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, 2000
Commission File Number 0-4690



                        FINANCIAL INDUSTRIES CORPORATION
             (Exact Name of Registrant as specified in its charter)

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



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:
5,054,661.


                                      - 1 -
<PAGE>

                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES


                                      INDEX

                                                                        Page No.

Part I - Financial Information

Item 1. Financial Statements
Consolidated Balance Sheets
         March 31, 2000 and December 31, 1999................................ 3

Consolidated Statements of Income
         For the three month period  ended
         March 31, 2000 and March 31, 1999................................... 5

Consolidated Statements of Cash Flows
         For the three month period ended
         March 31, 2000 and March 31, 1999................................... 7

Notes to Consolidated Financial Statements....................................9

Item 2. Management's Discussion and Analysis of
         Financial Conditions and Results of Operations......................11

Item 3. Quantitative and Qualitative Disclosures
            About Market Risk ...............................................17

Part II

Other  Information...........................................................18

Signature  Page..............................................................20




                                      - 2 -
<PAGE>

                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                             March 31,             December 31,
                                                               2000                   1999
                                                           (unaudited)
<S>                                                             <C>                    <C>


ASSETS

Investments other than investments
 in affiliate:

Fixed maturities available for sale
 at  market value (amortized cost of
 $79,597 and $78,252 at March 31,
 2000 and December 31, 1999, respectively)               $     78,920            $     77,515

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

Policy loans                                                    3,598                   3,595

Short-term investments                                         22,127                  24,839

     Total investments                                        104,649                 105,953

Cash and cash equivalents                                         873                     692

Investment in affiliate                                        71,594                  70,013

Accrued investment income                                       1,131                   1,180

Agency advances and other receivables                           6,323                   6,885

Reinsurance receivables                                        15,667                  14,848

Due and deferred premiums                                      12,255                  12,392

Property and equipment, net                                     1,355                   1,355

Deferred policy acquisition costs                              53,112                  52,490

Present value of future profits of
 acquired businesses                                           22,093                  23,109

Other assets                                                    4,658                   4,758

Separate account assets                                           383                     379

     Total Assets                                        $    294,093             $   294,054

</TABLE>




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


                                      - 3 -

<PAGE>

                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                      March 31,          December 31,
                                                                        2000                 1999
                                                                     (unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                       <C>                 <C>

Liabilities:
Policy liabilities and contract holder
 deposit funds:

Future policy benefits                                          $         60,979      $       59,783

Contract holder deposit funds                                             43,336              44,681

Unearned premiums                                                             14                  14

Other policy claims and benefits payable                                   4,211               4,282
                                                                         108,540             108,760
Subordinated notes payable to affiliate                                   39,960              41,497

Deferred federal income taxes                                             23,175              23,222

Other liabilities                                                          4,528               4,079

Separate account liabilities                                                 383                 379

Total Liabilities                                                        176,586             177,937

Commitments and Contingencies

Shareholders' equity:

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

Additional paid-in capital                                                 7,225               7,225

Accumulated other comprehensive loss                                      (2,364)             (2,454)

Retained earnings                                                        118,852             117,552
                                                                         124,882             123,492
Common treasury stock, at cost, 790,639
 shares in 2000 and 1999
                                                                          (7,375)             (7,375)
Total Shareholders' Equity                                               117,507             116,117

Total Liabilities and Shareholders' Equity                        $      294,093      $      294,054

</TABLE>



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


                                      - 4 -
<PAGE>

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

                                                                   Three Months Ended
                                                                         March 31,
                                                                2000                   1999
                                                                        (unaudited)
<S>                                                              <C>                    <C>

Revenues:

 Premiums                                                  $       8,401         $      8,581

 Net investment income                                             1,740                1,753

 Earned insurance charges                                          1,147                1,376
                                                                  11,288               11,710

Benefits and expenses:

 Policyholder benefits and expenses                                3,351                3,336

 Interest expense on contract holders
 deposit funds                                                       590                  505

 Amortization of present value of future
 profits of acquired businesses                                    1,016                1,210

 Amortization of deferred policy
  acquisition costs                                                1,349                1,203

 Operating expenses                                                2,947                2,916

 Interest expense                                                    528                  698
                                                                   9,781                9,868
Income before federal income tax and
 equity in net earnings of affiliates                              1,507                1,842

Provision for federal income taxes                                   259                  339

