<PAGE>   1

                    Securities and Exchange Commission
                         Washington, D. C. 20549

                                 FORM 10-K

             Annual Report Pursuant to Section 13 or 15 (d) of
                   the Securities Exchange Act of 1934

For the fiscal year ended                     Commission File Number 2-39729
December 31, 1997
                     Cotton States Life Insurance Company
	   -------------------------------------------------------
           (Exact name of registrant as specified in its charter)

        Georgia                              58-0830929
-----------------------	              		  -------------------
(State of incorporation                   (I.R.S.  Employer
 and jurisdiction)                        Identification No.)


244 Perimeter Center Parkway, N.E., Atlanta, Georgia            30346
-----------------------------------------------------	      ---------
 (Address of principal executive offices)                    (Zip code)

         Registrant's telephone number, including area code: (770)39l-8600
                                  	                 				      ------------
         Securities registered pursuant to Section 12(b) of the Act:

                          NONE

         Securities registered pursuant to Section 12(g) of the Act:

                         EXEMPT-UNDER RULE 12(g)(2)(G)

Indicate by check mark whether the registrant 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 and has been subject to the filing requirements for at
least the past 90 days.

    YES    X                 NO
	------            -------
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not applicable to the registrant and is not
contained herein.

                    [ X  ]

The aggregate market value of voting stock held by non-affiliates was
$65,663,906 based on the closing price of $15.63 on January 30, 1998, as
reported on the NASDAQ National Market.

As of January 31, 1998, there were 6,400,875 shares of registrant's common
stock outstanding.


The Exhibit Index is located on Page 46 .

The total number of pages in this document is 54 .






                             Cross-Reference Sheet

    Caption                     Page No.


ITEM  1.  BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . .  3

ITEM  2.  PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . .  7

ITEM  3.  LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . .  7

ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . .  7

ITEM  5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . .  8

ITEM  6.  SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . .  8

ITEM  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . 10

ITEM  7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
          MARKET RISK . . . . . . . . . . . . . . . . . . . . . . . . 13

ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . 14

ITEM  9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  . . . 35

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY . . . . . . 36

ITEM 11.  EXECUTIVE COMPENSATION  . . . . . . . . . . . . . . . . . . 39

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT  . . . . . . . . . . . . . . . . . . . . . . . . 44

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  . . . . . . 45

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
          AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . 46




				      2


                                   PART I

ITEM 1. BUSINESS
GENERAL

Cotton States Life Insurance Company (the "Company") was organized under the
laws of the State of Georgia in 1955.   The Company is currently licensed to
transact business in Alabama, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee and Virginia.

The Company currently markets only individual life insurance, payroll
deduction life insurance, guaranteed-simplified issue life insurance and
individual annuities.  The Company ceased writing new individual accident and
health insurance policies  in 1988.  The Company wrote group insurance only
for its employees and agents through January 1, 1996.

In July of 1989, the Company formed CSI Brokerage Services, Inc. ("CSI").  CSI
brokers insurance products for the Company's exclusive agents not offered by
the Company's affiliated property and casualty companies.

In November of 1989, the Company acquired 60 percent of the
outstanding common stock of Cotton States Marketing Resources, Inc.
("CSMRI").  During 1992, the Company acquired the remaining 40percent
of CSMRI stock. CSMRI brokers through the Company's exclusive agents
other insurance companies' life and accident and health products not
underwritten by the Company.

Year 2000 Computer Compliance

All of the Company's major computer systems became Year 2000 compliant on
January 1, 1998.  Two minor systems were not  converted, and they will be
replaced in1998 by third party software which is Year 2000 compliant.  The
cost of the conversion had and will have an immaterial effect on the Company's
earnings.  The Company is monitoring third party companies, i.e., companies in
which its subsidiaries receive override commissions, for Year 2000 compliance.
At this time, the Company is not aware of any third parties on whom it depends
for computer processing who will not be Year 2000 compliant; however, should
certain third parties fail to become Year 2000 compliant, it could negatively
affect the Companies earnings.
                                      3

Financial Information About Industry Segments


Business Segments:
The Company's products can be grouped into two major segments, individual life
insurance and brokerage operations.  For purposes of this summary operating
profit excludes income taxes.
<TABLE>
<CAPTION>

