 2002 and
during the first quarter of 2001.

During 2001, the FASB issued Statement of Financial Accounting Standards No. 142
(FAS 142),  "Goodwill and Other Intangible Assets," which supersedes  Accounting
Principles  Board  Opinion  No.  17 (APB  17),  "Intangible  Assets,"  and which
addresses  financial  accounting  and reporting for acquired  goodwill and other
intangible  assets upon and subsequent to their  acquisition.  The provisions of
FAS 142 are effective for FIC's fiscal year beginning  January 1, 2002. The most
significant  changes  made by FAS 142 are: (1)  goodwill  and  indefinite  lived
intangible  assets will no longer be  amortized,  but instead will be tested for
impairment  at  least  annually  at  the  reporting  unit  level,  and  (2)  the
amortization  period of  intangible  assets with finite  lives will no longer be
limited to forty years. The adoption of FAS 142 did not materially  affect FIC's
results of operations, liquidity or financial position.


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<PAGE>



During 2001, the FASB issued Statement of Financial Accounting Standards No. 143
(FAS  143),  "Accounting  for Asset  Retirement  Obligations",  which  addresses
financial   accounting  and  reporting  for  obligations   associated  with  the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  FAS 143 is effective  for financial  statements  issued for fiscal years
beginning  after  June 15,  2002,  the  adoption  of which  is not  expected  to
materially affect FIC's results of operations, liquidity or financial position.

Accounting Standard No. 121, "Accounting for Impairment of Long-Lived Assets and
for  Long-Lived  Assets  to Be  Disposed  Of" (FAS  121) and  amends  Accounting
Principles Bulletin Opinion No. 30, "Reporting Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business  and  Extraordinary,  Unusual
and  Infrequently  Occurring  Events and  Transactions"  (APB 30) and Accounting
Research Bulletin No. 51 (ARB 51) Consolidated  Financial Statements".  FAS 144
is effective for fiscal years beginning after December 15, 2001. The adoption of
FAS 144 did not  materially  affect FIC's  results of  operations,  liquidity or
financial position.

In May 2002, the FASB issued Statement of Financial Accounting Standards No. 145
(FAS  145),  "Rescission  of FAS Nos.  4, 44, and 64,  Amendment  of FAS 13, and
Technical  Corrections as of April 2002." This Statement rescinds FASB Statement
No. 4, Reporting Gains and Losses from  Extinguishment of Debt, and an amendment
of that  Statement,  FASB  Statement  No.  64,  Extinguishments  of Debt Made to
Satisfy  Sinking- Fund  Requirements.  This Statement also amends other existing
authoritative  pronouncements  to make various  technical  corrections,  clarify
meanings,  or describe their applicability under changed conditions.  FAS 145 is
effective for financial  statements  issued for fiscal years beginning after May
15, 2002, and is not expected to affect FIC's results of  operations,  liquidity
or financial position.

The AICPA also  recently  issued  Statement of Position No. 01-06 ("SOP  01-06")
"Accounting by Certain Entities (Including Entities with Trade Receivables) That
Lend to or Finance the Activities of Others." The guidance in SOP 01-06 relating
to  financing  and lending  activities  is  explicitly  applicable  to insurance
companies.  SOP 01-06  reconciles  and conforms  the  accounting  and  financial
reporting guidance presently contained in other accounting  guidance.  SOP 01-06
is effective for financial  statements  issued for fiscal years  beginning after
December 15, 2001. The Company's accounting practices for its lending activities
are already consistent with the guidance contained in SOP 01-06. The adoption of
SOP  01-06  did  not  have  a  significant  effect  on the  Company's  financial
statements.

In June 2002, the FASB issued  Statement of Financial  Accounting  Standards No.
146  ("FAS  146"),  "Accounting  for  Costs  Associated  with  Exit or  Disposal
Activities,"  which  addresses  financial  accounting  and  reporting  for costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a  Restructuring)."  FAS 146 is effective for exit or disposal
activities  that are initiated after December 31, 2002, the adoption of which is
not expected to  materially  affect FIC's  results of  operations,  liquidity or
financial position.


                                     - 17 -



<PAGE>



Restatement

Subsequent to the issuance of the Registrant's  financial statements included in
our Form 10-Q for the  period  ending  June 30,  2002,  the  Company  identified
approximately $1.4 million of certain death benefit expenses incurred during the
quarter  ended June 30,  2002 that were not  recorded  until the  quarter  ended
September  30,  2002 due to an  interface  error  between the  Company's  policy
administration  system  and its  general  ledger.  As a  result,  the  financial
statements  for the three and six month  periods  ending June 30, 2002 have been
restated.  A  summary  of the  effects  of  the  restatement  of  the  Company's
Consolidated Balance Sheets,  Statements of Income, and Cash Flow Statements, as
follows:


                                                As Reported         As Restated

Other Liabilities                               $10,467,000        $11,365,000

                                                  3 months ended June 30, 2002

Policyholder benefits and expenses              $ 9,739,000        $11,121,000

Provision for federal income taxes              $   860,000        $   376,000

Net income                                      $ 1,113,000        $   215,000

Basic earnings per share                        $      0.12        $      0.02

Diluted earnings per share                      $      0.12        $      0.02

                                                  6 months ended June 30, 2002

Policyholder benefits and expenses              $20,023,000        $21,405,000

Provision for federal income taxes              $ 1,793,000        $ 1,309,000

Net income before cumulative
 effect of change in accounting
 principle                                      $ 2,269,000        $ 1,371,000

Basic earnings per share                        $      0.24        $      0.14

Diluted earnings per share                      $      0.24        $      0.14

Cumulative effect of change in
 accounting principle                           $15,727,000        $15,727,000

  Basic earnings per share                      $      1.65        $      1.65

  Diluted earnings per share                    $      1.64        $      1.64

Net income                                      $17,996,000        $17,098,000

  Basic earnings per share                      $      1.89        $      1.80

  Diluted earnings per share                    $      1.88        $      1.78


                                     - 18 -



<PAGE>



Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
                                   RESTATEMENT

In this Item 2, references to results for the quarter ended June 30, 2002 are to
restated  results.  See the  Notes  to the  Consolidated  Financial  Statements.
Financial  Industries   Corporation  has  restated  its  consolidated  financial
statements for the quarterly period ended June 30, 2002. The restatement relates
to approximately  $1.4 million of certain death benefit expenses incurred during
the quarter  ended June 30, 2002 that were not recorded  until the quarter ended
September  30,  2002 due to an  interface  error  between the  Company's  policy
administration  system  and its  general  ledger.  As a  result,  the  financial
statements  for the three and six month  periods  ending June 30, 2002 have been
restated.

For  purposes of this Form 10-Q/A and in  accordance  with rule 12b-15 under the
Securities Exchange Act of 1934, as amended,  each item of the Form 10-Q for the
period  ended June 30,  2002 as  originally  filed on August  26,  2002 that was
affected by the restatement has been amended to the extent affected and restated
in its  entirety.  NO  ATTEMPT  HAS BEEN MADE IN THIS  FORM  10-Q/A TO MODIFY OR
UPDATE  OTHER  DISCLOSURES  AS  PRESENTED  IN THE  ORIGINAL  FORM 10-Q EXCEPT AS
REQUIRED TO REFLECT THE EFFECTS OF THIS RESTATEMENT.

The following discussion addresses the financial condition of FIC as of June 30,
2002, compared with December 31, 2001, and its results of operations for the six
months  ended June 30,  2002,  compared  with the same  period  last year.  This
discussion  should  be read in  conjunction  with  Management's  Discussion  and
Analysis  included  in FIC's  10-K dated  April 1, 2002,  to which the reader is
directed for additional information.

          Transactions Affecting Comparability of Results of Operations

On May 18, 2001,  pursuant to an Agreement  and Plan of Merger,  as amended (the
"Merger Agreement"),  dated as of January 17, 2001, among FIC,  InterContinental
Life Corporation ("ILCO"), and ILCO Acquisition Company, a Texas corporation and
wholly-owned  subsidiary of FIC ("Merger  Sub"),  Merger Sub was merged with and
into ILCO (the "Merger").  ILCO was the surviving  corporation of the Merger and
became  a  wholly-owned  subsidiary  of  FIC.  In  accordance  with  the  Merger
Agreement,  FIC  issued 1.1 shares of common  stock,  par value  $0.20 per share
("FIC Common Stock"), for each share of common stock, par value $0.22 per share,
of ILCO  outstanding  at the  time  of the  Merger  ("ILCO  Common  Stock").  In
addition,  each share of ILCO Common  Stock  issuable  pursuant  to  outstanding
options was assumed by FIC and became an option to acquire FIC Common Stock with
the number of shares and exercise  price  adjusted for the exchange ratio in the
Merger.  Prior to the merger,  FIC owned  approximately  48.1% of ILCO's  common
stock. Since ILCO was a wholly-owned  subsidiary of FIC for the six month period
ending June 30, 2002,  the  operations  of ILCO are  reported on a  consolidated
basis with FIC. For the period from January 1, 2001 through May 17, 2001,  FIC's
net income  includes  its equity  interest in the net income of ILCO,  with such
equity interest being based on FIC's  percentage  ownership of ILCO, and for the
period from May 18, 2001  through  June 30, 2001,  the  operations  of ILCO were
reported on a consolidated basis with FIC.


                                     - 19 -



<PAGE>



         Results of Operations - Six Months Ended June 30, 2002 and 2001

For the six-month period ended June 30, 2002, Financial Industries Corporation's
("FIC") net income was $17,098,000 (basic earnings of $1.80 per common share, or
diluted  earnings  of $1.78 per common  share) on  revenues  of  $62,241,000  as
compared to net income of $4,849,000  (basic earnings of $0.79 per common share,
or diluted earnings of $0.79 per common share) on revenues of $32,717,000 in the
first six  months of 2001.  Net  income in the six month  period  ended June 30,
2002,  before the  cumulative  effect of a change in accounting  principle,  was
$1,371,000 (basic and diluted earnings of $0.14 per common share).

Earnings per share for the six months  ended June 30, 2002 were  affected by the
increase in the number of FIC's common shares  outstanding due to the Merger. As
of June 30, 2002, the number of FIC's weighted average common shares outstanding
was 9,515,000,  as compared to weighted average shares  outstanding of 6,130,000
as of June 30, 2001. The June 30, 2001 average weighted shares outstanding takes
into account the fact that additional  shares were issued on May 18, 2001 due to
the Merger and were  outstanding  only for the period  from May 18, 2001 to June
30, 2001.  Additionally,  net income and earnings per share were affected by the
cumulative  effect of a change in accounting  principle of $15.7  million.  This
amount  represents the excess of fair value of net assets  acquired over cost as
of the  beginning  of 2002  related to the  Merger.  The Company  recorded  this
cumulative effect in conjunction with adopting Statement of Financial Accounting
Standards No. 141 (FAS 141),  "Business  Combinations,"  in the first quarter of
2002, as required by FAS 141.

Revenues

Premium revenues reported for traditional life insurance products are recognized
when due.  Premium  income for the first six months of 2002,  net of reinsurance
ceded,  was $18.9 million,  as compared to $17.1 million in the first six months
of 2001.  This source of revenues is related to the  traditional  life insurance
book of business of FIC's insurance  subsidiaries.  The  consolidation of ILCO's
operations contributed  approximately $4.6 million to premium income for the six
month  period  ended June 30,  2002 and $1.1  million to premium  income for the
period from May 18, 2001 to June 30,  2001.  At Family  Life  Insurance  Company
("Family  Life",  which has been a subsidiary of FIC for the  six-month  periods
ending  June  30,  2002  and  2001),  first  year  net  collected  premiums  for
traditional  life  insurance  products for the six month period  ending June 30,
2002 were $1.3  million as compared to $1.9 million for the same period in 2001.
The level of renewal premiums for traditional life insurance  products at Family
Life for the six  month  period  ending  June 30,  2002 was  $12.2  million,  as
compared to $13.6  million for the same period in 2001.  The decrease in renewal
premium is attributable  to the decrease in the traditional  life insurance book
of business.

Income from universal life and annuity  charges for the first six months of 2002
was $21.5  million,  as compared to $6.6 million in the same period of 2001. The
consolidation of ILCO's operations  contributed  approximately  $20.0 million to
earned  insurance  charges for the six month period ended June 30, 2002 and $4.5
million to earned insurance charges for the period from May 18, 2001 to June 30,
2001. At Family Life, earned insurance charges declined from $2.1 million in the
2001  period  ending June 30th to $1.5  million in the 2002  period  ending June
30th. This change is attributable to a decrease in Family Life's  universal life
and annuity  business.  The face amount of Family Life's in force universal life
policies  was $627  million at June 30, 2002 as compared to $817 million at June
30, 2001.


