SECURITIES AND EXCHANGE COMMISSION

                       Washington, D.C.  20549




                              FORM 10-Q

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

                        SECURITIES ACT OF 1934


For the Quarterly Period Ended March 31, 1998
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)
                                                 


The Austin Centre, 701 Brazos, 12th Floor
Austin, Texas                                     78701  
(Address of principal executive offices)       (Zip Code)

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




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

                                           YES  X    NO     

Number of common shares outstanding ($.20 par value) at end of
period:  5,427,965










          FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES


                                INDEX

                                                     Page No.




PART I - FINANCIAL INFORMATION

Consolidated Balance Sheets 
     March 31, 1998 and December 31, 1997................... 3

Consolidated Statements of Income 
     For the three month periods ended 
     March 31, 1998 and 1997................................ 5

Consolidated Statements of Cash Flows
     For the three month periods ended 
     March 31, 1998 and 1997................................ 6

Notes to Consolidated Financial Statements...................8

Management's Discussion and Analysis of 
     Financial Conditions and Results of Operations.........11

PART II

Other  Information..........................................21

Signature  Page.............................................23

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

<TABLE>
<S>                                        <C>         <C>
                                           March 31    Dec. 31
ASSETS                                        1998         1997   
                                                (unaudited)  

Investments:                                           

Fixed maturities available for sale, at                
market value (amortized cost of                       
$83,642 and $79,054 at 1998 and 1997,              
respectively)                              $ 86,131    $ 81,854
                                      

Equity securities, at market value                     
 (cost approximates $11)                          4           4

Policy loans                                  2,822       2,748

Short-term investments                       28,801      34,475

Total Investments                           117,758     119,081

                                                       
Cash and cash equivalents                       838         508

Investment in affiliate                      67,261      66,752

Accrued investment income                       990       1,184

Agent advances and other receivables          6,888       6,474

Reinsurance receivables                      11,462      11,086

Property and equipment, net                   1,724       1,724

Deferred policy acquisition costs            45,862      45,122

Present value of future profits of                     
acquired businesses                          32,924      34,437

Due and deferred premiums                    11,154      11,134

Other assets                                  5,166       6,346

Separate account assets                         510         476

Total Assets                               $302,537    $304,324
</TABLE>
                            
                                     
                                     
            The accompanying notes are an integral part of the 
                    consolidated financial statements.
                                     
                                     
             FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                         (in thousands of dollars)
                                     
                                     
                                     
<TABLE>
<S>                                        <C>         <C>
LIABILITIES AND SHAREHOLDERS' EQUITY       March 31    Dec. 31, 
                                               1998        1997   
Liabilities:                               (unaudited  
Policy liabilities and contract holder                 
deposit funds:                                         
Future policy benefits                     $  60,395   $  59,987
Contract holder deposit funds                 44,663      44,304
Unearned premiums                                 90          90
Other policy claims and                                
 benefits payable                              4,245       5,315
                                             109,393     109,696
                                                       
Subordinated notes payable to affiliate       52,256      53,792
Deferred federal income taxes                 21,959      21,631
Other liabilities                              3,094       4,880
Separate account liabilities                     510         476
Total Liabilities                            187,212     190,475
                                                       

Commitments and contingencies                          
                                                       
Shareholders' Equity:                                  
                                                       
Common stock, $.20 par value,10,000,000               
shares authorized; 5,845,300 issued and     
5,427,965 shares outstanding in 1998 and 
1997                                           1,169       1,169               
Additional paid-in capital                     7,225       7,225
Accumulated other comprehensive income         5,835       6,692
Retained earnings                            101,518      99,185
                                             115,747     114,271          
Common treasury stock, at cost, 417,335   
shares in 1998 and 1997                         (422)       (422)
                                                       
                                                       
Total Shareholders' Equity                   115,325     113,849          
                                                       
Total Liabilities and Shareholders' Equity   302,537     304,324          
                                                       
</TABLE>

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

             FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF INCOME
                        FOR THE THREE MONTH PERIOD
                       ENDED MARCH 31, 1998 AND 1997
           (in thousands of dollars, except for per share data)
                                (unaudited)

<TABLE>
<S>                                        <C>         <C>
                                            March 31,  March 31, 
Revenues:                                      1998        1997   
                                                       