                                           <C>            <C>         <C>
                                           1997           1996        1995
Individual insurance:                     ------         ------      ------
 Premiums:
    <S>                               <C>             <C>           <C>
    Life                              $ 7,341,176     5,825,424     4,808,860
    Accident and health                   174,483       165,328       209,372
                                   					---------     ---------     ---------
   Total premium income                  7,515,659     5,990,752     5,018,232
 Mortality and expense charges          9,430,814     8,697,621     7,218,946
 Net investment income                  7,918,667     7,484,596     6,987,699
 Realized investment gains                110,699       106,945       139,438
				                                   	---------     ---------     ---------
      Total revenue                    24,975,839    22,279,914    19,364,315

 Policyholder benefits                 11,214,540    10,326,754     8,936,276
 Operating expenses                     7,453,464     7,004,956     5,989,293
                            				       ----------    ----------    ----------
      Total benefits and expenses      18,668,004    17,331,710    14,925,569
	                     			              ----------    ----------    ----------

    Operating profit                    6,307,835     4,948,204     4,438,746
                            				       ----------    ----------    ----------

Brokerage:
 Brokerage revenue                      3,141,695     1,785,761     1,652,046
 Investment income                        137,733        81,172        34,852
                                   					---------     ---------     ---------

      Total revenue                     3,279,428     1,866,933     1,686,898
                                   					---------     ---------     ---------

 Operating expenses                     1,047,407       695,943       839,181
                                   					---------     ---------     ---------

      Operating profit                  2,232,021     1,170,990       847,717
                                   					---------     ---------     ---------

Combined operating profit               8,539,856     6,119,194     5,286,463
 Group insurance results                  (62,762)        3,960        40,992
 Earnings before Federal income taxes $ 8,477,094     6,123,154     5,327,455
                           				        ==========    =========     =========
</TABLE>

                                      4

Narrative Description of Business Segments

Individual Life

The major forms of individual life insurance presently offered by the Company
include universal life, guaranteed issue and simplified issue whole life,
graded premium whole life, participating whole life, annuities, various
supplemental riders including, but not limited to, accidental death,
disability waiver and guaranteed insurability, and disability income riders.

Unless the need for a medical examination is indicated by the application or
an investigation, the Company writes individual life insurance without
requiring blood and specimen in the following maximum amounts:

         Age Group                Maximum Insurance

           0-17                      $100,000
          18-45                        74,000
          46-50                        50,000
          51 and over                  24,000


Substandard life insurance risks are accepted by the Company at increased
rates, which are determined on an actuarial basis that the Company believes
will adequately compensate it for the additional risk involved.  The Company's
retention of substandard policies varies with its classification of the risk
and age of the insured, but in no event exceeds $100,000 on any life through
age 65 or $35,000 for issue ages over 65.  The Company has no fixed maximum on
the size of substandard policies and will entertain any application on which it
can obtain suitable reinsurance.  The Company requires a medical examination
on the majority of all substandard risks.  As of December 31, 1997, less than
3.5 percent of the Company's individual life premiums and mortality and
expense charges were represented by substandard risks.

The Company, as do others in the insurance industry, reinsures with other
companies portions of the individual life insurance policies it underwrites.
Reinsurance enables an insurance company to write a policy in an amount larger
than the risk it desires to assume.  A contingent liability exists on
insurance ceded to the reinsurer which might become a liability of the Company
in the event that the reinsurer fails to meet its obligations under the
reinsurance treaty.

The Company presently retains, with respect to individual life policies, no
more than $100,000 of insurance on any one life, which may be reduced,
depending upon the age and the physical classification of the insured.  All
accidental death riders are 100 percent reinsured.  As of December 31, 1997,
the aggregate amount of individual life insurance in force ceded by the Company
under its various reinsurance treaties totaled $936,616,000.