                                     - 20 -



<PAGE>



Net  investment  income  for the first six  months of 2002 was $21.1  million as
compared to $8.8 million in the same period of 2001. The consolidation of ILCO's
operations contributed  approximately $18.2 million to net investment income for
the six month  period  ended June 30, 2002 and $5.6  million for the period from
May 18, 2001 to June 30, 2001. FIC and its  subsidiaries'  investment  portfolio
were adversely  affected by the decline in the level of interest income received
from fixed income and short-term  investments.  This decline is  attributable to
lower  interest  rates  during the  period.  Net  investment  income was further
affected  by the sale of  short-term  investments  and the  reinvestment  of the
proceeds  from such sales in real  estate,  and the write  down of two  mortgage
loans  totaling  $1.0  million  in the  second  quarter  of 2002.  For a further
discussion  of the mortgage  loans,  refer to the  discussion  under the caption
'Investments'.

Real estate income is primarily earned from the leases on the buildings at River
Place  Pointe,  an office  complex  in  Austin,  Texas  which is owned and being
developed by  Investors  Life  Insurance  Company of North  America  ('Investors
Life').  Net real estate  income,  included in net investment  income,  was $3.2
million  for the six month  period  ended June 30,  2002,  as  compared  to $0.7
million for the same period in 2001. ILCO's real estate income was only included
in FIC's  income  statements  from May 18,  2001  through  June 30, 2001 for the
second quarter of 2001 and for the entire six month period in 2002.

Benefits and Expenses

Policyholder benefits and expenses were $21.4 million in the first six months of
2002,  as  compared  to $9.3  million  in the  first  six  months  of 2001.  The
consolidation of ILCO's operations for the six month period ending June 30, 2002
contributed  approximately  $16.0 million to policyholder  benefits and expenses
and contributed  $3.3 million for the period from May 18, 2001 to June 30, 2001.
At Investors  Life,  the level of  policyholder  benefits and expenses was $14.6
million for the first six months of 2001  compared to $16.0 million in the first
six months of 2002.  At Family  Life,  the level of  policyholder  benefits  and
expenses  was $6.0  million  for the first six months of 2001  compared  to $5.5
million for the same period in 2002. The increase in  policyholder  benefits and
expenses at ILCO,  was primarily  attributable  to an increase in death benefits
paid out of $1.6 million.

Interest  expense on contract  holders  deposit  funds was $15.1  million in the
first six months of 2002,  as compared to $4.7 million in the same period of the
year 2001. This increase is attributable to $14.1 million of interest expense on
contract  holders  deposit  funds  resulting  from the  consolidation  of ILCO's
operations  for the period  ended June 30,  2002,  compared  to $3.4  million of
ILCO's interest expense for the period from May 18, 2001 to June 30, 2001.

The expense related to the  amortization of deferred  policy  acquisition  costs
increased by $1.2 million to $4.1 million in the first six months of 2002,  from
$2.9  million in the first six  months of 2001.  A portion  of the  increase  in
amortization  is  attributable  to the  Merger . In the first  quarter  of 2002,
expenses  related to acquiring  new business  were $3.0  million,  of which $2.2
million has been capitalized as deferred policy acquisition costs. In the second
quarter of 2002,  expenses  related to acquiring new business were $3.9 million,
of which $2.7 million has been capitalized as deferred policy acquisition costs.
The amounts not  capitalized  in each quarter  were  recorded as expenses in the
relevant quarter. See "Critical Accounting Policies, Deferred Policy Acquisition
Costs and Present  Value of Future  Profits of Acquired  Business"  herein for a
further  discussion  of  capitalization  of expenses  related to  acquiring  new
business.


                                     - 21 -



<PAGE>



In the first six months of 2002,  the  amortization  of present  value of future
profits of acquired business was $2.3 million as compared to $1.8 million in the
first six months of 2001. The consolidation of ILCO's amortization  expense with
FIC's contributed  approximately  $0.7 million in the period ended June 30, 2002
and $0.2 million for the period from May 18, 2001 to June 30, 2001.

The operating  expenses for the first six months of 2002 were $16.6 million,  as
compared to $8.5 million in the first six months of 2001. The  consolidation  of
ILCO's operations  contributed  approximately $9.9 million to operating expenses
for the six month period ended June 30, 2002 as compared to $2.2 million for the
period from May 18, 2001 to June 30, 2001.  The level of operating  expenses for
the six month period  ending June 30, 2002  included:  (i)  expenses  related to
acquiring new  business;  (ii)  $318,156  related to the  repurchase of James M.
Grace's  employment  contract;  and (iii) a donation of $1 million to the Roy F.
and Joann Cole Mitte  Foundation which was made in the first quarter of 2002, as
compared  to a $375,000  donation  in the first  quarter of 2001.  For a further
discussion of the repurchase of Mr. Grace's employment contract and the donation
to the  Foundation,  see FIC's 10-K for the year ended December 31, 2001,  dated
April 1, 2002.

Interest  expense  for the first six months of 2002 was $0, as  compared to $0.6
million in the first six  months of 2001.  This  interest  expense is related to
indebtedness  owed to Investors Life by Family Life  Corporation (a wholly owned
subsidiary of FIC) and FIC. The consolidation of ILCO's operations with those of
FIC for the  entire  six  month  period  ending  June 30,  2002  results  in the
elimination of this interest expense in the income statements of FIC.

The provision for federal  income taxes was $1.3 million in the first six months
of 2002 as  compared  to $1.4  million  in the  first six  months  of 2001.  The
inclusion of ILCO's results contributed  approximately $1.3 million to the level
of federal  income taxes for the six months ended June 30, 2002.  Because of the
Merger and  subsequent  consolidation  of FIC and ILCO's  provision  for federal
income taxes, FIC was not able to utilize the small company tax deduction, which
provided  lower tax rates.  The decrease in federal  income taxes from the small
company  deduction  utilized in the six months ended June 30, 2001 was $134,495.
Additionally,  due to the Merger, the Company will incur approximately  $175,000
in federal income taxes in the second quarter of 2002 related to  non-deductible
compensation.


                                     - 22 -



<PAGE>



Equity in Net Income of InterContinental Life Corporation

For the period from  January 1, 2001 to May 17,  2001,  FIC's  equity in the net
earnings of ILCO,  net of federal  income tax, was $1.3  million.  Following the
merger of ILCO with FIC on May 18, 2001,  the results of ILCO were  consolidated
with those of FIC. Accordingly,  there is no equity in net earnings of affiliate
results for the period ended June 30, 2002.

Prior to the  merger  with ILCO,  FIC owned  3,591,534  shares of ILCO's  common
stock. In addition,  Family Life owned 342,400 shares of ILCO common stock. As a
result, FIC owned, directly and indirectly through Family Life, 3,933,934 shares
(approximately  48.1%) of ILCO's  common stock.  Upon  completion of the merger,
ILCO became a wholly-owned subsidiary of FIC.

            Results of Operations - Three Months Ended June 30, 2002
               as compared to the Three Months Ended June 30, 2001

For the  three-month  period  ended  June 30,  2002,  FIC's net  income was $0.2
million  (basic and diluted  earnings of $0.02 per common  share) on revenues of
$30.0  million as  compared  to net income of $2.8  million  (basic and  diluted
earnings of $0.38 per common  share) on total  revenues of $22.1  million in the
same three month  period of 2001.  The increase in total  revenues  from 2001 to
2002 is primarily  attributable to the  consolidation of ILCO's  operations into
FIC's  Statements of Income for the entire second  quarter of 2002. The decrease
in net income from June 30, 2001 to June 30, 2002 was primarily  attributable to
$1.2 million of increased  expenses due to the  acquisition of new business that
was not  capitalized  as deferred  policy  acquisition  costs , $1.0  million of
capital losses relating to the write-down of two mortgage  loans,  and increases
in policyholder benefits and expenses.  For a further discussion of the mortgage
loans, see "Investments" herein.

                         Liquidity and Capital Resources

Liquidity  describes the ability of a company to generate  sufficient cash flows
to meet  the cash  requirements  of  business  operations.  FIC is an  insurance
holding company whose principal assets consist of the outstanding  capital stock
of its insurance  subsidiaries - Family Life Insurance  Company ("Family Life"),
Investors Life Insurance Company of North America  ("Investors Life"), and prior
to  February   19,   2002,   Investors   Life   Insurance   Company  of  Indiana
("Investors-IN").  Prior  to the  merger  of FIC and ILCO on May 18,  2001,  the
principal  assets  of  FIC  consisted  of the  common  stock  of  its  insurance
subsidiary,  Family  Life - and its  equity  ownership  in  ILCO.  As a  holding
company, FIC's ability to meet its cash requirements,  pay interest on any debt,
pay  expenses  related to its  affairs  and pay  dividends  on its common  stock
substantially depends upon dividends from its subsidiaries.

Prior  to  June  2001,  the  principal  source  of  liquidity  for  FIC  and its
wholly-owned  subsidiary,  Family Life  Corporation,  consisted  of the periodic
payment of principal  and  interest by Family Life  pursuant to the terms of the
surplus  debenture  issued in connection with the Family Life  acquisition  from
Merrill Lynch.


                                     - 23 -



<PAGE>



For periods  subsequent to June 30, 2001,  FIC's  available  source of liquidity
will be dividends paid to it from its  subsidiaries.  Applicable state insurance
laws generally restrict the ability of insurance companies to pay cash dividends
in excess of prescribed limitations without prior approval.

The ability of Family Life and Investors  Life to pay  shareholder  dividends is
and will continue to be subject to restrictions  set forth in the insurance laws
and regulations of Washington,  their domiciliary  state.  Washington limits how
and when Family Life and  Investors  Life can pay  shareholder  dividends by (a)
including  the "greater  of" standard for payment of dividends to  shareholders,
(b) requiring  that prior  notification  of a proposed  dividend be given to the
Washington Insurance  Commissioner and (c) requiring that cash dividends 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.
Neither  Investors Life nor Family Life paid any dividends  during the first six
months of 2002. For the six month period ended June 30, 2002, Investors Life had
earned surplus of $51.4 million and a net gain from  operations of $3.4 million,
and  Family  Life  had  earned  surplus  of $3.6  million  and a net  gain  from
operations of $1.9 million.

Prior to the  merger  of  Investors  Life and  Investors-IN  in  February  2002,
Investors-IN was domiciled in the State of Indiana.  Under the Indiana insurance
code, a domestic insurer may make dividend  distributions  upon proper notice to
the  Department  of  Insurance,  as long as the  distribution  is  reasonable in
relation to adequate  levels of  policyholder  surplus and quality of  earnings.
Investors-IN did not make any dividend payments in 2002.

Sources of cash for FIC's  insurance  subsidiaries  consist of premium  payments
from  policyholders  and annuity  holders,  charges on policies  and  contracts,
investment income, and proceeds from the sale of investment assets.  These funds
are applied  primarily to provide for the payment of claims under  insurance and
annuity policies, payment of policy withdrawals, surrenders and loans, operating
expenses, taxes, investments in portfolio securities, and shareholder dividends.

FIC's cash and cash equivalents at June 30, 2002 was $7.4 million as compared to
$7.1 million at December 31, 2001.  Cash and cash  equivalents  at June 30, 2001
was $12.1 million.

FIC's net cash flow used in operating activities was ($11.7) million for the six
month  period  ending June 30,  2002,  as compared to $1.7  million  provided by
operating  activities for the same period in the year 2001. The increase in cash
used in operating  activities of $13.3 million from the first six months of 2001
to the same period in 2002 was primarily attributable to a $6.6 million increase
in agent  advances and other  receivables  due to an increase in federal  income
taxes  recoverable and an increase in amounts due from on a reinsurance  treaty,
and a decrease in policy liabilities and accruals of $7.5 million.


                                     - 24 -



<PAGE>



Net cash flow  provided by  investing  activities  was $11.5  million in the six
month  period  ending June 30,  2002,  as  compared to $5.2  million in the same
period  of 2001.  The cash  provided  by  investing  activities  was  positively
affected by an $14.8  million  increase in cash from a net change in  short-term
investments  and a $1.7 million  decrease in policy  loans.  These  amounts were
offset by a ($10.6) million capitalization of real estate.

Net cash flow provided by financing activities was $0.5 million in the first six
months of 2002, as compared to $2.5 million in the first six months of 2001. The
decrease in cash provided by financing  activities is due to $7.0 million in net
cash FIC  received in the period ended June 30, 2001 due to the  acquisition  of
ILCO.