Income before equity in net earnings
 of affiliates                                                     1,248                1,503

Equity in net earnings of affiliate,
 net of tax                                                          966                  765

Net Income                                              $          2,214     $          2,268
</TABLE>


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


                                      - 5 -
<PAGE>

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


                                                                     Three Months Ended
                                                                          March 31,
                                                                 2000                   1999

                                                                          (unaudited)
<S>                                                               <C>                    <C>

Net Income Per Share

Basic:

Average weighted shares outstanding                                5,055                5,055

Basic earnings per share                                    $       0.44         $       0.45

Diluted:

Common stock and common stock equivalents                          5,167                5,206

Diluted earnings per share                                  $       0.43         $       0.44

</TABLE>




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


                                      - 6 -
<PAGE>

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


                                                                  Three Months Ended
                                                                       March 31,
                                                            2000                      1999
                                                                     (unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
<S>                                                          <C>                       <C>


Net Income                                          $       2,214            $       2,268
Adjustments to reconcile net income
 to net cash provided by operating
 activities:

Amortization of present value of future
 profits of acquired business                               1,016                    1,210

Amortization of deferred policy
 acquisition costs                                          1,349                    1,203

Equity in undistributed earnings of
 affiliate                                                 (1,526)                  (1,314)

Changes in assets and liabilities:

Decrease in accrued
 investment income                                             49                      228

Increase in agent advances and
 other receivables                                           (257)                    (969)

Decrease in due premiums                                      137                      197

Increase in deferred policy acquisition
 costs                                                     (1,971)                  (2,057)

Decrease in other assets                                      100                      341

(Decrease) increase in policy liabilities
 and accruals                                                (220)                      82

Decrease in other liabilities                                (465)                    (652)

(Decrease) increase in deferred federal
 income taxes                                                 (47)                      138

Other, net                                                   (140)                     (69)

Net cash provided by operating activities             $       239            $         606
</TABLE>



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


                                      - 7 -

<PAGE>

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

                                                                    Three Months Ended
                                                                          March 31,
                                                                 2000                 1999
                                                                        (unaudited)
<S>                                                               <C>                  <C>

  CASH FLOWS FROM INVESTING ACTIVITIES

 Fixed maturities purchased                             $        (1,462)    $        (7,000)

Increase in policy loans                                             (3)                (78)

 Proceeds from sales and maturities of
  fixed maturities                                                   232              9,769

 Net increase (decrease) in short-term investments                 2,712             (2,603)

 Net cash provided by investing activities                         1,479                 88

CASH FLOW FROM FINANCING
 ACTIVITIES

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

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

 Net increase (decrease) in cash                                     181               (843)

 Cash and cash equivalents, beginning of year                        692              2,601

 Cash and cash equivalents, end of period                   $        873     $        1,758
</TABLE>


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


                                      - 8 -
<PAGE>

                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 which 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, 1999  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 current year presentation.

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

Other Comprehensive Income

The following is a  reconciliation  of accumulated  other  comprehensive  income
(loss) from December 31, 1999 to March 31, 2000 (in thousands):

<TABLE>
<CAPTION>

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


Balance at December 31, 1999            $ (2,454)                $      0                $ (2,454)
Current Period Change                         89                        1                      90
Balance at March 31, 2000               $ (2,365)                $      1                $ (2,364)
</TABLE>

Dividends Declared

On January 17, 2000,  FIC's Board of Directors  approved an annual cash dividend
in the amount of $.18 per common  share.  The  dividend  is payable on April 12,
2000 to  shareholders  of record on April 5, 2000. The dividend has been accrued
in other liabilities on the consolidated balance sheet.






                                      - 9 -
<PAGE>





                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

New Accounting Pronouncements

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




                                     - 10 -
<PAGE>


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

For  the  three-month  period  ended  March  31,  2000,   Financial   Industries
Corporation's  ("FIC") net income was  $2,214,000  (basic  earnings of $0.44 per
common  share,  or diluted  earnings  of $0.43 per common  share) as compared to
$2,268,000  (basic  earnings of $0.45 per common share,  or diluted  earnings of
$0.44 per common  share) in the first three  months of 1999.  Earnings per share
are stated in accordance with the requirements of FAS No. 128, which establishes
two  measures  of  earnings  per share:  basic  earnings  per share and  diluted
earnings  per share.  Basic  earnings  per share is computed by dividing  income
available to common shareholders by the weighted average number of common shares
outstanding during the period.  Diluted earnings per share reflect the potential
dilution that would occur if securities or other contracts to issue common stock
were converted or exercised.