The following tabulation sets forth information pertaining to the Company's
individual life insurance in-force for the three years ended December 31, 1997:

                                             1997         1996       1995

In-force ($000 omitted)                  $3,843,875    3,531,398   3,255,762
Reinsurance ceded ($000 omitted)            936,616      884,504     801,111
In-force net of reinsurance               ---------    ---------   ---------
     ($000 omitted)                       2,907,259    2,646,894   2,454,651
                                   					  ---------    ---------   ---------
Number of policies in-force                  65,677       57,736      52,041
					                                     ---------    ---------   ---------
Average size of policy in-force              59,000       61,000      63,000
Ratio of voluntary terminations           ---------    ---------   ---------
     to mean of insurance in-force            11.75%       11.21%      12.24%

                                      5
Brokerage

The Company owns two brokerage subsidiaries, CSI and CSMR.  CSI provides the
Company with commission income from brokerage agreements with other property
 and casualty insurance carriers.  These carriers supply the Company's
multi-line agents with property and casualty products that the Company's
affiliated property and casualty companies do not underwrite, such as
non-standard auto insurance, crop hail insurance, multi-peril insurance,
mobile home insurance, poultry house insurance and flood insurance.

Thirty-nine percent of the CSI's revenues come from overrides on the sale of
non-standard auto insurance through one carrier.  The Company believes that it
could easily find a new carrier should that need arise.  Thirty- six percent
of the Company's gross revenue comes from overrides on the sale of crop hail
and multi-peril insurance through one carrier.  The Company has nine years
remaining on a contract with this carrier.

CSMR provides the Company with commission income from brokerage agreements with
other life and health insurance companies.  These companies supply the Company's
multi-line agents with life and health products that the Company does not choose
to underwrite, such as individual major-medical policies, impaired risk life
insurance, first to die life insurance, group life and health insurance.
Through CSMR the Company has contracted with 1,400 independent agents to write
the Company's guaranteed-simplified issue life insurance.


Agency Force

The Company offers its insurance through multi-line exclusive agents who also
write all lines of property and casualty insurance for Cotton States Mutual
Insurance Company ("Mutual") and its subsidiary, Shield Insurance Company
("Shield").  See Item 13 of this report for an explanation of the relationship
between the Company, Mutual and Shield.  Because its agents write all major
lines of insurance, the Company's commission rates are less than the
prevailing industry rate.  Approximately 261 multi-line exclusive agents are
under contract to the Company, Mutual and Shield, and are paid on a commission
basis. The Company's multi-line exclusisve agents are distributed as follows:

                  No. Agents    State

                     46         Alabama
                     25         Florida
                    164         Georgia
                     21         Kentucky
                      5         Tennessee

The Company has 1,400 independent agents to sell its whole life guaranteed
issue-simplified issue policy and brokerage products.


Regulation

The Company, like other insurance companies, is subject to regulation and
supervision by the states in which it transacts business.  The insurance laws
of these states confer upon supervisory authorities broad administrative
powers relating to (I) the regulation and revocation of licenses to transact
business, (ii) the regulation of trade practices, (iii) the licensing of
agents, (iv) the approval of the form and content of policies and advertising,
(v) the depositing of securities for the benefit of policyholders, (vi) the
type and amount of investments permitted, and (vii) the maintenance of
specified reserves and capital for the protection of policyholders.  In
general, insurance laws and regulations are designed primarily to protect
policyholders rather than shareholders.
                                      6

The Company is also required under these laws to file detailed annual reports
with the supervisory agencies in each of the states in which it does business.
Under the rules of the National Association of Insurance Commissioners, the
Company's records are examined periodically by one or more of the state
supervisory agencies.


Employees

In addition to its principal officers, the Company shares approximately 109
salaried employees with Shield and Mutual.  The Company pays an allocated
portion of the shared employee's salaries, either based upon the Company's
premium income in relation to the premium income of Mutual and Shield or to
actual time expended on each company's affairs.  The Company and its
subsidiaries have 34 salaried employees who work on a full-time basis in its
home office, where all administrative functions, such as underwriting, billing
and collection of premiums, are centralized and from which all sales
activities are directed.  None of the Company's employees is subject to a
collective bargaining agreement.  The Company believes that its employee
relations are good.


Competition

The Company operates in a highly competitive industry.  It competes with a
large number of stock and mutual insurance companies.  Larger stock and mutual
companies may have a competitive advantage in that they have greater financial
and human resources that enable them to offer more diversified lines of
coverage, develop new products faster, and develop economies of scale.