The cash  requirements of FIC, and its holding company  subsidiary,  Family Life
Corporation,  consist  primarily of its service of the  indebtedness  created in
connection  with  FIC's  ownership  of Family  Life.  As of June 30,  2002,  the
investment   portfolio  of  Investors  Life  included  $26.1  million  of  notes
receivable  from  affiliates,  represented  by (i) a  loan  of  $30  million  by
Investors Life to Family Life  Corporation made in July 1993, in connection with
the prepayment of indebtedness which had been previously issued to Merrill Lynch
as  part  of  the  1991  acquisition  of  Family  Life  Insurance  Company  by a
wholly-owned  subsidiary  of FIC,  and (ii) a loan of $4.5  million by Investors
Life  to  Family  Life  Insurance  Investment  Company  made in  July  1993,  in
connection with the same transaction described above.

The  provisions  of the notes owned by  Investors  Life  include  the  following
provisions:  (a) the $30 million note provides for quarterly principal payments,
in the amount of $163,540 each for the period December 12, 1996 to September 12,
2001;  beginning with the principal payment due on December 12, 2001, the amount
of the principal payment increases to $1,336,458;  the final quarterly principal
payment is due on September  12, 2006;  the interest rate on the note remains at
9%, and (b) the $4.5 million note provides for quarterly principal payments,  in
the amount of $24,531 each for the period  December  12, 1996 to  September  12,
2001;  beginning with the principal payment due on December 12, 2001, the amount
of the principal  payment increases to $200,469;  the final quarterly  principal
payment is due on September  12, 2006;  the interest rate on the note remains at
9%.

Due to the Merger,  this  indebtedness  is not  included  as a liability  on the
consolidated  financial  statements of FIC. FIC's other  liquidity  requirements
relate principally to the need for cash flow to meet operating expenses, as well
as the  liabilities  associated  with its insurance  subsidiaries'  various life
insurance and annuity products.

Additionally,  in  2002  and  2001,  FIC  has  used  cash  to pay  dividends  to
shareholders.  In May, 2001, the Board of Directors approved a policy pertaining
to the payment of  dividends  to the  shareholders  of the  Company  whereby the
Company will endeavor to declare and pay, on a semi-annual  basis, a dividend on
the common  stock of the  Company so as to  provide to the  shareholders  of the
Company an  annualized  yield of  approximately  3% on the  market  value of the
common  stock of the Company at the time of the  declaration  of such  dividend.
Based on this policy, a dividend of $0.23 per share was paid on June 21, 2002 to
shareholders  of record on June 7, 2002.  The total amount of cash that FIC paid
to shareholders for the June 21, 2002 dividend was $2,207,000.


                                     - 25 -



<PAGE>



Given the historical  cash flow of our  subsidiaries  and the current  financial
results,  management  believes that the cash,  cash  equivalents  and short term
investments of FIC and its  subsidiaries are sufficient to meet the needs of its
business and to satisfy debt service.  There are no commitments or capital asset
requirements  that are  expected to have an adverse  effect on the  liquidity of
FIC.

                                   Investments

As of June 30, 2002, FIC's invested assets, excluding separate accounts, totaled
$746.9  million,  a decrease of $9.4 million from $756.3 million at December 31,
2001.  The decrease is primarily  attributable  to a decrease of $4.4 million in
fixed  maturities  available  for sale (due to a decrease of $8.7 million in the
book value of bonds  matured,  offset by a $4.3  million  increase in the market
value of the fixed  maturities  portfolio),  and a decrease of $11.8  million in
short-term investments. These decreases in invested assets were partially offset
with  $9.4  million  reinvested  in  real  estate.   There  are  no  significant
differences between the portfolio composition as of June 30, 2002 as compared to
December 31, 2001.

The assets held by Family Life and  Investors  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". FIC determines
the  allocation  of our  assets  primarily  on the basis of cash flow and return
requirements of our products and secondarily by the level of investment risk.

A key element of the Company's investment strategy is to avoid large exposure in
other  investment  categories  which the Company believes carry higher credit or
liquidity   risks,   including   private   placements,   partnerships  and  bank
participations.  These categories  accounted for only $32,256 of invested assets
as of June 30, 2002 and $45,479 of invested assets at December 31, 2001.

Our fixed maturity securities portfolio is predominately  comprised of low risk,
investment  grade,  available for sale  publicly  traded  corporate  securities,
mortgage-backed  securities and United States  Government  bonds. As of June 30,
2002,  the market value of the fixed  maturities  available for sale segment was
$497.0  million  as  compared  to an  amortized  cost of  $488.0  million  or an
unrealized gain of $9.0 million.  The increase reflects unrealized gains on such
investments  related to changes in interest rates  subsequent to the purchase of
such investments. At December 31, 2001, the market value of the fixed maturities
available for sale segment was $501.4  million as compared to an amortized  cost
of $496.7 million.


                                     - 26 -



<PAGE>



The investments of FIC's insurance  subsidiaries in  mortgage-backed  securities
included  collateralized  mortgage  obligations ("CMOs") of $138.2 million as of
June  30,  2002 as  compared  to  $201.8  million  at  December  31,  2001,  and
mortgage-backed pass-through securities of $24.1 million as of June 30, 2002 and
$31.2  million at December 31, 2001.  Mortgage-backed  pass-through  securities,
sequential CMO's and support bonds, which comprised  approximately  45.6% of the
book value of FIC's  mortgage-backed  securities at June 30, 2002, are sensitive
to prepayment and extension risks. FIC's insurance subsidiaries 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,  2002,  PAC and TAC  instruments  and  scheduled  bonds  represented
approximately  54.4% of the book  value  of  FIC's  mortgage-backed  securities.
Sequential and support classes represented approximately 30.8% of the book value
of  FIC's  mortgage-backed  securities  at June 30,  2002.  In  addition,  FIC's
insurance  subsidiaries  limit the risk of  prepayment  of CMOs by not  paying a
premium  for  any  CMOs.   FIC's   insurance   subsidiaries  do  not  invest  in
mortgage-backed securities with increased prepayment risk, such as interest-only
stripped  pass-through  securities and inverse  floater bonds.  FIC's  insurance
subsidiaries  did not  have  any  z-accrual  bonds  as of  June  30,  2002.  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.  For the year 2002,  the  investment  objectives  of FIC's
insurance subsidiaries include the making of selected investments in CMOs.

The securities  valuation office (SVO) of the National  Association of Insurance
Commissioners evaluates all public and private bonds purchased as investments by
insurance  companies.  The SVO assigns one of six investment  categories to each
security it reviews. Category 1 is the highest quality rating, and Category 6 is
the lowest.  As of June 30, 2002, the majority of our bonds are investment grade
(Category  1  and  2).  The  Company's  fixed  maturities  portfolio  (including
short-term investments),  included only a non-material amount of debt securities
which,  in the annual  statements of the companies as filed with state insurance
departments, were designated by the SVO as "3" (medium quality) or below.

FIC's short-term  investments  consist  primarily of U.S.  Government bonds. The
level of short-term investments at June 30, 2002 was $126.5 million, as compared
to $138.3  million as of  December  31,  2001.  The $11.8  million  decrease  in
short-term  investments  was offset by a $9.4 million  increase in invested real
estate.


                                     - 27 -



<PAGE>




Invested  real  estate at June 30,  2002 was $70.4  million as compared to $61.0
million at December 31, 2001. The real estate investment is primarily related to
the  development  of the River Place Pointe  project  ("River Place  Pointe") by
Investors  Life. In October 1998,  Investors Life purchased  River Place Pointe,
which  consisted  of two  adjoining  tracts of land  located in  Austin,  Texas,
totaling  47.995 acres.  The aggregate  purchase price for these tracts was $8.1
million.  Investors Life obtained a Site Development  Permit for the tracts from
the City of Austin  allowing  for the  construction  of seven  office  buildings
totaling  600,000  square  feet,  with  associated  parking,  drives and related
improvements.  Construction on the first section of the Project,  which consists
of  four  office   buildings,   an  associated   parking  garage,   and  related
infrastructure  was completed  during 2000 and 2001.  Construction on the second
section  continued  during  the first  six  months  of 2002,  including  work on
buildings  five,  six and seven.  Building five was completed  during the second
quarter of 2002 and  completion  of the  remainder of the project is expected by
the end of 2002.

As of  June  30,  2002,  Investors  Life  had  invested  $91.7  million  in  the
construction of River Place Pointe,  of which $19.9 million is recorded on FIC's
balance sheet as real estate occupied by the Company.  Investors Life paid $10.6
million during the first six months of 2002 on  construction  of the project and
expects to pay an  additional  $5.4 million to complete the project.  As of June
30, 2002,  302,589  rentable  square feet of office space was leased and 152,858
rentable  square  feet was  available  for  lease.  Upon the  completion  of the
remainder of the project,  which includes two more office buildings,  there will
be 128,824 additional rentable square feet available for lease. According to the
Federal Deposit  Insurance  Corporation's  ("FDIC") National Edition of Regional
Outlook,  Second  Quarter,  2002,  the Austin  office market posted the nation's
greatest  increase in office vacancy rate (15.2  percentage  points) from first-
quarter 2001 to  first-quarter  2002, and, at 23.3 percent,  ranks second in the
country.  Additionally,  the FDIC report states that sublease space in Austin is
nearly 3.5 million  square feet,  or 44 percent of the metro area's total vacant
space, and will remain an obstacle to on the recovery of Austin's office market.

As of June 30, 2002, $3.7 million was invested in mortgage loans, as compared to
$4.7 million at December 31, 2001.  The Company does not make new mortgage loans
on commercial properties. Substantially all of the Company's mortgage loans were
made by its subsidiaries prior to their acquisition by the Company.  At June 30,
2002,  none of the  mortgage  loans  held by the  Company  had  defaulted  as to
principal or interest for more than 90 days, and none of the Company's  mortgage
loans were in foreclosure.  The Company  participates  with a third party in two
mortgage  loans in New York  state,  Champlain  Centre Mall and Salmon Run Mall,
with a total balance due of $4.6 million at June 30, 2002. On June 18, 2002, the
Company agreed to a proposed  payoff of these loans at a discount.  The borrower
paid off the loans in August,  2002, with a payment of $3.6 million. The Company
reduced the carrying  value of the two loans by $1.0 million as of June 30, 2002
as an impairment of an invested asset.

Policy  loans  totaled  $48.2  million at June 30,  2002,  as  compared to $49.8
million at December 31, 2001.

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


                                     - 28 -



<PAGE>



                          Critical Accounting Policies

The  financial  statements  contain  a  summary  of  FIC's  critical  accounting
policies,  including a discussion of recently-issued  accounting pronouncements.
Certain of these  policies are  considered  to be important to the  portrayal of
FIC's  financial  condition,  since they require  management to make  difficult,
complex or  subjective  judgments,  some of which may relate to matters that are
inherently  uncertain.  These policies  include  valuation of : investments  and
deferred  acquisition  costs and present  value of future  profits.  For the six
month period ended June 30, 2002,  the Company's  critical  accounting  policies
also included the cumulative effect of accounting changes regarding the goodwill
acquired from the merger with ILCO.

Cumulative Effect of Accounting  Changes.  During the first quarter of 2002, the
Company  adopted  Statement of Financial  Accounting  Standards  (SFAS) No. 141,
"Business  Combinations." SFAS No. 141 eliminates the practice of amortizing and
deferring  excess of fair value of net assets  acquired  over cost and  requires
unallocated negative goodwill to be recognized  immediately.  In accordance with
the standard,  FIC ceased negative goodwill  amortization on January 1, 2002 and
recognized  the  unamortized  balance  of $15.7  million  of  negative  goodwill
acquired in the Merger.


Investments.  The  Company's  investments  primarily  consist of fixed  maturity
securities,  which include bonds,  notes and redeemable  preferred stocks.  Fair
values of investments  in fixed  securities are based on quoted market prices or
dealer quotes.  Fixed  maturities are classified as "available for sale" and are
reported at fair value,  with  unrealized  investment  gains and losses,  net of
income taxes,  credited or charged directly to shareholder's  equity.  Generally
accepted accounting  principles require that investments be written down to fair
value when  declines in value are  considered  other than  temporary.  When such
impairments occur, the decrease in value is reported in net income as a realized
investment loss and a new cost basis is  established.  During the second quarter
of 2002 an impairment  write-down  was recorded  resulting in a realized loss of
$1.0 million in two mortgage loans.

Deferred  Policy  Acquisition  Costs  and  Present  Value of Future  Profits  of
Acquired Business. The costs of acquiring new business,  including certain costs
of issuing  policies and certain other variable  selling  expenses  (principally
commissions),  are deferred policy acquisition costs ("DAC"). DAC is capitalized
and then amortized to reflect an expense in relation to the projected  stream of
profits (for universal life and annuity products) or to the premium revenue (for
traditional life products). Such projections require use of certain assumptions,
including interest margins,  product loads, mortality rates,  persistency rates,
and maintenance expense levels. Effective with respect to new business issued on
and after January 1, 2002, the Company has  capitalized  DAC based on an updated
analysis of its cost structure and  assumptions as to product  performance.  For
business  written  previously,  DAC is amortized  using  previously  established
methods  and  practices.   Management   periodically   reviews  the  assumptions
associated with the amortization models prospectively.