Net premiums                                $   9,764  $  10,013
Net investment income                           1,938      2,220
Earned insurance charges                        1,427      1,246
Other                                             347        597
   Total                                       13,476     14,076

Benefits & expenses:                                   
                                                       
Policyholder benefits and expenses              4,108      4,675
Interest expense on contractholder                     
deposit funds                                     640        583
Amortization of present value of future     
profits of acquired businesses                  1,513      1,552          
Amortization of deferred policy               
acquisition costs                               1,196      1,202
Operating expenses                              3,099      2,809
Interest expense                                  719        883     
   Total                                       11,275     11,704     
                                                       

Income before federal income taxes and                 
equity in net earnings of affiliate             2,201      2,372

Provision for federal income taxes                400        586
                                                       

Income before equity in net earnings of                
affiliate                                       1,801      1,786
                                              
                                                 
Equity in net earnings of affiliate               532        442
Net Income                                  $   2,333  $   2,228           

                                                       
Net income per share:                                  
Basic:                                                 
Weighted average common stock outstanding       5,428      5,428
Basic earnings per share                    $    0.43  $    0.41

                                                       
Diluted:                                               
Common stock and common stock equivalents       5,603      5,568
Diluted earnings per share                  $    0.42  $    0.40
</TABLE>
                                
                                     
                                     
                                     
                                     
            The accompanying notes are an integral part of the
                     consolidated financial statements.
                                     
                                     
                                     
             FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE THREE MONTH PERIOD
                       ENDED MARCH 31, 1998 and 1997
                         (in thousands of dollars)
                                (unaudited)

<TABLE>
<S>                                        <C>         <C>
                                             3 Months Ended
                                               March 31
                                                       

                                              1998        1997    
                                                          

CASH FLOWS FROM OPERATING ACTIVITIES:                  

Net income                                 $  2,333    $  2,228 

Adjustments to reconcile net income to                 
net cash provided by operating                         
activities:                                            
Amortization of present value of future                
profits of acquired businesses                1,513       1,552 
Amortization of deferred policy                        
acquisition costs                             1,196       1,202
Equity in undistributed earnings of                    
affiliate                                    (1,220)     (1,230)

Changes in assets and liabilities:                     

Decrease in accrued investment income           194         174

Increase in agent advances and other                   
receivables                                    (742)       (363)
                                            

Policy acquisition costs deferred            (1,936)     (2,191)  


(Decrease) increase in policy liabilities              
and contract holder deposit funds              (303)        848
                     
                                                            

Increase in due and deferred premiums           (68)        (12)

Decrease in other liabilities                (1,786)       (465)

Increase (decrease) in deferred federal                
income taxes                                    328         (68)
                                           

Decrease (increase) in other assets           1,180        (263)

Other, net                                       (2)        220

Net cash provided by operating activities  $    687    $  1,632
                                                       
</TABLE>

                        




            The accompanying notes are an integral part of the
                     consolidated financial statements.
                                     
             FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE THREE MONTH PERIOD
                       ENDED March 31, 1998 and 1997
                         (in thousands of dollars)
                                (unaudited)

<TABLE>
<S>                                        <C>         <C>
                                               3 Months Ended
                                                  March 31, 
                                                       

                                               1998        1997   

CASH FLOWS FROM INVESTING ACTIVITIES                   
                                                       

Investments purchased                      $ (9,082)   $ (3,058)

Proceeds from sales and maturities of                   
Investments                                   4,661       3,329

Net change in short-term investments          5,674         296
Increase in policy loans                        (74)        (79)

Purchases & retirements of equipment, net       -0-        (582)

Net cash provided by (used in )                        
investing activities                          1,179         (94)

                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                  

Repayment of debt                            (1,536)     (1,537)

Net cash used in financing                             
activities                                   (1,536)     (1,537) 

Net increase in cash and cash                          
equivalents                                     330           1

Cash and cash equivalents, beginning of                
period                                          508         308
                                                 

Cash and cash equivalents, end of period   $    838    $    309
</TABLE>
     
                                     
                                     
                                     
            The accompanying notes are an integral part of the
                     consolidated financial statements.
                                     


          FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES

      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



The financial statements included herein reflect all adjustments
which are, in the opinion of management, necessary to present a
fair statement of the interim results.  The statements have been
prepared to conform to the requirements of Form 10-Q and do not
necessarily include all disclosures required by generally
accepted accounting principles (GAAP).  The reader should refer
to Form 10-K for the year ended December 31, 1997 previously
filed with the Commission for financial statements prepared in
accordance with GAAP.  Certain prior year amounts have been
reclassified to conform with current year presentation. 