Mutual companies may also have an additional advantage compared to stock
insurers because all of their profits accrue to the policyholders.
Furthermore, the Company's annuities compete with annuities offered by banks,
thrifts, brokerage firms and other financial institutions.  Many of these
institutions enjoy a competitive advantage in that they do not incur
commission costs.


The Company has certain advantages that enables it to keep its premium rates
competitive with similar policies offered by competing companies.  These
advantages are:

     1.   The Company offers most of its insurance through the same agents
 	  who write property and casualty insurance for Mutual and Shield.
	  The sale of insurance through the same agents who sell property
	  and casualty insurance enables the Company to incur less agency
	  development and sales expense than is customary in the industry;

     2.   Because the Company's agents can provide customers with coverage
	  for all major lines of insurance they have the advantage of
	  "account" selling.  Account selling enables insureds to contact
	  one agent regarding their total insurance needs; and

     3.   The Company shares certain facilities, equipment and personnel with
	  Mutual and Shield.  The Company believes that sharing these expenses
	  has a favorable impact on the ratio of expenses to premium income
	  and enables the Company to enjoy economies of scale.

In order to keep pace with trends in the industry, the Company frequently
introduces new products with premium rates and benefits that it believes are
competitive with the industry.


ITEM 2.  PROPERTIES

The Company, Mutual and Shield occupy offices located at 244 Perimeter Center
Parkway, Atlanta, Georgia.  The building is owned by a general partnership
composed of Mutual and Gold Kist Inc. ("Gold Kist").  The Company has no
ownership interest in the partnership.  The facility consists of a three-story
office building containing approximately 260,000 square feet of space of which
the Company, Mutual and Shield share approximately 90,000 square feet.  Rental
expense is allocated to the Company based on its proportionate share of square
footage occupied.
                                      7

ITEM 3.  LEGAL PROCEEDINGS

The Company is a defendant in various actions incidental to the conduct of
its business.  While the ultimate outcome of these matters cannot be estimated
with certainty, management does not believe the actions will result in any
material loss to the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            Not applicable.


             PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Common Stock Data

On January 1, 1998, there were approximately 1,250 stockholders of the
Company's common stock. The stock (symbol CSLI) is traded over-the-counter.
Price history as provided by NASDAQ and dividends declared during the past
two years are presented below:

                            Stock Price        Dividend
                         High        Low       Declared
                     			 ----       ----       --------
1997

    First Quarter       $7.69       6.69         .027
    Second Quarter      11.00       6.31         .033
    Third Quarter       11.50       9.75         .033
    Fourth Quarter      15.44      11.18         .033


1996
    First Quarter       $5.60       4.80         .021
    Second Quarter       6.40       5.20         .027
    Third Quarter        6.67       5.54         .027
    Fourth Quarter       7.80       5.60         .027



ITEM 6.  SELECTED FINANCIAL DATA.

                    Ten-Year Selected Financial Data

<TABLE>
<CAPTION>
                                <C>            <C>         <C>          <C>         <C>
                                1997           1996        1995         1994        1993
As of December 31
<S>                            <C>           <C>          <C>          <C>          <C>
Total assets                   $165,337,309  148,824,187  139,381,979  124,412,468  116,237,515
                               ------------  -----------  -----------  -----------  -----------
Total liabilities              $115,941,296  105,910,335   99,694,942   90,855,648   85,285,402
                               ------------  -----------  -----------  -----------   ----------
Total stockholders' equity     $ 49,396,013   42,913,852   39,687,037   33,556,820   30,952,113
                               ------------  -----------  -----------  -----------   ----------
Book value per share                 $ 7.72         6.71         6.23         5.28         5.10
                                     ------         ----         ----         ----         ----
Closing price per share              $15.25         7.60         4.80         3.63         3.20
Years ended December 31              ------         ----         ----         ----         ----
Premium income                 $  8,189,370    6,702,922    7,842,595    7,991,806    8,005,457
                               ------------    ---------    ---------    ---------    ---------
                                      8
Mortality and expense
    charges earned             $  9,430,814    8,697,621    7,218,946    7,136,723    5,529,950
                               ------------    ---------    ---------    ---------    ---------
Net investment income, realized
    investment gains, brokerage
    and other revenue          $ 11,308,794    9,458,474    8,814,035    7,597,136    7,271,267
                               ------------    ---------    ---------    ---------    ---------
Total revenue                  $ 28,928,978   24,859,017   23,875,576   22,725,665   20,806,674
                               ------------   ----------   ----------   ----------   ----------
Benefits and expenses          $ 20,451,884   18,735,863   18,548,121   18,333,697   18,149,664
                               ------------   ----------   ----------   ----------   ----------
Net earnings                   $  6,304,558    4,832,577    4,070,871    3,303,024    2,435,355
                               ------------   ----------   ----------   ----------   ----------
Basic net earnings per share   $        .99          .76          .64          .54          .40
                               ------------   ----------   ----------   ----------   ----------
Diluted net earnings per share $        .96          .74          .63          .51          .39
                               ------------   ----------   ----------   ----------   ----------
Dividends per share            $       .126         .102         .072         .060         .051
                               ------------   ----------   ----------   ----------   ----------