                                     - 29 -



<PAGE>



Present  value of future  profits of acquired  business  ("PVFP")  are the costs
associated  with acquiring  blocks of insurance from other  companies or through
the  acquisition  of other  companies.  PVFP is  capitalized  and amortized in a
manner that matches these costs against the associated revenues.

From the  period of  January  1, 2001  through  May 18,  2001,  FIC's net income
includes  its  equity  interest  in the net  income of ILCO,  with  such  equity
interest being based on FIC's percentage ownership of ILCO.

For a further discussion of accounting standards,  refer to the discussion under
the caption New Accounting Pronouncements herein.

                                Subsequent Events

Separate Accounts

As of August 1, 2002,  the separate  account assets of the Company were adjusted
to  reflect  the  results  of a review of  policyholder  liability  accounts.  A
subsidiary of the Company  (Investors  Life Insurance  Company of North America)
sponsors two variable annuity separate  accounts,  representing  twelve separate
divisions.  The assets of each  division  are invested in shares of a designated
unaffiliated  mutual fund. The sponsor increased the assets of five divisions in
an  aggregate  amount  of  $279,981,   with  a  corresponding  increase  in  the
contractholder  interests  in the  separate  accounts.  With  respect to the six
divisions for which the net assets  attributable  to  contractholders  were less
than the amount of assets held in the underlying fund, the sponsor decreased the
assets in an aggregate amount of $490,322.

In addition,  Investors Life administers a variable annuity separate account for
a third party insurer. That separate account consists of fourteen divisions. The
assets of each division are invested in shares of a designated mutual fund. As a
result of the referenced review, Investors Life funded an increase in the assets
of five  divisions in an  aggregate  amount of  $357,585,  with a  corresponding
increase in the contractholder interests in the separate account. Investors Life
is considering the contractual indemnification rights, if any, it may have as to
the sponsor of the separate account.

Administrative  Leave of President,  Chief Executive Officer and Chairman of the
Board

Effective  August 19, 2002,  the Board of Directors of the Company placed Roy F.
Mitte, the President,  Chief Executive  Officer and Chairman of the Board of the
Registrant,  on  administrative  leave pending the satisfactory  completion of a
review by the Audit  Committee of the Board of Directors  into certain  expenses
that were paid by the Company  during the reporting  period and prior  reporting
periods that may have been personal,  rather than business-related  expenses, of
Mr. Mitte. On August 15, 2002, the Audit Committee retained  independent counsel
to conduct such review.  The Board of  Directors  elected Dr.  Eugene Payne as a
Director of the Registrant  and appointed him as interim  Chairman of the Board,
and  appointed  Thomas C.  Richmond,  a Director  and Vice  President,  as Chief
Operating  Officer.  On August 24, 2002,  the Board of Directors  appointed  Mr.
Richmond to the additional position of interim Chief Executive Officer.


                                     - 30 -



<PAGE>



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 "Management's Discussion and Analysis of Financial Condition and Operations -
Investments".

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 that 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 that 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. The Company does not use derivative financial instruments.

     Interest  Rate Risk The Company  manages the interest rate risk inherent in
our assets  relative to the  interest  rate risk  inherent  in our  liabilities.
Generally,  we manage  interest rate risk based on the application of a commonly
used model. The model projects the impact of interest rate changes on a range of
factors,  including duration and potential prepayment.  For example, 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 $25.7  million at June 30, 2002 and
$24.6  million at December 31, 2001.  For  purposes of the  foregoing  estimate,
fixed maturities and short- term investments were taken into account. The market
value of such assets was $624.5  million at June 30, 2002 and $640.7  million at
December 31, 2001.

The fixed income  investments  of the Company  include  certain  mortgage-backed
securities.  The market value of such  securities was $173.2 million at June 30,
2002 and $209.9 million at December 31, 2001.  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 $3.9 million
at June 30, 2002 and $6.7 million at December 31, 2001.

Separate account assets have not been included,  since gains and losses on those
assets generally accrue to the policyholders.

The Company does not use derivative financial instruments to manage our exposure
to fluctuations in interest rates.


                                     - 31 -



<PAGE>



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.

Item 4. Controls and Procedures

(a) The chief executive  officer and chief financial officer of the Company have
evaluated the effectiveness of the Company's  disclosure controls and procedures
pursuant to Rule 13a-14 under the  Securities  Exchange Act of 1934 as of a date
within  90  days  prior  to the  filing  date  of  this  report.  Based  on that
evaluation,  such officers have concluded that the Company's disclosure controls
and procedures,  as modified following implementation of the procedure described
in paragraph  (b),  below,  are  effective to ensure that  material  information
relating to the Company and its subsidiaries is made known to such officers in a
timely manner for inclusion in the Company's periodic filings with the SEC.

(b) In  connection  with the  preparation  of its financial  statements  for the
quarter ended September 30, 2002, the Company  identified  certain  transactions
that occurred in the quarter  ended June 30, 2002,  but were not recorded in the
financial  results for that  period.  These  accounting  errors  relate to death
benefits for a relatively new annuity product line. The errors were inadvertent,
unintentional and were due to a failure in the mechanical  interface between the
Company's  policy  administration  system and the general  ledger system used to
record consolidated  transaction for GAAP reporting purposes.  The effect on the
financial  statements  for the quarter  ended June 30, 2002  resulting  from the
correction of these errors is described in the notes to the financial statements
included in this Report.

As a result  of the  identification  of these  accounting  errors,  the  Company
initiated  and completed a review of all product  lines,  to assure that benefit
payments were properly recorded for the current period. The Company intends that
this manual  review  will be  continued  on at least a  quarterly  basis until a
resolution of the mechanical  interface  system is implemented and tested.  This
modification,  when  implemented,  would  eliminate the need for a manual review
procedure to assure the proper recording of benefit payments.

Except as described  above,  there were no significant  changes in the Company's
internal  controls or in other  factors  that could  significantly  affect these
controls subsequent to the date of their most recent evaluation by the Company's
chief executive officer and chief financial officer.


                                     - 32 -



<PAGE>



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  on the
financial statements.

     Litigation  Relating to the FIC/ ILCO Merger.  On the day that FIC and ILCO
each  publicly  announced  the  formation  of a special  committee to evaluate a
potential merger, two class action lawsuits were filed against ILCO, FIC and the
officers and directors of ILCO. The actions allege that a cash  consideration in
the proposed merger is unfair to the shareholders of ILCO, that it would prevent
the ILCO  shareholders  from  realizing the true value of ILCO, and that FIC and
the named officers and directors had material conflicts of interest in approving
the transaction. In their initial pleadings, the plaintiffs sought certification
of the cases as class actions and the named plaintiffs as class representatives,
and  among  other  relief,  requested  that  the  merger  be  enjoined  (or,  if
consummated,  rescinded  and set aside) and that the  defendants  account to the
class members for their damages.  The  defendants  believe that the lawsuits are
without  merit and intend to  vigorously  contest the  lawsuits.  Management  is
unable to  determine  the  impact,  if any,  that the  lawsuits  may have on the
results of operations of the Company.

     Other Litigation.  Additionally, FIC's insurance subsidiaries are regularly
involved in  litigation,  both as a defendant and as plaintiff.  The  litigation
naming  the  insurance   subsidiaries  as  defendant   ordinarily  involves  our
activities as a provider of insurance protection  products.  Management does not
believe that such litigation, either individually or in the aggregate, will have
a material  adverse  effect on the Company's  business,  financial  condition or
results of operations.

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 June 4, 2002. The
          only matter submitted at the meeting to a vote of the Shareholders was
          the election of directors.  All of the nominees had previously  served
          as directors of the Company, and all were reelected as directors.


                                     - 33 -



<PAGE>



         The voting tabulation as to each nominee was as follows:

        Name                            In Favor                Withheld

        Hans Annarino                   6,560,526               564,664
        John D. Barnett                 6,579,707               545,483
        David G. Caldwell               6,560,476               564,714
        S. Tim Casey                    6,559,692               565,498
        Jeffrey H. Demgen               6,559,322               565,868
        Theodore A. Fleron              6,559,307               565,883
        W. Lewis Gilcrease              6,561,613               563,577
        Roy F. Mitte                    6,553,349               571,841
        M. Scott Mitte                  6,551,744               573,446
        Elizabeth T. Nash               6,561,012               564,178
        Frank Parker                    6,580,989               544,201
        Thomas C. Richmond              6,558,632               566,558


Item 5.  Other Information

Receipt of Delisting Notification from Nasdaq

On August 20, 2002, the Company received a notification from Nasdaq stating that
Nasdaq had not received the Company's 10-Q for the period ended June 30, 2002 as
required by Marketplace Rule 4310(c)(14) and thus the Company's securities would
be delisted  from the Nasdaq  Stock  Market at the opening of business on August
28,  2002  unless  the  Company  requests  a  hearing  in  accordance  with  the
Marketplace Rules. As a result, the trading symbol for the Company's  securities
were changed from FNIN to FNINE at the opening of business on August 23, 2002.

The Company  intends to make a timely  request  for a hearing  before the Nasdaq
Listing  Qualification Panel to review the determination and shall make a public
announcement on or before August 27, 2002, through the news media that discloses
the receipt of the above-referenced notification, as required by the Marketplace
Rules.


                                     - 34 -



<PAGE>



Item 6.  Exhibits and Reports on Form 8-K:

          (a) Exhibits

               Form 10-K Annual Report of Registrant for the year ended December
               31, 2001  heretofore  filed by Registrant with the Securities and
               Exchange Commission, which is hereby incorporated by reference.

               Material Contracts - Relating to Management Compensation Plans or
               Arrangements

               10.27  Employment  Agreement  between  Registrant  and Jeffrey H.
               Demgen  dated as of May 1,  2002  and  ratified  by the  Board of
               Directors on August 17, 2002, as amended on August 19, 2002.

               10.28  Employment  Agreement  between  Registrant  and  Thomas C.
               Richmond  dated as of May 1,  2002 and  ratified  by the Board of
               Directors on August 17, 2002.

               10.29 Employment  Agreement between  Registrant and Hans Annarino
               dated as of May 1, 2002 and ratified by the Board of Directors on
               August 17, 2002.

               10.30  Employment  Agreement  between  Registrant and Theodore A.
               Fleron  dated as of March 22,  2002 and  ratified by the Board of
               Directors on August 17, 2002.

          (b) Reports on Form 8-K:

               (i) On August 15, 2002, the Registrant  filed a Current Report on
               Form 8-K.  The current  report  pertained to the filing of a Form
               12b-25,   Notification  of  Late  Filing,   indicating  that  the
               quarterly  report would not be timely filed for the quarter ended
               June 30, 2002. The Company  indicated in the Form 8-K filing that
               it had  been  working  diligently  to  prepare  its  consolidated
               financial  statements for the quarter and six-month periods ended
               June 30, 2002 and such consolidated financial statements had been
               substantially   completed.   However,   in  connection  with  the
               preparation of such reports,  management  discovered that certain
               expenses  which were paid by the  Company  during  the  reporting
               period and prior reporting periods may have been personal, rather
               than  business-related  expenses,  of  the  President  and  Chief
               Executive  Officer of the Company.  On August 15, 2002, the Audit
               Committee of the Board of Directors retained  independent counsel
               to conduct a review for the current and prior periods.


                                     - 35 -



<PAGE>



               (ii) On August 20, 2002, the Registrant filed a Current Report on
               Form 8-K.  The current  report  pertained  to the  administrative
               leave of Roy F. Mitte, the President, Chief Executive Officer and
               Chairman of the Board of the  Registrant,  pending the completion
               of the review by the Audit Committee of the matters  described in
               the  Registrant's  Current  Report  on Form  8-K  filed  with the
               Securities and Exchange Commission on August 15, 2002.

               The Form 8-K  further  indicated  that (a) Dr.  Eugene  Payne was
               elected  a  Director  of the  Registrant  and has been  appointed
               interim  Chairman of the Board;  (b) Thomas C. Richmond,  who has
               been  Registrant's Vice President in charge of Operations and the
               Executive Vice President of Operations for  Registrant's two life
               insurance company  subsidiaries,  has been given the formal title
               of Chief Operations Officer; and (c) the Company formed a Special
               Committee  of the Board of  Directors  to review and consider the
               structure  and  functions of the offices of the President and the
               Chief Executive Officer during the administrative leave.