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

New Accounting Pronouncements

In June 1997, the FASB issued Statement of Financial Accounting
Standard (FAS) No. 130, " Reporting Comprehensive Income."  The
new standard, which is effective for financial statements issued
for periods ending after December 15, 1997, established standards
for reporting, in addition to net income, other comprehensive
income and its components including, as applicable, foreign
currency income, minimum pension liability adjustments and
unrealized gains and losses on certain investments in debt and
equity securities.  Upon adoption, the Company is also required
to reclassify financial statements for earlier periods provided
for comparative purposes.  The Company adopted this standard in
the first quarter of 1998.  Total comprehensive income for the
three months ended March 31, 1998 and March 31, 1997 is $1.5
million and $(1.8) million, respectively.

          FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES

      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following is a reconciliation of accumulated other
comprehensive income from December 31, 1997 to March 31, 1998 (in
thousands):

                    Net            
                    Unrealized
                    Gain on
                    Investments    Net            Total
                    In fixed       apreciation    accumulated
                    Maturities     (depreciation) other
                    Available      of equity      comprehensive
                    For sale       securities     income

Balance at
December 31, 1997   $ 6,660        $      32      $ 6,692
Current period
change                 (822)             (35)        (857)
Balance at
March 31, 1998      $ 5,838        $     (3)      $ 5,835





In June 1997, the FASB issued FAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
establishes standards for reporting information about operating
segments.  Generally, FAS 131 requires that financial information
be reported on the basis that is used internally for evaluating
performance.  The Company is required to adopt FAS 131 effective
January 1, 1998, and comparative information for earlier years
must be restated.  This statement does not need to be applied to
interim financial statements in the initial year of application.  

New Accounting Pronouncements, continued

In February 1998, the FASB issued FAS No. 132, "Employers
Disclosures about Pensions and Other Postretirement Benefits,"
which revises current disclosure requirements for employers'
pension and other retiree benefits. FAS 132 does not change the
measurement or recognition of pension or other postretirement
benefit plans.  The Company is required to adopt FAS 132
effective January 1, 1998, with restatement of disclosures for
earlier years required.

    In December 1997, the Accounting Standards Executive Committee
      issued Statement of Position ("SOP") 97-3, "Accounting by
          FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES

      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 Insurance and Other Enterprises for Insurance-Related
Assessments," which provides guidance on accounting for
insurance-related assessments.  The Company is required to adopt
SOP 97-3 effective January 1, 1999. Previously issued financial
statements should not be restated unless the SOP is adopted prior
to the effective date and during an interim period.  

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


For the three-month period ended March 31, 1998, Financial
Industries Corporation's ("FIC") net income was $2,333,000 (basic
earnings of $0.43 per common share, or diluted earnings of $0.42
per common share) as compared to $2,228,000 (basic earnings of
$0.41 per common share, or diluted earnings of $0.40 per common
share) in the first three months of 1997. Earnings per share are
stated in accordance with the requirements of FAS No. 128, which
establishes two measures of earnings per share: basic earnings
per share and diluted earnings per share. Basic earnings per
share is computed by dividing income available to common
shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect
the potential dilution that would occur if securities or other
contracts to issue common stock were convereted or exercised. For
the three month period ended March 31, 1997, earnings per share
have been restated to reflect the effect of FAS No. 128.


                        Results of Operations

FIC's income from operations - as determined before federal
income tax and equity in net earnings of its affiliate,
InterContinental Life Corporation - for the three-month period
ended March 31, 1998, was $2,201,000 (on revenues of
$13,476,000), as compared to $2,372,000 (on revenues of
$14,076,000) in the first three months of 1997.  

Premiums for the first three months of 1998, net of reinsurance
ceded, were $9.8 million, as compared to $10.0 million in the
first three months of 1997. Policyholder benefits and expenses
were $4.1 million in the 1998 period, as compared to $4.7 million
in the first three months of 1997.