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


                              Results of Operations

FIC's  income from  operations - as  determined  before  federal  income tax and
equity in net earnings of its affiliate, InterContinental Life Corporation - for
the  three-month  period ended March 31, 2000,  was  $1,507,000  (on revenues of
$11,288,000),  as compared to  $1,842,000  (on revenues of  $11,710,000)  in the
first three months of 1999.

Premiums for the first three months of 2000, net of reinsurance ceded, were $8.4
million,  as  compared  to $8.6  million  in the  first  three  months  of 1999.
Policyholder  benefits  and expenses  were $3.4 million in the first  quarter of
2000, as compared to $3.3 million in the first three months of 1999.

As of March 31, 2000,  the market value of the fixed  maturities  available  for
sale  segment  was $78.9  million as  compared  to an  amortized  value of $79.6
million, or an unrealized loss of $0.7 million. The decrease reflects unrealized
losses on such  investments  related to changes in interest rates  subsequent to
the purchase of such investments.  The net of tax effect of this decrease ($0.46
million at March 31,  2000) has been  recorded as an  decrease in  shareholders'
equity.  As required under the provisions of FAS No. 130, the  determination  of
"Accumulated other comprehensive  loss" includes separate  identification of the
change in values which occurred during the current period.




                                     - 11 -
<PAGE>


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

For the three-month period ended March 31, 2000, the Company's equity in the net
earnings of InterContinental  Life Corporation  ("ILCO"),  net of federal income
tax, was $966,000, as compared to $765,000 for the first three months of 1999.

On March 17,  1999,  ILCO paid a stock  dividend  (one share of common stock for
each outstanding share of common stock).  FIC currently owns 3,590,292 shares of
ILCO's common stock.  In addition,  Family Life currently owns 342,400 shares of
ILCO common stock.  As a result,  FIC currently  owns,  directly and  indirectly
through Family Life,  3,932,692 shares  (approximately  47.50%) of ILCO's common
stock.

As of March 31, 2000, the market value of ILCO's fixed maturities  available for
sale  segment  was $419.5  million as compared  to an  amortized  cost of $426.2
million, or an unrealized loss of $6.7 million. The decrease reflects unrealized
losses on such  investments  related to changes in interest rates  subsequent to
the purchase of such  investments.  Since FIC owns  approximately  47.50% of the
common stock of ILCO,  the net of tax effect of this  decrease  ($1.9 million at
March 31, 2000) is included in  "Accumulated  other  comprehensive  loss" on the
Consolidated   Balance   Sheets  and  has  been   recorded  as  an  decrease  in
shareholders' equity.


                     Liquidity and Capital Resources of ILCO

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

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,  2000,  the  outstanding  principal
balances  of the  surplus  debentures  were  $0.456  million  and $2.9  million,
respectively.


                                     - 12 -
<PAGE>

The terms of the latter of the two Surplus Debentures  required final payment of
the remaining principal balance on March 31, 2000. Effective September 28, 1999,
ILCO and  Investors-NA  amended the payment  schedule to provide  payment of the
remaining  balance in four  installments,  with the final  installment being due
July 1, 2000.  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, 2000, the statutory capital and surplus
of  Investors-NA  was $73.6 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 its subsidiaries.  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, 2000,
Investors-NA had earned surplus of $52.037 million.

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 $18.6  million at March 31, 2000.  In June,
1999,  Investors-IN  paid a  dividend  in the  amount of $3  million to its sole
shareholder, Investors-NA. The amount of the dividend was less than the net gain
from  operations for the prior fiscal year;  accordingly,  no prior approval was
required  for the  payment of the  dividend.  Advance  notice of the payment was
provided  to the  Indiana  Department  of  Insurance,  in  accordance  with  the
provisions of the Indiana Insurance Code.

The Form 10-Qs of ILCO for the  three-month  periods  ended  March 31,  2000 and
March 31,1999,  set forth the business  operations and financial results of ILCO
and its life insurance  subsidiaries.  Such 10-Q reports of ILCO,  including the
discussion by ILCO's management under the caption  "Management's  Discussion and
Analysis of Financial  Conditions  and Results of Operations"  are  incorporated
herein by reference.