                                     - 36 -



<PAGE>



                                    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



_____________________________________           ________________________________
Eugene E. Payne                                 George M. Wise, III
Chief Executive Officer                         Chief Financial Officer


Date:   November 18, 2002


                                     - 37 -



<PAGE>



                                  CERTIFICATION

I, Eugene E. Payne, Chief Executive Officer of Financial Industries  Corporation
("FIC"), certify that:

1. I have reviewed this quarterly report on Form 10-Q of FIC;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4.  The  Registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  Registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

     b) evaluated the effectiveness of the Registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):


                                     - 38 -



<PAGE>



     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  Registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     Registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  Registrant's  internal
     controls; and


6. The  Registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 18, 2002                         By:/s/ Eugene E. Payne

                                                        Eugene E. Payne
                                                        Chief Executive Officer


                                     - 39 -



<PAGE>



                                  CERTIFICATION

I,  George M. Wise, III,   Chief  Executive  Officer  of  Financial   Industries
Corporation ("FIC"), certify that:

1. I have reviewed this quarterly report on Form 10-Q of FIC;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4.  The  Registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
     information   relating  to  the  Registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

     b) evaluated the effectiveness of the Registrant's  disclosure controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     quarterly report (the "Evaluation Date"); and

     c)  presented  in  this  quarterly   report  our   conclusions   about  the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
     controls which could adversely affect the  Registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     Registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
     employees  who  have  a  significant  role  in  the  Registrant's  internal
     controls; and


                                     - 40 -



<PAGE>



6. The  Registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 18, 2002                         By:/s/ George M. Wise, III

                                                       George M. Wise, III
                                                       Chief Financial Officer


                                     - 41 -



<PAGE>



                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection  with the  Quarterly  Report of Financial  Industries  Corporation
("FIC")  on Form 10-Q for the  quarter  ended June 30,  2002,  as filed with the
Securities and Exchange Commission on the date hereof (the "Report"),  we Thomas
C.  Richmond,  Interim Chief  Executive  Officer,  and Jeffrey H. Demgen,  Chief
Financial  Officer,  certify  pursuant  to 18 U.S.C.  SECTION  1350,  as adopted
pursuant  to  SECTION  906 of the  Sarbanes-  Oxley  Act of  2002,  that  to our
knowledge and belief:

     (1) The Report fully  complies  with the  requirements  of section 13(a) or
     15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
     material respects, the financial condition and result of operations of FIC.



    /s/ Eugene E. Payne                              /s/  George M. Wise, III
__________________________________              ________________________________
Eugene E. Payne                                 George M. Wise, III
Chief Executive Officer                         Chief Financial Officer


Date: November 18, 2002


                                     - 42 -



<PAGE>



                                 EXHIBIT 10.27

                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT  AGREEMENT (this  "Agreement") is entered into as of May 1,
2002,  between Financial  Industries  Corporation,  a Texas corporation with its
principal  place of business  located at 6500 River Place Blvd.,  Building  One,
Austin, Texas 78730 (the "Company"),  and Jeffrey H. Demgen, of 6500 River Place
Blvd., Building One, Austin, Texas 78730 (the "Employee").

                                    RECITALS

     The Company is primarily engaged in the business of insurance and financial
services.

     The Company desires to employ the Employee,  and the Employee desires to be
so employed by the Company, on the terms and subject to the conditions set forth
in this Agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration of the premises and the mutual promises
set forth in this  Agreement,  the  Company  and the  Employee  hereby  agree as
follows:

          1. Employment.

          (a) Subject to the terms and conditions  contained herein, the Company
          hereby  agrees to employ the Employee,  and the Employee  accepts such
          employment, from the date hereof through December 31, 2005. During the
          Employee's employment under this Agreement, the Employee shall perform
          such  duties  for  the  Company  as are  customarily  performed  by an
          employee in a similar position or as may from time to time be assigned
          to the Employee by the board of directors of the Company (the "Board")
          or by the President of the Company.  The Employee shall have the title
          of Vice President or such other title or titles,  if any, as from time
          to time may be assigned to the Employee by the Board.


                                     - 43 -



<PAGE>



          (b) The Employee agrees to perform faithfully,  industriously,  and to
          the best of the Employee's ability,  experience,  and talents,  all of
          the duties as assigned to him as needed from time to time.  So long as
          the  Employee is  employed by the  Company,  the  Employee  shall not,
          without the written consent of the Company:

               (i)  engage in any other  activity  for  compensation,  profit or
               other pecuniary advantage, during the term of this Agreement;

               (ii) render or perform services of a business,  professional,  or
               commercial  nature,  either alone or as an employee,  consultant,
               director, officer, or partner of another business entity, whether
               or not for  compensation,  which services are competitive with or
               adverse  to the  business  of the  Company or its  affiliates  or
               subsidiaries; or

               (iii) invest in or become a shareholder of another corporation or
               other  entity  (other than an  affiliate  of the  Company)  which
               business is  competitive  with or adverse to the  business of the
               Company or its  affiliates or  subsidiaries,  if such  investment
               requires  active  involvement of the Employee in the operation of
               said corporation or other entity.

     2. Location of  Employment.  The Employee's  principal  place of employment
     shall be at the principal  executive offices of the Company located at 6500
     River Place Blvd.,  Building One, Austin,  Texas 78730, or the Austin area.
     Employee  shall not be required to perform  services for the Company or its
     affiliates outside of the Central Texas area.

     3. Compensation.

          (a) In exchange for full performance of the Employee's obligations and
          duties  under  this  Agreement,  the  Company  shall pay the  Employee
          $180,000 per year.  Such payments shall be payable in  installments in
          accordance with the Company's regular payroll schedule.

          (b) The base  salary  described  in  subsection  (a) hereof is a gross
          amount, and the Company shall be required to withhold from such amount
          deductions  with  respect to  Federal,  state and local  taxes,  FICA,
          unemployment  compensation  taxes and similar  taxes,  assessments  or
          withholding requirements.


                                     - 44 -



<PAGE>



          (c)  During  the  Employee's  employment  under  this  Agreement,  the
          Employee  shall  also be  reimbursed  by the  Company  for  reasonable
          business   expenses   actually  incurred  or  paid  by  the  Employee,
          consistent with the policies established by the Board, in rendering to
          the  Company  or its  affiliates  the  services  provided  for in this
          Agreement,  upon  presentation  of  expense  statements  or such other
          supporting  information  as is  consistent  with the  policies  of the
          Company.

          (d) The Employee shall be entitled to participate in all benefit plans
          (including but not limited to, deferred  compensation plans,  medical,
          dental, or life insurance plans) which shall be available from time to
          time  to the  management  employees  of  the  Company  (including  the
          management  employees of an affiliate of the Company)  generally.  If,
          for any reason,  the Company is unable to make  available  to Employee
          coverage under the life insurance or the group medical insurance plans
          generally  available to employees  of the Company,  the Company  shall
          obtain  substantially  similar individual life insurance,  and medical
          insurance  benefits for Employee and his family.  The dollar amount of
          the Employee's  contribution  to the premiums for such individual life
          insurance and medical  insurance  benefits shall not exceed the dollar
          amount of the  contribution  which would  otherwise  have been made by
          Employee under the group life and medical plans generally available to
          employees of the Company.

     4. Term.

          (a) This  Agreement  shall be effective  as of the date first  written
          above, and shall terminate on December 31, 2005. The Agreement may not
          be  terminated  by the Company  prior to such date,  other than as set
          forth  herein.  If Employee is  terminated  in a manner  other than as
          provided  herein,  the Company  shall pay the Employee  the  remaining
          salary through the end of the term of this Agreement.

          (b)  The  employment  of  the  Employee  under  this  Agreement  shall
          terminate on the date of the Employee's death.

          (c)  The  employment  of the  Employee  under  this  Agreement  may be
          terminated by the Company upon written  notice from the Board that, in
          the opinion of the Board,  the Employee has (i)  demonstrated  willful
          misconduct in the execution of the  Employee's  duties which have been
          appropriately  assigned in accordance with the terms and provisions of
          this Agreement, (ii) been convicted of or pleaded nolo contendere to a
          felony or other serious crime involving the theft or  misappropriation
          of money, or (iii) misappropriated assets of the Company.


                                     - 45 -



<PAGE>



          (d)  The  employment  of  the  Employee  under  this  Agreement  shall
          terminate upon receipt by the Board of a written notice of resignation
          signed by the Employee or, if no notice is given, on the date on which
          the Employee voluntarily  terminates his employment  relationship with
          the  Company.  In such  event,  Employee  shall not be entitled to any
          further compensation or benefits hereunder.

          (e) If the  Employee's  employment  is  terminated  pursuant  to  this
          Section  4(c) or 4(d),  the  Employee  shall  not be  entitled  to any
          compensation  or benefits  from the Company,  under  Section 3 of this
          Agreement or otherwise, except for the following:

               (i)  base  salary  accrued,   and  reasonable  business  expenses
               incurred,  under Section 3 of this Agreement  through the date of
               such termination; and

               (ii) such benefits,  if any, as may be required to be provided by
               the Company under the Comprehensive Omnibus Budget Reconciliation
               Act (COBRA), or any successor or similar legislation.

          (f) In the event of a Change in Control of the Company,  the remaining
          amounts payable under this Agreement shall become  immediately due and
          payable in one lump sum. Following such payment,  this Agreement shall
          terminate.

     5. Employee's Representations.

          (a) The Employee  represents  that he has full authority to enter into
          this  Agreement  and that he is free to enter into this  Agreement and
          not under any contractual  restraint which would prohibit the Employee
          from  satisfactorily  performing  his duties to the Company under this
          Agreement.

          (b) The  Employee  acknowledges  that he is free to seek  advice  from
          independent  counsel with respect to this Agreement.  The Employee has
          either  obtained  such  advice  or,  after  carefully  reviewing  this
          Agreement,  has decided to forego  such  advice.  The  Employee is not
          relying on any representation or advice from the Company or any of its
          officers, directors, attorneys or other representatives regarding this
          Agreement, its content or effect.

     6.  Governing  Law. This  Agreement  shall be governed by and construed and
     enforced in accordance with the laws of the State of Texas.


                                     - 46 -



<PAGE>



     7. Entire Agreement.  This Agreement constitutes the whole agreement of the
     parties  hereto in  reference  to any  employment  of the  Employee  by the
     Company and in  reference to any of the matters or things  herein  provided
     for or hereinabove  discussed or mentioned in reference to such employment;
     all prior agreements, promises, representations and understandings relative
     thereto being herein merged.

     8. Assignability.

          (a) In the event the Company shall merge or consolidate with any other
          corporation,  partnership or business entity,  or all or substantially
          all of the Company's  business or assets shall be  transferred  in any
          manner to any other corporation,  partnership or business entity, then
          such  successor  to the  Company  shall  thereupon  succeed to, and be
          subject  to, all rights,  interests,  duties and  obligations  of, and
          shall  thereafter  be  deemed  for  all  purposes  hereof  to be,  the
          "Company" under this Agreement.

          (b) This  Agreement is personal in nature and the Employee  shall not,
          without the written  consent of the Company,  assign or transfer  this
          Agreement or any rights or obligations hereunder.

          (c) Except as set forth in subsection (a) above,  nothing expressed or
          implied in this  Agreement is intended or shall be construed to confer
          upon or give to any person,  other than the parties to this Agreement,
          any right,  remedy or claim under or by reason of this Agreement or of
          any term, covenant or condition of this Agreement.

     9.  Amendments;   Waivers.   This  Agreement  may  be  amended,   modified,
     superseded,  canceled,  renewed or extended  and the terms or  covenants of
     this Agreement may be waived only by a written  instrument  executed by the
     parties to this Agreement or, in the case of a waiver, by the party waiving
     compliance. Any such written instrument must be approved by the Board to be
     effective as against the  Company.  The failure of any party at any time or
     times to require performance of any provision of this Agreement shall in no
     manner  affect the right at a later time to enforce the same.  No waiver by
     any  party  of the  breach  of any  term  or  provision  contained  in this
     Agreement,  whether by conduct or otherwise,  in any one or more instances,
     shall be deemed to be, or construed as, a further or  continuing  waiver of
     any such  breach,  or a waiver of the breach of any other term or  covenant
     contained in this Agreement.


                                     - 47 -



<PAGE>




     10. Notice.  All notices,  requests or consents required or permitted under
     this  Agreement  shall be made in  writing  and shall be given to the other
     party by personal delivery,  overnight air courier (with receipt signature)
     or facsimile transmission (with "answerback" confirmation of transmission),
     if to the  Company,  sent as  follows:  Financial  Industries  Corporation,
     Attention: Legal Department,  6500 River Place Blvd., Building One, Austin,
     Texas 78730, and

     if to the  Employee:  Jeffrey H. Demgen,  6500 River Place Blvd.,  Building
     One,  Austin,  Texas 78730, or such other addresses or telecopy  numbers of
     which the parties have given notice pursuant to this Section

     10. Each such notice, request or consent shall be deemed effective upon the
     date of  mailing of such  notice,  provided  the  mailing  party  retains a
     receipt signature or confirmation of transmission, as applicable.