As of March 31, 1998, the market value of the fixed maturities
available for sale segment was $86.1 million as compared to an
amortized value of $83.6 million, or an unrealized gain of $2.5
million.  The increase reflects unrealized gains on such
investments related to changes in interest rates subsequent to
the purchase of such investments.  There is no assurance that
this gain will be realized in the future. The net of tax effect
of this increase ($1.6 million at March 31, 1998) has been
recorded as an increase in shareholders' equity. As required
under the provisions of FAS No. 130, the determination of
"Accumulated other comprehensive income" includes separate
identification of the change in values which occurred during the
current period.

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



      Equity in Net Income of InterContinental Life Corporation

General:

Prior to the acquisition of Family Life Insurance Company
("Family Life") in June of 1991, FIC's primary involvement in the
life insurance business was through its equity interest in
InterContinental Life Corporation ("ILCO").  For the three-month
period ended March 31, 1998, the Company's equity in the net
earnings of ILCO, net of federal income tax, was $532,000, as
compared to $442,000 for the first three months of 1997.

FIC currently owns 1,795,146 shares of ILCO's common stock, and
holds options to acquire an additional 1,702,155 shares.  The
options were granted under an option agreement between FIC and
ILCO which was entered into in March, 1986 ("Option Agreement").
In addition, Family Life currently owns 171,200 shares of ILCO
common stock.  As a result, FIC currently owns, directly and
indirectly through Family Life, 1,966,346 shares (approximately
45%) of ILCO's common stock and holds options to acquire
1,702,155 shares.  If all of FIC's rights under the Option
Agreement were to be presently exercised, FIC's ownership would
amount to approximately 60% of the issued and outstanding shares
of ILCO's common stock. The Option Agreement provides that it
continues in effect as long as FIC guarantees indebtedness of
ILCO. The current Senior Loan of ILCO is scheduled to be fully
repaid on October 1, 1998. Accordingly, unless ILCO's Senior Loan
is extended, or ILCO otherwise incurs indebtedness which is
guaranteed by FIC, FIC's rights under the Option Agreement would
expire on October 1, 1998.
 
As of March 31, 1998, the market value of ILCO's fixed maturities
available for sale segment was $461.6 million as compared to an
amortized cost of $446.2 million, or an unrealized gain of $15.4
million.  The increase reflects unrealized gains on such
investments related to changes in interest rates subsequent to
the purchase of such investments.  Since FIC owns approximately
45% of the common stock of ILCO, the net of tax effect of this
increase ($4.2 million at March 31, 1998) is included in
"Accumulated other comprehensive income" on the Consolidated
Balance Sheets and has been recorded as an increase in
shareholders' equity.

Liquidity and Capital Resources of ILCO:

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

In December 1997, InterContinental Life Insurance Company
("ILIC"), an indirect subsidiary of ILCO, transferred its
domicile from New Jersey to Indiana. Following the completion of
the redomestication, ILIC merged with Investors Life Insurance
Company of Indiana (formerly known as Meridian Life Insurance
Company and referred to as "Pre-Merger Investors-IN" for purposes
of identifying the entity prior to the December, 1997 merger
transaction described below), with ILIC as the surviving entity
in the merger process. Immediately after the merger, ILIC changed
its name to Investors Life Insurance Company of Indiana. As used
hereinafter, the phrase "Investors-IN" shall be used to refer to
the merged entities. The redomestication, merger and name change
was previously described in detail in the Company's Form 10-K for
the year ended December 31, 1997.

The cash requirements of ILCO consist primarily of its service of
the indebtedness created in connection with the 1988 acquisition
of the Investors Life Companies and the 1995 acquisition of Pre-
Merger Investors-IN.  As of December 31, 1997, the outstanding
principal balance of ILCO's senior loan obligations was $11.0
million due to the prepayment by ILCO of a payment originally
scheduled for the first querter of 1998.  As a result, the
outstanding principal balance of ILCO's senior loan obligation
was $11.0 million at March 31, 1998.   