                                     - 13 -
<PAGE>



                         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, 2000, the  outstanding  balance of such  indebtedness  was
$39.96 million on the Subordinated Notes granted by Investors-NA.

The  principal  source of  liquidity  for  FIC's  subsidiaries  consists  of the
periodic  payment of principal and interest by Family Life pursuant to the terms
of a Surplus  Debenture.  The terms of the  Surplus  Debenture  were  previously
approved by the Washington Insurance  Commissioner.  Under the provisions of the
Surplus Debenture and current law, no prior approval of the Washington Insurance
Department  is required  for Family Life to pay  interest  or  principal  on the
Surplus  Debenture;  provided that,  after giving effect to such  payments,  the
statutory  surplus  of Family  Life is in excess of 6% of assets  (the  "surplus
floor").  However,  Family  Life has  voluntarily  agreed  with  the  Washington
Insurance Commissioner that it will provide at least five days advance notice of
payments which it will make under the surplus  debenture.  As of March 31, 2000,
the statutory  capital and surplus of Family Life was $25.55 million,  an amount
substantially  in  excess  of the  surplus  floor.  As of March  31,  2000,  the
principal  balance of the  Surplus  Debenture  was  $11.884  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.



                                     - 14 -
<PAGE>


FIC's net cash flow  provided by operating  activities  was $0.24 million in the
first three  months of 2000,  as  compared  to $0.61  million in the first three
months of 1999. Net cash flow used in financing activities was $1.537 million in
the first three months of 2000, as compared to $1.537 million in the first three
months of 1999.

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

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

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

                                   Investments

As of March 31, 2000, the Company's  investment  assets totaled $104.65 million,
as compared to $105.95 million as of December 31, 1999.

The level of short-term  investments  at March 31, 2000 was $22.13  million,  as
compared  to $24.84  million  as of  December  31,  1999.  The fixed  maturities
available for sale portion  represents $78.9 million of investment  assets as of
March 31, 2000, as compared to $77.5 million at December 31, 1999. The amortized
cost of fixed  maturities  available  for sale as of March  31,  2000 was  $79.6
million representing a net unrealized loss of $0.7 million. This unrealized loss
principally  reflects  changes in  interest  rates from the date the  respective
investments  were  purchased.  To reduce the exposure to interest  rate changes,
portfolio  investments  are selected so that  diversity,  maturity and liquidity
factors approximate the duration of associated policyholder liabilities.

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".



                                     - 15 -
<PAGE>


The fixed maturities  portfolio of Family Life, as of March 31, 2000,  consisted
solely of fixed maturities  investments  which, in the annual  statements of the
companies, as filed with state insurance departments,  were designated under the
National Association of Insurance  Commissioners ("NAIC") rating system as a "1"
(highest quality).

The   investments  of  Family  Life  and  ILCO's   insurance   subsidiaries   in
mortgage-backed securities included collateralized mortgage obligations ("CMOs")
of  $22.1  million  and  $181.3  million,   respectively,   and  mortgage-backed
pass-through  securities  of $6.4 million and $39.4  million,  respectively,  at
March 31, 2000.  Mortgage-backed  pass-through securities,  sequential CMO's and
support bonds,  which comprised  approximately  45.8% of the book value of FIC's
mortgage-   backed   securities   and   53.8%  of  the  book   value  of  ILCO's
mortgage-backed  securities at March 31, 2000,  are sensitive to prepayment  and
extension  risks.  ILCO and FIC have reduced the risk of  prepayment  associated
with  mortgage-backed  securities  by  investing in planned  amortization  class
("PAC"),  target  amortization  class ("TAC")  instruments and scheduled  bonds.
These  investments are designed to amortize in a predictable  manner by shifting
the risk of prepayment of the underlying  collateral to other investors in other
tranches  ("support  classes")  of the  CMO.  At  March  31,  2000,  PAC and TAC
instruments  and scheduled  bonds  represented  approximately  54.2% of the book
value of FIC's  mortgage-backed  securities and approximately  46.2% of the book
value of ILCO's  mortgage-backed  securities.  Sequential  and  support  classes
represented  approximately  23.3%  of the book  value  of FIC's  mortgage-backed
securities and approximately  35.8% of the book value of ILCO's  mortgage-backed
securities  at March  31,  2000.  In  addition,  FIC and ILCO  limit the risk of
prepayment  of CMOs by not  paying a premium  for any CMOs.  ILCO and FIC do not
invest in  mortgage-backed  securities with increased  prepayment  risk, such as
interest-only  stripped  pass-through  securities  and  inverse  floater  bonds.
Neither  FIC nor  ILCO  had any  z-accrual  bonds  as of  March  31,  2000.  The
prepayment  risk that  certain  mortgage-  backed  securities  are subject to is
prevalent in periods of declining  interest rates,  when mortgages may be repaid
more rapidly than  scheduled as individuals  refinance  higher rate mortgages to
take   advantage  of  the  lower  current  rates.   As  a  result,   holders  of
mortgage-backed  securities may receive large  prepayments on their  investments
which cannot be  reinvested  at an interest  rate  comparable to the rate on the
prepaying  mortgages.  Neither FIC nor ILCO made additional  investments in CMOs
during  1999.  For the year  2000,  the  investment  objectives  of FIC and ILCO
include the making of selected investments in CMOs.