     11.  Severability.  Any provision of this  Agreement  that is prohibited or
     unenforceable  in any  jurisdiction  shall,  as to  such  jurisdiction,  be
     ineffective to the extent of such prohibition or  unenforceability  without
     invalidating the remaining  provisions  hereof, and any such prohibition or
     unenforceability  in  any  jurisdiction  shall  not  invalidate  or  render
     unenforceable such provision in any other jurisdiction.

IN WITNESS WHEREOF,  the parties to this Agreement have executed this Employment
Agreement as of the date first above written.

Financial Industries Corporation
a Texas corporation


By: __________________________
    Roy F. Mitte
    Chairman, President and Chief Executive Officer


Employee: _____________________________
          Jeffrey H. Demgen


Witnessed By: _____________________________
              Sheryl Kinlaw
              Counsel


                                     - 48 -



<PAGE>



                     FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS FIRST AMENDMENT TO EMPLOYMENT  AGREEMENT (this "Amendment"),  dated as
of  August  19,  2002  Financial  Industries  Corporation,  a Texas  corporation
("FIC"), and Jeffrey H. Demgen ("Demgen").

     WHEREAS, the parties have entered into an employment agreement, dated as of
May 1, 2002 and  ratified  by the Board of  Directors  of FIC on August 17, 2002
(the "Employment Agreement"); and

     WHEREAS,  FIC and  Demgen  desire  to amend  the  terms  of the  Employment
Agreement pursuant to the terms hereof.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
herein contained, FIC and Demgen hereby agree as follows:

     1. Amendment:

     Paragraph  4(d)  of the  Employment  Agreement  is  hereby  amended  in its
entirety to read as follows:

     (d) The employment of the Employee under this Agreement shall not terminate
     upon the voluntary  resignation of the Employee of his  resignation as Vice
     President  and Chief  Financial  Officer of the Company or, if no notice is
     given,  on the  date on  which  the  Employee  voluntarily  terminates  his
     employment  relationship  with the Company.  In such event,  Employee shall
     continue  to  be  entitled  to  the  compensation  and  benefits   provided
     hereunder.


     2.  Confirmation.  Except as  amended  by this  Amendment,  the  Employment
     Agreement shall remain in full force and effect.


                                     - 49 -



<PAGE>



     3. Instruments to be Read Together. This Amendment shall form a part of the
     Employment Agreement for all purposes and the Employment Agreement and this
     Amendment shall henceforth be read together.

     4.   Counterparts.   This   Amendment  may  be  executed  in  one  or  more
     counterparts,  each of which shall be deemed to be an original,  but all of
     which together shall constitute one and the same instrument.

     5.  Governing  Law. This  Amendment  shall be governed by and construed and
     enforced in accordance with the laws of the State of Texas.

     IN WITNESS  WHEREOF,  the parties  have  executed  this First  Amendment to
     Employment  Agreement on the date and year first above  written.  FINANCIAL
     INDUSTRIES CORPORATION



     By: _________________________________
         Name:
         Title:



         _________________________________
         Jeffrey H. Demgen



                                     - 50 -



<PAGE>



                                  EXHIBIT 10.28

                              EMPLOYMENT AGREEMENT


THIS EMPLOYMENT  AGREEMENT (this "Agreement") is entered into as of May 1, 2002,
between Financial Industries Corporation, a Texas corporation with its principal
place of business located at 6500 River Place Blvd., Building One, Austin, Texas
78730 (the  "Company"),  and Thomas C. Richmond,  of 1004 Antelope Ridge,  Cedar
Park, Texas 78613 (the "Employee").

                                    RECITALS

The Company is  primarily  engaged in the business of  insurance  and  financial
services.

The Company  desires to employ the Employee,  and the Employee  desires to be so
employed by the Company, on the terms and subject to the conditions set forth in
this Agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration of the premises and the mutual promises
set forth in this  Agreement,  the  Company  and the  Employee  hereby  agree as
follows:

     1. Employment.

     (a)  Subject to the terms and  conditions  contained  herein,  the  Company
     hereby  agrees  to employ  the  Employee,  and the  Employee  accepts  such
     employment,  from the date hereof  through  December 31,  2005.  During the
     Employee's employment under this Agreement, the Employee shall perform such
     duties for the  Company as are  customarily  performed  by an employee in a
     similar position or as may from time to time be assigned to the Employee by
     the board of directors of the Company (the  "Board") or by the President of
     the Company.  The Employee  shall have the title of Vice  President or such
     other title or titles,  if any, as from time to time may be assigned to the
     Employee by the Board.

     (b) The Employee agrees to perform  faithfully,  industriously,  and to the
     best of the Employee's ability,  experience, and talents, all of the duties
     as assigned to him as needed from time to time.  So long as the Employee is
     employed  by the  Company,  the  Employee  shall not,  without  the written
     consent of the Company:

          (i) engage in any other  activity  for  compensation,  profit or other
          pecuniary advantage, during the term of this Agreement;


                                     - 51 -



<PAGE>



          (ii)  render or  perform  services  of a  business,  professional,  or
          commercial  nature,  either  alone  or  as  an  employee,  consultant,
          director,  officer, or partner of another business entity,  whether or
          not for  compensation,  which services are competitive with or adverse
          to the business of the Company or its affiliates or subsidiaries; or

          (iii)  invest in or become a  shareholder  of another  corporation  or
          other entity (other than an affiliate of the Company)  which  business
          is  competitive  with or adverse to the business of the Company or its
          affiliates  or  subsidiaries,   if  such  investment  requires  active
          involvement  of the Employee in the operation of said  corporation  or
          other entity.

     2. Location of  Employment.  The Employee's  principal  place of employment
     shall be at the principal  executive offices of the Company located at 6500
     River Place Blvd.,  Building One, Austin,  Texas 78730, or the Austin area.
     Employee  shall not be required to perform  services for the Company or its
     affiliates outside of the Central Texas area.

     3. Compensation.

     (a) In exchange for full  performance  of the  Employee's  obligations  and
     duties under this  Agreement,  the Company shall pay the Employee  $180,000
     per year. Such payments shall be payable in installments in accordance with
     the Company's regular payroll schedule.

     (b) The base salary  described in subsection  (a) hereof is a gross amount,
     and the Company shall be required to withhold  from such amount  deductions
     with  respect  to  Federal,  state  and  local  taxes,  FICA,  unemployment
     compensation   taxes  and  similar   taxes,   assessments   or  withholding
     requirements.

     (c) During the Employee's  employment  under this  Agreement,  the Employee
     shall also be reimbursed by the Company for  reasonable  business  expenses
     actually  incurred or paid by the  Employee,  consistent  with the policies
     established by the Board, in rendering to the Company or its affiliates the
     services  provided  for in this  Agreement,  upon  presentation  of expense
     statements or such other  supporting  information as is consistent with the
     policies of the Company.


                                     - 52 -



<PAGE>



     (d) The  Employee  shall be entitled to  participate  in all benefit  plans
     (including  but not  limited  to,  deferred  compensation  plans,  medical,
     dental, or life insurance plans) which shall be available from time to time
     to the  management  employees  of the  Company  (including  the  management
     employees of an affiliate  of the Company)  generally.  If, for any reason,
     the Company is unable to make available to Employee coverage under the life
     insurance  or the group  medical  insurance  plans  generally  available to
     employees of the Company,  the Company shall obtain  substantially  similar
     individual life insurance,  and medical insurance benefits for Employee and
     his  family.  The  dollar  amount  of the  Employee's  contribution  to the
     premiums for such individual life insurance and medical insurance  benefits
     shall  not  exceed  the  dollar  amount  of the  contribution  which  would
     otherwise have been made by Employee under the group life and medical plans
     generally available to employees of the Company.

     4. Term.

     (a) This  Agreement  shall be effective as of the date first written above,
     and  shall  terminate  on  December  31,  2005.  The  Agreement  may not be
     terminated  by the  Company  prior to such  date,  other  than as set forth
     herein.  If  Employee  is  terminated  in a manner  other than as  provided
     herein, the Company shall pay the Employee the remaining salary through the
     end of the term of this Agreement.

     (b) The employment of the Employee under this Agreement  shall terminate on
     the date of the Employee's death.

     (c) The  employment of the Employee  under this Agreement may be terminated
     by the Company upon written  notice from the Board that,  in the opinion of
     the Board,  the Employee has (i)  demonstrated  willful  misconduct  in the
     execution of the Employee's duties which have been  appropriately  assigned
     in accordance  with the terms and provisions of this  Agreement,  (ii) been
     convicted of or pleaded nolo  contendere to a felony or other serious crime
     involving the theft or misappropriation of money, or (iii)  misappropriated
     assets of the Company.

     (d) The  employment of the Employee under this  Agreement  shall  terminate
     upon receipt by the Board of a written notice of resignation  signed by the
     Employee  or,  if no notice  is  given,  on the date on which the  Employee
     voluntarily  terminates his employment  relationship  with the Company.  In
     such event,  Employee shall not be entitled to any further  compensation or
     benefits hereunder.

     (e) If the  Employee's  employment is  terminated  pursuant to this Section
     4(c) or 4(d),  the Employee  shall not be entitled to any  compensation  or
     benefits from the Company,  under Section 3 of this Agreement or otherwise,
     except for the following:

          (i) base salary accrued,  and reasonable  business expenses  incurred,
          under  Section  3  of  this   Agreement   through  the  date  of  such
          termination; and

          (ii) such  benefits,  if any, as may be required to be provided by the
          Company under the  Comprehensive  Omnibus  Budget  Reconciliation  Act
          (COBRA), or any successor or similar legislation.

     (f) In the event of a Change  in  Control  of the  Company,  the  remaining
     amounts  payable  under this  Agreement  shall become  immediately  due and
     payable in one lump sum.  Following  such  payment,  this  Agreement  shall
     terminate.


                                     - 53 -



<PAGE>



     5. Employee's Representations.

     (a) The Employee  represents  that he has full authority to enter into this
     Agreement  and that he is free to enter into this  Agreement  and not under
     any   contractual   restraint   which  would  prohibit  the  Employee  from
     satisfactorily performing his duties to the Company under this Agreement.

     (b)  The  Employee  acknowledges  that  he is  free  to  seek  advice  from
     independent counsel with respect to this Agreement. The Employee has either
     obtained such advice or, after  carefully  reviewing  this  Agreement,  has
     decided  to  forego  such  advice.  The  Employee  is  not  relying  on any
     representation  or  advice  from  the  Company  or  any  of  its  officers,
     directors, attorneys or other representatives regarding this Agreement, its
     content or effect.

     6.  Governing  Law. This  Agreement  shall be governed by and construed and
     enforced in accordance with the laws of the State of Texas.

     7. Entire Agreement.  This Agreement constitutes the whole agreement of the
     parties  hereto in  reference  to any  employment  of the  Employee  by the
     Company and in  reference to any of the matters or things  herein  provided
     for or hereinabove  discussed or mentioned in reference to such employment;
     all prior agreements, promises, representations and understandings relative
     thereto being herein merged.

     8. Assignability.

     (a) In the event the  Company  shall  merge or  consolidate  with any other
     corporation, partnership or business entity, or all or substantially all of
     the Company's  business or assets shall be transferred in any manner to any
     other corporation,  partnership or business entity,  then such successor to
     the  Company  shall  thereupon  succeed  to, and be subject to, all rights,
     interests,  duties and obligations  of, and shall  thereafter be deemed for
     all purposes hereof to be, the "Company" under this Agreement.

     (b) This  Agreement  is  personal  in nature  and the  Employee  shall not,
     without  the  written  consent  of the  Company,  assign or  transfer  this
     Agreement or any rights or obligations hereunder.

     (c) Except as set forth in  subsection  (a)  above,  nothing  expressed  or
     implied in this  Agreement is intended or shall be construed to confer upon
     or give to any person, other than the parties to this Agreement, any right,
     remedy  or claim  under or by  reason  of this  Agreement  or of any  term,
     covenant or condition of this Agreement.


                                     - 54 -



<PAGE>



     9.  Amendments;   Waivers.   This  Agreement  may  be  amended,   modified,
     superseded,  canceled,  renewed or extended  and the terms or  covenants of
     this Agreement may be waived only by a written  instrument  executed by the
     parties to this Agreement or, in the case of a waiver, by the party waiving
     compliance. Any such written instrument must be approved by the Board to be
     effective as against the  Company.  The failure of any party at any time or
     times to require performance of any provision of this Agreement shall in no
     manner  affect the right at a later time to enforce the same.  No waiver by
     any  party  of the  breach  of any  term  or  provision  contained  in this
     Agreement,  whether by conduct or otherwise,  in any one or more instances,
     shall be deemed to be, or construed as, a further or  continuing  waiver of
     any such  breach,  or a waiver of the breach of any other term or  covenant
     contained in this Agreement.