ILCO's principal source of liquidity consists of the periodic
payment of principal and interest to it by Investors-NA, pursuant
to the terms of the two surplus debentures.  The surplus
debentures were originally issued by Standard Life Insurance
Company and their terms were previously approved by the
Mississippi Insurance Commissioner.  In connection with the 1993
merger of Standard Life into Investors-NA, the obligations of the
surplus debentures were assumed by Investors-NA.  As of March 31,
1998, the outstanding principal balances of the surplus
debentures were $4.96 million and $18.34 million, respectively. 
Since Investors-NA is domiciled in the State of Washington, the
Washington insurance law applies to the administration of the
terms of the surplus debentures.  Under the provisions of the
surplus debentures and current law, no prior approval of the
Washington Insurance Commissioner is required for Investors-NA to
pay interest or principal on the surplus debentures; provided
that, after giving effect to such payments, the statutory surplus
of Investors-NA is in excess of $10 million (the "surplus
floor").  However, Investors-NA has voluntarily agreed with the
Washington Insurance Commissioner that it will provide at least
five days advance notice of payments which it will make under the
surplus debenture.  As of March 31, 1998, the statutory capital
and surplus of Investors-NA was $71.9 million, an amount
substantially in excess of the surplus floor.  The funds required
by Investors-NA to meet its obligations to ILCO under the terms
of the surplus debentures are generated from operating income
generated from insurance and investment operations.

In addition to the payments under the terms of the Surplus
Debentures, ILCO has received dividends from Standard Life (now,
from Investors-NA). Washington's insurance code includes the
"greater of" standard for payment of dividends to shareholders,
but has a requirement that prior notification of a proposed
dividend be given to the Washington Insurance Commissioner and
that cash dividends may be paid only from earned surplus. Under
the "greater of" standard, an insurer may pay a dividend in an
amount equal to the greater of (i) 10% of policyholder surplus or
(ii) the insurer's net gain from operations for the previous
year. As of March 31, 1998, Investors-NA had earned surplus of
$34.7 million.  Since the law applies only to dividend payments,
the ability of Investors-NA to make principal and interest
payments under the Surplus Debentures is not affected. ILCO does
not anticipate that Investors-NA will have any difficulty in
making principal and interest payments on the Surplus Debentures
in the amounts necessary to enable ILCO to service the Senior
Loan for the foreseeable future.
 
Investors-IN is 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. Under
Indiana law the dividend must be paid from earned surplus.
Extraordinary dividend approval would be required where a
dividend exceeds the greater of 10% of surplus or the net gain
from operations for the prior fiscal year. Investors-IN had
earned surplus of $19.1 million at March 31, 1998.  

The Form 10-Qs of ILCO for the three-month periods ended March
31, 1998 and March 31, 1997, set forth the business operations
and financial results of ILCO and its life insurance
subsidiaries.  Such 10-Q reports of ILCO, including the
discussion by ILCO's management under the caption "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations" are incorporated herein by reference.


                   Liquidity and Capital Resources:

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

The cash requirements of FIC and its subsidiaries consist
primarily of its service of the indebtedness created in
connection with its ownership of Family Life.  As of March 31,
1998, the outstanding balance of such indebtedness was $52.3
million on the Subordinated Notes granted by Investors-NA. On
April 17, 1996, the Senior Loan granted by a group of banks was
completely paid off.

The principal source of liquidity for FIC's subsidiaries consists
of the periodic payment of principal and interest by Family Life 
pursuant to the terms of a Surplus Debenture.  The terms of the
Surplus Debenture were previously approved by the Washington
Insurance Commissioner.  Under the provisions of the Surplus
Debenture and current law, no prior approval of the Washington
Insurance Department is required for Family Life to pay interest
or principal on the Surplus Debenture; provided that, after
giving effect to such payments, the statutory surplus of Family
Life is in excess of 6% of assets (the "surplus floor"). 
However, Family Life has voluntarily agreed with the Washington
Insurance Commissioner that it will provide at least five days
advance notice of payments which it will make under the surplus
debenture.  As of March 31, 1998, the statutory capital and
surplus of Family Life was $30.4 million, an amount substantially
in excess of the surplus floor.   As of March 31, 1998, the
principal balance of the Surplus Debenture was $29.6 million. 
The funds required by Family Life to meet its obligations under
the terms of the Surplus Debenture are generated primarily from
premium payments from policyholders, investment income and the
proceeds from the sale and redemption of portfolio investments.   


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

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

FIC's net cash flow provided by operating activities was $687,000
in the first three months of 1998, as compared to $1,632,000 in
the first three months of 1997.  Net cash flow used in financing
activities was $(1,536,000) in the 1998 period, as compared to
$(1,537,000) in the first three months of 1997.