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




                                     - 16 -
<PAGE>

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

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

                             Accounting Developments

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


Item 3. Quantitative and Qualitative Disclosures About Market Risk

General

FIC's principal  assets are financial  instruments,  which are subject to market
risks.  Market risk is the risk of loss arising  from adverse  changes in market
rates, principally interest rates on fixed rate investments. For a discussion of
the  Company's  investment  portfolio and the  management  of that  portfolio to
reflect the nature of the  underlying  insurance  obligations  of the  Company's
insurance  subsidiaries,  please  refer to the  information  set forth in Item 2
"Management's  Discussion  and Analysis of Financial  Conditions  and Results of
Operation - Investments" of this report.

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

The primary market risk to the Company's  investment  portfolio is interest rate
risk.  Since the Company own  approximately  47.50% of the common stock of ILCO,
the interest  rate risk of ILCO's fixed  income  portfolio  has an effect on the
value of FIC's  "investment in  affiliate".  The Company does not use derivative
financial instruments.



                                     - 17 -
<PAGE>

Interest Rate Risk

(a)  FIC's Fixed Income Investments

     Assuming an immediate  increase of 100 basis points in interest rates,  the
     net  hypothetical  loss in  fair  market  value  related  to the  financial
     instruments segment of the Company's balance sheet is estimated to be $ 3.4
     million  at March 31,  2000 and $9.7  million at  December  31,  1999.  For
     purposes  of  the  foregoing  estimate,  the  following  categories  of the
     Company's  fixed  income  investments  were taken into  account:  (i) fixed
     maturities,   including  fixed  maturities  available  for  sale  and  (ii)
     short-term investments. The market value of such assets was $ 101.1 million
     at March 31, 2000 and $102.4 million at December 31, 1999.

     The fixed income investments of the Company include certain mortgage-backed
     securities. The market value of such securities was $ 28.1 million at March
     31, 2000 and $ 27.3  million at December  31,  1999.  Assuming an immediate
     increase of 100 basis points in interest rates, the net  hypothetical  loss
     in the fair market  value  related to such  mortgage-backed  securities  is
     estimated  to be $ 1.5  million  at March  31,  2000 and $ 1.9  million  at
     December 31, 1999.


(b)  FIC's Investment in Affiliate

     The value of FIC's  investment  in  affiliate  is affected by the amount of
     unrealized gains and losses, net of tax, in the investment portfolio of its
     affiliate,  ILCO.  Assuming an  immediate  increase of 100 basis  points in
     interest rates, the net hypothetical  loss in value, net of tax, related to
     the  Company's  investment  in affiliate is estimated to be $6.7 million at
     March 31, 2000 and $6.3 million at December 31, 1999.


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

Part II. Other Information

Item 1. Legal Proceedings

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

ILCO and  Investors-NA  are  defendants in a lawsuit which was filed in October,
1996, in Travis County, Texas. CIGNA Corporation,  an unrelated Company, is also
a named defendant in the


                                     - 18 -
<PAGE>

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,
          1999  heretofore  filed by Registrant with the Securities and Exchange
          Commission, which is hereby incorporated by reference.

     (b)  Reports on Form 8-K

          None.



                                     - 19 -
<PAGE>

                FINANCIAL INDUSTRIES CORPORATION AND SUBSIDIARIES



                                    SIGNATURE



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





FINANCIAL INDUSTRIES CORPORATION

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



Date:   May 15, 2000






                                     - 20 -
<PAGE>