     10. Notice.  All notices,  requests or consents required or permitted under
     this  Agreement  shall be made in  writing  and shall be given to the other
     party by personal delivery,  overnight air courier (with receipt signature)
     or facsimile transmission (with "answerback" confirmation of transmission),

     if to the  Company,  sent as  follows:  Financial  Industries  Corporation,
     Attention: Legal Department,  6500 River Place Blvd., Building One, Austin,
     Texas 78730, and

     if to the Employee:  Thomas C. Richmond,  1004 Antelope Ridge,  Cedar Park,
     Texas 78613,

     or such other addresses or telecopy numbers of which the parties have given
     notice  pursuant to this Section 10. Each such  notice,  request or consent
     shall be deemed effective upon the date of mailing of such notice, provided
     the  mailing  party  retains  a  receipt   signature  or   confirmation  of
     transmission, as applicable.

     11.  Severability.  Any provision of this  Agreement  that is prohibited or
     unenforceable  in any  jurisdiction  shall,  as to  such  jurisdiction,  be
     ineffective to the extent of such prohibition or  unenforceability  without
     invalidating the remaining  provisions  hereof, and any such prohibition or
     unenforceability  in  any  jurisdiction  shall  not  invalidate  or  render
     unenforceable such provision in any other jurisdiction.


                                     - 55 -



<PAGE>



IN WITNESS WHEREOF,  the parties to this Agreement have executed this Employment
Agreement as of the date first above written.


Financial Industries Corporation
 a Texas corporation

By: ______________________________________
    Roy F. Mitte
    Chairman, President and Chief Executive Officer



Employee: ________________________________
          Thomas C. Richmond


Witnessed By: ____________________________
              Sheryl Kinlaw
              Counsel



                                     - 56 -



<PAGE>



                                  EXHIBIT 10.29

                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT  AGREEMENT (this  "Agreement") is entered into as of May 1,
2002,  between Financial  Industries  Corporation,  a Texas corporation with its
principal  place of business  located at 6500 River Place Blvd.,  Building  One,
Austin,  Texas 78730 (the "Company"),  and Hans Annarino,  of 542 East Milam, La
Grange, Texas 78945 (the "Employee").

                                    RECITALS

The Company is  primarily  engaged in the business of  insurance  and  financial
services.

The Company  desires to employ the Employee,  and the Employee  desires to be so
employed by the Company, on the terms and subject to the conditions set forth in
this Agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration of the premises and the mutual promises
set forth in this  Agreement,  the  Company  and the  Employee  hereby  agree as
follows:

     1. Employment.

     (a)  Subject to the terms and  conditions  contained  herein,  the  Company
     hereby  agrees  to employ  the  Employee,  and the  Employee  accepts  such
     employment,  from the date hereof  through  December 31,  2005.  During the
     Employee's employment under this Agreement, the Employee shall perform such
     duties for the  Company as are  customarily  performed  by an employee in a
     similar position or as may from time to time be assigned to the Employee by
     the board of directors of the Company (the  "Board") or by the President of
     the Company.  The Employee  shall have the title of Vice  President or such
     other title or titles,  if any, as from time to time may be assigned to the
     Employee by the Board.

     (b) The Employee agrees to perform  faithfully,  industriously,  and to the
     best of the Employee's ability,  experience, and talents, all of the duties
     as assigned to him as needed from time to time.  So long as the Employee is
     employed  by the  Company,  the  Employee  shall not,  without  the written
     consent of the Company:

          (i) engage in any other  activity  for  compensation,  profit or other
          pecuniary advantage, during the term of this Agreement;


                                     - 57 -



<PAGE>



          (ii)  render or  perform  services  of a  business,  professional,  or
          commercial  nature,  either  alone  or  as  an  employee,  consultant,
          director,  officer, or partner of another business entity,  whether or
          not for  compensation,  which services are competitive with or adverse
          to the business of the Company or its affiliates or subsidiaries; or

          (iii)  invest in or become a  shareholder  of another  corporation  or
          other entity (other than an affiliate of the Company)  which  business
          is  competitive  with or adverse to the business of the Company or its
          affiliates  or  subsidiaries,   if  such  investment  requires  active
          involvement  of the Employee in the operation of said  corporation  or
          other entity.

     2. Location of  Employment.  The Employee's  principal  place of employment
shall be at the principal executive offices of the Company located at 6500 River
Place Blvd.,  Building One,  Austin,  Texas 78730, or the Austin area.  Employee
shall not be required  to perform  services  for the  Company or its  affiliates
outside of the Central Texas area.

     3. Compensation.

     (a) In exchange for full  performance  of the  Employee's  obligations  and
     duties under this  Agreement,  the Company shall pay the Employee  $195,000
     per year. Such payments shall be payable in installments in accordance with
     the Company's regular payroll schedule.

     (b) The base salary  described in subsection  (a) hereof is a gross amount,
     and the Company shall be required to withhold  from such amount  deductions
     with  respect  to  Federal,  state  and  local  taxes,  FICA,  unemployment
     compensation   taxes  and  similar   taxes,   assessments   or  withholding
     requirements.

     (c) During the Employee's  employment  under this  Agreement,  the Employee
     shall also be reimbursed by the Company for  reasonable  business  expenses
     actually  incurred or paid by the  Employee,  consistent  with the policies
     established by the Board, in rendering to the Company or its affiliates the
     services  provided  for in this  Agreement,  upon  presentation  of expense
     statements or such other  supporting  information as is consistent with the
     policies of the Company.

     (d) The  Employee  shall be entitled to  participate  in all benefit  plans
     (including  but not  limited  to,  deferred  compensation  plans,  medical,
     dental, or life insurance plans) which shall be available from time to time
     to the  management  employees  of the  Company  (including  the  management
     employees of an affiliate  of the Company)  generally.  If, for any reason,
     the Company is unable to make available to Employee coverage under the life
     insurance  or the group  medical  insurance  plans  generally  available to
     employees of the Company,  the Company shall obtain  substantially  similar
     individual life insurance,  and medical insurance benefits for Employee and
     his  family.  The  dollar  amount  of the  Employee's  contribution  to the
     premiums for such individual life insurance and medical insurance  benefits
     shall  not  exceed  the  dollar  amount  of the  contribution  which  would
     otherwise have been made by Employee under the group life and medical plans
     generally available to employees of the Company.


                                     - 58 -



<PAGE>



     4. Term.

     (a) This  Agreement  shall be effective as of the date first written above,
     and  shall  terminate  on  December  31,  2005.  The  Agreement  may not be
     terminated  by the  Company  prior to such  date,  other  than as set forth
     herein.  If  Employee  is  terminated  in a manner  other than as  provided
     herein, the Company shall pay the Employee the remaining salary through the
     end of the term of this Agreement.

     (b) The employment of the Employee under this Agreement  shall terminate on
     the date of the Employee's death.

     (c) The  employment of the Employee  under this Agreement may be terminated
     by the Company upon written  notice from the Board that,  in the opinion of
     the Board,  the Employee has (i)  demonstrated  willful  misconduct  in the
     execution of the Employee's duties which have been  appropriately  assigned
     in accordance  with the terms and provisions of this  Agreement,  (ii) been
     convicted of or pleaded nolo  contendere to a felony or other serious crime
     involving the theft or misappropriation of money, or (iii)  misappropriated
     assets of the Company.

     (d) The  employment of the Employee under this  Agreement  shall  terminate
     upon receipt by the Board of a written notice of resignation  signed by the
     Employee  or,  if no notice  is  given,  on the date on which the  Employee
     voluntarily  terminates his employment  relationship  with the Company.  In
     such event,  Employee shall not be entitled to any further  compensation or
     benefits hereunder.

     (e) If the  Employee's  employment is  terminated  pursuant to this Section
     4(c) or 4(d),  the Employee  shall not be entitled to any  compensation  or
     benefits from the Company,  under Section 3 of this Agreement or otherwise,
     except for the following:

          (i) base salary accrued,  and reasonable  business expenses  incurred,
          under  Section  3  of  this   Agreement   through  the  date  of  such
          termination; and

          (ii) such  benefits,  if any, as may be required to be provided by the
          Company under the  Comprehensive  Omnibus  Budget  Reconciliation  Act
          (COBRA), or any successor or similar legislation.


                                     - 59 -



<PAGE>



     5. Employee's Representations.

     (a) The Employee  represents  that he has full authority to enter into this
     Agreement  and that he is free to enter into this  Agreement  and not under
     any   contractual   restraint   which  would  prohibit  the  Employee  from
     satisfactorily performing his duties to the Company under this Agreement.

     (b)  The  Employee  acknowledges  that  he is  free  to  seek  advice  from
     independent counsel with respect to this Agreement. The Employee has either
     obtained such advice or, after  carefully  reviewing  this  Agreement,  has
     decided  to  forego  such  advice.  The  Employee  is  not  relying  on any
     representation  or  advice  from  the  Company  or  any  of  its  officers,
     directors, attorneys or other representatives regarding this Agreement, its
     content or effect.

     6.  Governing  Law. This  Agreement  shall be governed by and construed and
enforced in accordance with the laws of the State of Texas.


     7. Entire Agreement.  This Agreement constitutes the whole agreement of the
parties hereto in reference to any employment of the Employee by the Company and
in reference to any of the matters or things herein  provided for or hereinabove
discussed or mentioned in reference to such  employment;  all prior  agreements,
promises,  representations  and  understandings  relative  thereto  being herein
merged.

     8. Assignability.

     (a) In the event the  Company  shall  merge or  consolidate  with any other
     corporation, partnership or business entity, or all or substantially all of
     the Company's  business or assets shall be transferred in any manner to any
     other corporation,  partnership or business entity,  then such successor to
     the  Company  shall  thereupon  succeed  to, and be subject to, all rights,
     interests,  duties and obligations  of, and shall  thereafter be deemed for
     all purposes hereof to be, the "Company" under this Agreement.

     (b) This  Agreement  is  personal  in nature  and the  Employee  shall not,
     without  the  written  consent  of the  Company,  assign or  transfer  this
     Agreement or any rights or obligations hereunder.

     (c) Except as set forth in  subsection  (a)  above,  nothing  expressed  or
     implied in this  Agreement is intended or shall be construed to confer upon
     or give to any person, other than the parties to this Agreement, any right,
     remedy  or claim  under or by  reason  of this  Agreement  or of any  term,
     covenant or condition of this Agreement.


                                     - 60 -



<PAGE>



     9.  Amendments;   Waivers.   This  Agreement  may  be  amended,   modified,
superseded,  canceled,  renewed or extended  and the terms or  covenants of this
Agreement may be waived only by a written instrument  executed by the parties to
this Agreement or, in the case of a waiver, by the party waiving compliance. Any
such written instrument must be approved by the Board to be effective as against
the  Company.  The  failure  of any  party  at any  time  or  times  to  require
performance  of any  provision of this  Agreement  shall in no manner affect the
right at a later time to enforce the same.  No waiver by any party of the breach
of any term or  provision  contained  in this  Agreement,  whether by conduct or
otherwise, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing  waiver of any such breach, or a waiver of the breach of
any other term or covenant contained in this Agreement.

     10. Notice.  All notices,  requests or consents required or permitted under
this Agreement shall be made in writing and shall be given to the other party by
personal  delivery,  overnight air courier (with receipt signature) or facsimile
transmission (with "answerback" confirmation of transmission),

     if to the  Company,  sent as  follows:  Financial  Industries  Corporation,
     Attention: Legal Department,  6500 River Place Blvd., Building One, Austin,
     Texas 78730, and

     if to the Employee: Hans Annarino, 542 East Milam, La Grange, Texas 78945,


     or such other addresses or telecopy numbers of which the parties have given
     notice  pursuant to this Section 10. Each such  notice,  request or consent
     shall be deemed effective upon the date of mailing of such notice, provided
     the  mailing  party  retains  a  receipt   signature  or   confirmation  of
     transmission, as applicable.

     11.  Severability.  Any provision of this  Agreement  that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.


IN WITNESS WHEREOF,  the parties to this Agreement have executed this Employment
Agreement as of the date first above written.