In connection with the purchase of the Investors Life Companies
by ILCO and the purchase of Family Life by a wholly-owned
subsidiary of FIC, FIC guaranteed the payment of the indebtedness
created in connection with such acquisitions.  After giving
effect to the refinancing of the ILCO Senior Loan and the
repayment of the ILCO Subordinated Loans, the guaranty
commitments of FIC with respect to the debt obligations of ILCO
relate to the ILCO Senior Loan, with an outstanding principal
balance at March 31, 1998 of $11.0 million.    

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

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

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

                             Investments

As of March 31, 1998, the Company's investment assets totaled
$117.8 million, as compared to $110.2 million as of March 31,
1997.  

The level of short-term investments at March 31, 1998 was $28.8
million, as compared to $25.3 million as of March 31, 1997.  The
fixed maturities available for sale portion represents $86.1
million of investment assets as of March 31, 1998, as compared to
$82.5 million at March 31, 1997.  The amortized cost of fixed
maturities available for sale as of March 31, 1998 was $83.6
million representing a net unrealized gain of $2.5 million.  This
unrealized gain principally reflects changes in interest rates
from the date the respective investments were purchased.  To
reduce the exposure to interest rate changes, portfolio
investments are selected so that diversity, maturity and
liquidity factors approximate the duration of associated
policyholder liabilities. 

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

The fixed maturities portfolio of Family Life, as of March 31,
1998, consisted solely of fixed maturities investments which, in
the annual statements of the companies, as filed with state
insurance departments, were designated under the National
Association of Insurance Commissioners ("NAIC") rating system as
a "1" (highest quality).  

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


                         Year 2000 Compliance

The Company and its subsidiaries utilize a centralized computer
system to process policyholder records and financial information. 
In addition, the Company uses non-centralized computer terminals 
in connection with its operations.  The software programs used in
connection with these systems will be affected by what is
referred to as the "Year 2000 problem" or "Y2K problem".  This
refers to the limitations of the programming code in certain
existing software programs to recognize date sensitive
information as the year 2000 approaches.  Unless modified prior
to the year 2000, such  systems may not properly recognize such
information and could generate erroneous data or cause a system
to fail to operate properly.  

The Company has evaluated its centralized computer systems and
has developed a plan to reach  Y2K compliance.  A central feature
of  the plan is to convert most of the centralized systems to a
common system which is already in compliance with Y2K
requirements.  The Company is in the process of this systems
conversion and anticipates that the project will be completed  in
advance of the year 2000.

The Plan calls for an upgrade of the Family Life's administrative
systems by changing individual lines of computer code in order to
modify current operating software such that it will become Y2K
compliant. The administrative systems which are not modified will
be converted onto the Company's CK/4 System, a system designed to
be Y2K compliant according to the representations of the vendor.

A material number of policies administered by Family Life, will
be modified rather than converted. The modification of the PMS
system (administering approximately 122,000 policies for Family
Life) was completed in March, 1998. The conversion of the Cypros
AP system (administering approximately 21,400 policies for Family
Life) is scheduled for completion at the end of September, 1999.

A non-material number of Family Life policies are administered by
systems which also administer policies for ILCO and its
subsidiaries. With regard to ILCO and its subsidiaries, the ALIS
system (administering approximately 49,280 policies for
Investors-NA) was converted to CK/4 in January of 1998. The
conversion of the Life 70 system (administering approximately
17,285 policies for Investors-IN) is scheduled for completion in
April, 1999. The modification of the Lifecomm-B system which is
responsible for the 19,205 policies assumed after the acquisition
of State Auto Life is also scheduled for completion in April,
1999. The conversion of the Lifecomm-A system (administering
approximately 65,266 policies for Investors-NA) is now scheduled
for completion in September of 1999.

In 1997, FIC Computer Services - a subsidiary of FIC which
provides data processing services for the Company and its
affiliates -  purchased new mainframe hardware and accompanying
operating software, which the vendor has represented to be Y2K
compliant.  This hardware and software will be tested in 1998.
The telephone system has been tested by the maintenance provider
for that system and the Company has received assurances that the
telephone system is Y2K compliant.

With respect to non-centralized systems (i.e. desktop computers),
the Company anticipates that updated software releases will be
commercially available well in advance of the year 2000. 
Accordingly, to the extent that such systems rely on date
sensitive information, the Company expects that the effort needed
to correct for Y2K problems will  be less time intensive than the
effort needed to achieve compliance for its centralized systems.