Note: All share and per share amounts have been adjusted for the following stock splits*.

       October 1995   five-for-four
       April 1997     five-for-four
       January 1998   three-for-two


     <C>           <C>           <C>          <C>          <C>
     1992          1991          1990         1989         1988
  111,133,117    102,258,764    94,837,003   89,058,288   80,680,249
  -----------    -----------    ----------   ----------   ----------
   82,346,176     75,210,219    68,395,286   62,061,677   55,993,144
  -----------    -----------    ----------   ----------   ----------
   28,786,941     27,048,545    26,441,717   26,996,611   24,687,105
  -----------    -----------    ----------   ----------   ----------
        4.74            4.46          4.20         4.19         3.83
       -----           -----         -----        -----        -----
        2.77            2.77          3.09         3.31         2.29
       -----           -----         -----        -----        -----

    9,671,662      9,444,004     8,778,515    8,559,692    8,027,527
    ---------      ---------     ---------    ---------    ---------

    4,803,708      4,314,299     3,962,877    2,992,291    2,912,562
    ---------      ---------     ---------    ---------    ---------

    7,111,110      7,069,597     6,291,331    6.575,258    6,257,920
    ---------      ---------     ---------    ---------    ---------
   21,586,480     20,827,900    19,032,723   18,127,241   17,198,009
   ----------     ----------    ----------   ----------   ----------
                                      9

   19,122,882     19,182,874    17,027,478   15,913,687   14,459,976
   ----------     ----------    ----------   ----------   ----------
    2,108,597      1,292,026     1,655,245    2,506,426    2,429,623
   ----------     ----------    ----------   ----------   ----------

          .33            .21           .26          .39          .37
   ----------     ----------    ----------   ----------   ----------
          .33            .20           .25          .38          .37
   ----------     ----------    ----------   ----------   ----------
         .068           .119          .119         .103         .103
   ----------     ----------    ----------   ----------   ----------
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS.


Management's Discussion and Analysis of Consolidated Financial Condition
and Consolidated Results of Operations

Liquidity and Capital Resources

Premiums, mortality and expense charges, and investment income are the
Company's major sources of cash flow used to meet its short-term and
long-term cash requirements.

The Company's short-term obligations consist primarily of operating expenses
and policyholder benefits.  The Company has been able to meet these funding
requirements out of operating cash and cash equivalents.  The Company does
not anticipate that it will become necessary to sell long-term investments to
meet short-term obligations.

The Company's principal long-term obligations are fixed contractual
obligations incurred in the sale of its life insurance products.  The
premiums charged for these products are based on conservative and actuarially
sound assumptions as to mortality, persistency and interest.  The Company
believes these assumptions will produce revenues sufficient to meet its future
contractual benefit obligations and operating expenses, and provide an adequate
profit margin to finance future growth without a major entry into the debt or
equity markets.

Investment Securities and Securities Available for Sale

Following is a summary of fixed maturities held for investment and available
for sale by rating class:

                        HELD FOR INVESTMENT            AVAILABLE FOR SALE
                       12/31/97     12/31/96       12/31/97         12/31/96
                       --------     --------       --------         --------
   U. S. Government  $ 1,497,025   3,119,413      29,728,865      29,458,220
   A or better        16,607,415  17,126,370      55,898,026      48,953,029
   Baa2 or better        -            -            6,264,380       2,211,000
                      ----------  ----------      ----------      ----------
                     $18,104,440  20,245,783      91,891,271      80,622,249
                     -----------  ----------      ----------      ----------

In 1995, the Company provided loss provisions of approximately $300,000 for
U.S. Government agency derivative securities whose decline in value was deemed
to be other than temporary.  These securities were U.S. Government agency
securities whose principal repayments were linked to the valuation of foreign
currencies.  The last security matured in 1996.