                                     - 61 -



<PAGE>



Financial Industries Corporation
 a Texas corporation

By:  _____________________________________
     Roy F. Mitte
     Chairman, President and Chief Executive Officer



Employee: ________________________________
          Hans Annarino


Witnessed By: ____________________________
              Sheryl Kinlaw
              Counsel


                                     - 62 -



<PAGE>



                                  EXHIBIT 10.30


                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT  AGREEMENT  (this  "Agreement") is entered into as of March
22, 2002, between Financial  Industries  Corporation  ("FIC") and Investors Life
Insurance  Company of North  American  ("Investors  Life") of 6500  River  Place
Blvd., Building One, Austin, Texas 78730 (hereinafter referred to jointly as the
"Company"),  and Theodore A. Fleron,  of 1600 Easy Street,  Austin,  Texas 78746
(the "Employee").

                                    RECITALS

The Company is  primarily  engaged in the business of  insurance  and  financial
services.

The Company  desires to employ the Employee,  and the Employee  desires to be so
employed by the Company, on the terms and subject to the conditions set forth in
this Agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration of the premises and the mutual promises
set forth in this  Agreement,  the  Company  and the  Employee  hereby  agree as
follows:

     1. Employment.

     (a) Employee acts as General  Counsel to the Company and its  subsidiaries.
Subject to the terms and conditions  contained herein, the Company hereby agrees
to employ the Employee, and the Employee accepts such employment,  from the date
hereof  until  March 20,  2005.  During  the  Employee's  employment  under this
Agreement,  the  Employee  shall  perform  such  duties  for the  Company as are
customarily  performed by an employee in a similar  position or as may from time
to time be  assigned  to the  Employee  by the  Board of  Directors  of FIC (the
"Board") or by the  President of the Company;  provided,  however,  the Employee
shall only be assigned duties which are the same or substantially similar to the
duties that Employee performed at the time that this Agreement was executed.

     (b) The Employee agrees to perform  faithfully,  industriously,  and to the
best of the Employee's ability,  experience,  and talents,  all of the duties as
assigned to him as General  Counsel.  So long as the Employee is employed by the
Company, the Employee shall not, without the written consent of the Company:


                                     - 63 -



<PAGE>



          (i) engage in any other  activity  for  compensation,  profit or other
          pecuniary advantage, during the term of this Agreement;

          (ii)  render or  perform  services  of a  business,  professional,  or
          commercial  nature,  either  alone  or  as  an  employee,  consultant,
          director,  officer, or partner of another business entity,  whether or
          not for  compensation,  which services are competitive with or adverse
          to the business of the Company or its affiliates or subsidiaries; or

          (iii)  invest in or become a  shareholder  of another  corporation  or
          other entity (other than an affiliate of the Company)  which  business
          is  competitive  with or adverse to the business of the Company or its
          affiliates  or  subsidiaries,   if  such  investment  requires  active
          involvement  of the Employee in the operation of said  corporation  or
          other entity.

     2. Location of  Employment.  The Employee's  principal  place of employment
     shall be at the principal  executive offices of the Company located at 6500
     River Place Blvd.,  Building One, Austin,  Texas 78730, or the Austin area.
     Employee  shall not be required to perform  services for the Company or its
     affiliates outside of the Austin area.

     3. Compensation.

     (a) In exchange for full  performance  of the  Employee's  obligations  and
     duties under this Agreement, the Company shall pay the Employee as follows:

        From                            To                          Amount

        April 1, 2002                   March 20, 2003              $ 145,000
        March 21, 2003                  March 20, 2004              $ 145,000
        March 21, 2004                  March 20, 2005              $ 145,000

Such payments shall be payable in  installments in accordance with the Company's
regular payroll schedule.

     (b) The base salary  described in subsection  (a) hereof is a gross amount,
     and the Company shall be required to withhold  from such amount  deductions
     with  respect  to  Federal,  state  and  local  taxes,  FICA,  unemployment
     compensation   taxes  and  similar   taxes,   assessments   or  withholding
     requirements.


                                     - 64 -



<PAGE>



     (c) During the Employee's  employment  under this  Agreement,  the Employee
     shall also be reimbursed by the Company for  reasonable  business  expenses
     actually  incurred or paid by the  Employee,  consistent  with the policies
     established by the Board, in rendering to the Company or its affiliates the
     services  provided  for in this  Agreement,  upon  presentation  of expense
     statements or such other  supporting  information as is consistent with the
     policies of the Company.

     (d) The  Employee  shall be entitled to  participate  in all benefit  plans
     (including  but not  limited  to,  deferred  compensation  plans,  medical,
     dental,  life  insurance  plans,  or stock  option  plans)  which  shall be
     available  from time to time to the  domestic  management  employees of the
     Company (including the management employees of an affiliate of the Company)
     generally.  If, for any reason,  the Company is unable to make available to
     Employee  coverage under the life insurance or the group medical  insurance
     plans  generally  available to employees of the Company,  the Company shall
     obtain   substantially   similar  individual  life  insurance  and  medical
     insurance  benefits for Employee and his family.  The dollar  amount of the
     Employee's  contribution to the premiums for such individual life insurance
     and medical  insurance  benefits  shall not exceed the dollar amount of the
     contribution  which would  otherwise  have been made by Employee  under the
     group life and  medical  plans  generally  available  to  employees  of the
     Company.

     4. Term.

     (a) This  Agreement  shall be  effective  as of March 22,  2002,  and shall
     terminate on March 20, 2005.  The  Agreement  may not be  terminated by the
     Company  prior to such  date,  other  than as set  forth in  Section  4. If
     Employee  is  terminated  in a manner  other than as provided  herein,  the
     Company shall pay the Employee the remaining  salary through the end of the
     term of this Agreement.

     (b) The employment of the Employee under this Agreement  shall terminate on
     the date of the Employee's death.

     (c) The  employment of the Employee  under this Agreement may be terminated
     by the Company  upon  written  notice from the Board that the  Employee has
     been  convicted of or pleaded nolo  contendere to a felony or other serious
     crime involving the theft or misappropriation of assets of the Company.

     (d) The  employment of the Employee under this  Agreement  shall  terminate
     upon receipt by the Board of a written notice of resignation  signed by the
     Employee  or,  if no notice  is  given,  on the date on which the  Employee
     voluntarily  terminates his employment  relationship  with the Company.  In
     such event,  Employee  shall not be  entitled  to any further  compensation
     hereunder.


                                     - 65 -



<PAGE>



     (e) If the  Employee's  employment is  terminated  pursuant to this Section
     4(c) or (d),  the  Employee  shall not be entitled to any  compensation  or
     benefits from the Company,  under Section 3 of this Agreement or otherwise,
     except for the following:

          (i) base salary accrued,  and reasonable  business expenses  incurred,
          under  Section  3  of  this   Agreement   through  the  date  of  such
          termination; and

          (ii) such  benefits,  if any, as may be required to be provided by the
          Company under the  Comprehensive  Omnibus  Budget  Reconciliation  Act
          (COBRA), or any successor or similar legislation.

          (iii)  such  benefits  as  are  provided   under  all  benefits  plans
          (including  pension  plans,  401K plans and stock option plans) of the
          Company in which the Employee participated.

     (f) In the event of a Change  in  Control  of the  Company,  the  remaining
     amounts  payable  under this  Agreement  shall become  immediately  due and
     payable in one lump sum.  Following  such  payment,  this  Agreement  shall
     terminate.  For the purposes of this Agreement, a "Change in Control" shall
     be deemed to have taken place upon the occurrence of any one or more of the
     following: (i) Roy F. Mitte is no longer the Chairman,  President and Chief
     Executive  Officer of the  Company,  (ii) a majority  of the members of the
     Board of Directors of the Company are not  individuals who were selected to
     serve as Directors by Roy F. Mitte.

     (g) In no event  shall the  amount of the  payment  to be made to  Employee
     under the provisions of Section 4(f),  above,  exceed an amount which would
     cause  all  amounts  to be  received  by  Employee  which  are  treated  as
     "parachute  payments"  (within  the  meaning of section  280G(b)(2)  of the
     Internal Revenue Code) to exceed 2.99 times the "base amount" applicable to
     Employee for purposes of section 280G(b)(3) of the Internal Revenue Code.

     5. Employee's Representations.

     (a) The Employee  represents  that he has full authority to enter into this
     Agreement  and that he is free to enter into this  Agreement  and not under
     any   contractual   restraint   which  would  prohibit  the  Employee  from
     satisfactorily performing his duties to the Company under this Agreement.

     (b)  The  Employee  acknowledges  that  he is  free  to  seek  advice  from
     independent counsel with respect to this Agreement. The Employee has either
     obtained such advice or, after  carefully  reviewing  this  Agreement,  has
     decided  to  forego  such  advice.  The  Employee  is  not  relying  on any
     representation  or  advice  from  the  Company  or  any  of  its  officers,
     directors, attorneys or other representatives regarding this Agreement, its
     content or effect.


                                     - 66 -



<PAGE>



     6.  Governing  Law. This  Agreement  shall be governed by and construed and
     enforced in accordance with the laws of the State of Texas.

     7. Entire Agreement.  This Agreement constitutes the whole agreement of the
     parties  hereto in  reference  to any  employment  of the  Employee  by the
     Company and in  reference to any of the matters or things  herein  provided
     for or hereinabove  discussed or mentioned in reference to such employment;
     all prior agreements, promises, representations and understandings relative
     thereto being herein merged.

     8. Assignability.

     (a) In the event the  Company  shall  merge or  consolidate  with any other
     corporation, partnership or business entity, or all or substantially all of
     the Company's  business or assets shall be transferred in any manner to any
     other corporation,  partnership or business entity,  then such successor to
     the  Company  shall  thereupon  succeed  to, and be subject to, all rights,
     interests,  duties and obligations  of, and shall  thereafter be deemed for
     all purposes hereof to be, the "Company" under this Agreement.

     (b) This  Agreement  is  personal  in nature  and the  Employee  shall not,
     without  the  written  consent  of the  Company,  assign or  transfer  this
     Agreement or any rights or obligations hereunder.

     (c) Except as set forth in  subsection  (a)  above,  nothing  expressed  or
     implied in this  Agreement is intended or shall be construed to confer upon
     or give to any person, other than the parties to this Agreement, any right,
     remedy  or claim  under or by  reason  of this  Agreement  or of any  term,
     covenant or condition of this Agreement.

     9.  Amendments;   Waivers.   This  Agreement  may  be  amended,   modified,
     superseded,  canceled,  renewed or extended  and the terms or  covenants of
     this Agreement may be waived only by a written  instrument  executed by the
     parties to this Agreement or, in the case of a waiver, by the party waiving
     compliance. Any such written instrument must be approved by the Board to be
     effective as against the  Company.  The failure of any party at any time or
     times to require performance of any provision of this Agreement shall in no
     manner  affect the right at a later time to enforce the same.  No waiver by
     any  party  of the  breach  of any  term  or  provision  contained  in this
     Agreement,  whether by conduct or otherwise,  in any one or more instances,
     shall be deemed to be, or construed as, a further or  continuing  waiver of
     any such  breach,  or a waiver of the breach of any other term or  covenant
     contained in this Agreement.


                                     - 67 -



<PAGE>



     10. Notice.  All notices,  requests or consents required or permitted under
     this  Agreement  shall be made in  writing  and shall be given to the other
     party by personal delivery,  overnight air courier (with receipt signature)
     or facsimile transmission (with "answerback" confirmation of transmission),
     if to the Company,  sent as follows:  Attention:  Thomas C. Richmond,  6500
     River  Place  Blvd.,  Building  One,  Austin,  Texas  78730,  and if to the
     Employee:  Theodore A. Fleron,  1600 Easy Street,  Austin,  Texas 78746, or
     such other  addresses  or telecopy  numbers of which the parties have given
     notice  pursuant to this Section 10. Each such  notice,  request or consent
     shall be deemed effective upon the date of mailing of such notice, provided
     the  mailing  party  retains  a  receipt   signature  or   confirmation  of
     transmission, as applicable.

     11.  Severability.  Any provision of this  Agreement  that is prohibited or
     unenforceable  in any  jurisdiction  shall,  as to  such  jurisdiction,  be
     ineffective to the extent of such prohibition or  unenforceability  without
     invalidating the remaining  provisions  hereof, and any such prohibition or
     unenforceability  in  any  jurisdiction  shall  not  invalidate  or  render
     unenforceable such provision in any other jurisdiction.

IN WITNESS WHEREOF,  the parties to this Agreement have executed this Employment
Agreement as of the date first above written.

Financial Industries Corporation
Investors Life Insurance Company of North America



By: ______________________________________
    Roy F. Mitte
    Chairman, President and Chief Executive Officer

    6500 River Place Blvd.,
    Building One
    Austin, Texas 78730
    Telephone: (512) 404-5000

Employee:

By: ______________________________________
    Theodore A. Fleron
    1600 Easy Street
    Austin, Texas 78746


                                     - 68-