                       Accounting Developments

In February 1997, the Financial Accounting Standards Board (FASB)
issued Financial Accounting Standard (FAS) No. 128, "Earnings Per
Share," which revises the standards for computing earnings per
share previously prescribed by APB Opinion No. 15, "Earnings Per
Share."  The Statement establishes two measures of earnings per
share:  basic earnings per share and diluted earnings per share. 
Basic earnings per share is computed by dividing income available
to common shareholders by the weighted average number of common
shares outstanding during the period.  Diluted earnings per share
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were converted or
exercised.  The Statement requires dual presentation of basic and
diluted earnings per share on the face of the income statement
for all entities with potential dilutive securities outstanding. 
The Statement also requires a reconciliation of the numerator and
denominator of the basic earnings per share computation to the
numerator and denominator of the diluted earnings per share
computation.

The Statement is effective for interim and annual periods ending
after December 15, 1997.  Earlier application is not permitted. 
However, a company may disclose pro forma earnings per share
amounts that would have resulted if it had applied the Statement
in an earlier period. The Company adopted FAS No. 128 in its
annual financial statements for the year ended December 31, 1997.
 
In June, 1997, the FASB issued FAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting
and display of comprehensive income and its components in a
financial statement with the same prominence as other financial
statements.  Total comprehensive income is required to be
reported in condensed interim financial statements. Comprehensive
income is defined as net income adjusted for changes in
stockholders' equity resulting from events other than net income
or transactions related to an entity's capital instruments.  The
Company adopted FAS 130 effective January 1, 1998, with
reclassification of financial statements for earlier years.

In June, 1997, the FASB issued FAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information", which
establishes standards for reporting information about operating
segments. Generally, FAS No. 131 requires that financial
information be reported on the basis that it is used internally
for evaluating performance. The Company adopted FAS 131 effective
January 1, 1998 and comparative information for earlier years
must be restated. This statement does not need to be applied to
interim financial statements in the initial year of application.
The adoption of FAS No. 131 did not have a material impact on the
Company's results of operations, liquidity or financial position.

In February, 1998, the FASB issued FAS No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits",
which revises current disclosure requirements for employers'
pension and other retiree benefits.  FAS No. 132 does not change
the measurement or recognition of pension or other postretirement
benefit plans.  The Company adopted FAS No. 132 effective January
1, 1998, with restatement of disclosures for earlier years. The
adoption of FAS No. 132 did not have a material impact on the
Company's results of operations, liquidity or financial position.

In December, 1997, the Accounting Standards Executive Committee
issued Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related
Assessments", which provides guidance on accounting for
insurance-related assessments.  The Company is required to adopt
SOP 97-3, effective January 1, 1999.  Previously issued financial
statements should not be restated unless the SOP is adopted prior
to the effective date and during an interim period.  The adoption
of SOP 97-3 is not expected to have a material impact on the
Company's results of operations, liquidity or financial position.


          FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES


Part II.Other Information

Item 1.  Legal Proceedings

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

ILCO and Investors-NA are defendants in a lawsuit which was filed
in October, 1996, in Travis County, Texas.  CIGNA Corporation, an
unrelated Company, is also a named defendant in the lawsuit.  The
named plaintiffs in the suit (a husband and wife), allege that the
universal life insurance policies sold to them by INA Life
Insurance Company (a company which was merged into Investors-NA in
1992) utilized unfair sales practices.  The named plaintiffs seek
reformation of the life insurance contracts and an unspecified
amount of damages.  The named plaintiffs also seek a class action
as to similarly situated individuals.  No certification of a class
has been granted as of the date hereof.  The Company believes that
the suit is without merit and intends to vigorously defend this
matter.

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

Item 2.  Changes in Securities

          None

Item 3.  Defaults Upon Senior Securities

          None

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

          None

Item 5.  Other Information

          None

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

          Form 10-K Annual Report of Registrant for the year ended
          December 31, 1997 heretofore filed by Registrant with the
          Securities and Exchange Commission, which is hereby
          incorporated by reference.

     (b)  Reports on Form 8-K:

          None



          FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES



                              SIGNATURE



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





                         FINANCIAL INDUSTRIES CORPORATION

                            /s/ James M. Grace        
                         James M. Grace, Treasurer



Date:   May 15, 1998