                                      10

Mortgage Loans
The Company's mortgage loan policy stipulates that the Company will loan no
more than 80 percent of the value on residential loans and no more than 75
percent of the value on commercial loans.  The Company grants loans only to
employees (excluding officers and directors), agents, agent's relatives,
employees of Gold Kist and current mortgagees.

The geographic distribution of the loan portfolio is:

         No of Loans          State                   Book Value
  12/31/97     12/31/96                         12/31/97      12/31/96
       5          5          Alabama         $    259,155      313,697
       6          6          Florida              418,326      443,165
      70         81          Georgia            3,538,481    4,013,415
      --         --                             ---------    ---------
      81         92                            $4,215,962    4,770,277
                                          						=========    =========
The loan-to-value ratio on delinquent loans is 35 percent, the Company does
not anticipate any loss should it choose to foreclose.  The Company has
foreclosed on only one loan since 1985 and incurred no loss on the sale of
the underlying collateral.

Policy Loans
All policy loans are secured by the cash surrender value of the policies.


Short-term Investments
All short-term investments are in U.S. Treasury Bills.

                         Results of Operations
Premium Income:
Premium income on traditional life contracts has increased 26 percent, 21
percent, and 17 percent for 1997, 1996, and 1995 respectively. The increases
came from the sales of the Company's guaranteed issue and simplified issue
whole life policies.  The Company has contracted with over 1400 independent
agents to market this product across the Southeast.  During 1997, the Company
has expanded its multi-line exclusive agency in Kentucky to 21 agents and
started expansion into Tennessee with 5 agents.

Individual accident and health premiums were $174,483, $165,328 and $209,372
in 1997, 1996 and 1995 respectively.   In 1988, the Company ceased writing new
individual accident and health policies.

The Company anticipates that premium income from this line will remain flat.

Effective January 1, 1996, the Company and Cotton States Mutual moved its
employee and agent health plans to an outside health provider.  Premiums
received in 1995 from these groups were $2,136,420.  In 1997 and 1996 the only
group premium the Company earned were group life premiums received from
participation in the Federal employee and servicemen pools.  The earnings
effect from participation in these pools is not material.

                                      11

Mortality and Expense Charges Earned:
Mortality and expense charges earned on universal life contracts increased 8
percent, 20 percent and 1 percent in 1997, 1996 and 1995, respectively.
Mortality and expense charges earned on the Company's payroll deduction
universal life product continue to grow as new cases are added and other in
force cases mature through re-enrollments.  On an overall annual basis, the
Company expects increases in the 8 percent and 10 percent range.

Investment Income:
Investment income increased 6 percent, 8 percent and 10 percent  in 1997, 1996
and 1995, respectively.   The increases are due to larger investment
portfolios.  Fluctuations in interest rates on new investments account for the
variance in yearly increases.


Realized Investment Gains:
Realized investment gains during the past three years resulted primarily from
the sale of bonds.  The Company anticipates that future gains will be
approximately $120,000 per year.


Brokerage and Other Income:
CSI Brokerage Services provides the Company with commission income from
brokerage agreements with  property and casualty insurance carriers.  These
carriers supply the Company's multi-line agents with property and casualty
products that the Company's affiliated property and casualty companies do not
underwrite.  CSI earned $1,236,114 in 1997, $561,555 in 1996 and $438,707 in
1995.  In late 1996, CSI in conjunction with its property and casualty
affiliate, finalized a contract to transfer management of its property and
casualty affiliate's multi-peril crop and crop hail insurance to Blakely Crop
Hail, a Kansas-based company.  Through a ten year brokerage agreement with
Blakely, CSI will receive an override commission based on premium volume
generated by sales of multi-peril crop and crop hail insurance sold by its
multi-line exclusive agents.  During 1997, approximately $780,000 of revenue
was realized under this agreement.  This equates to approximately $468,000
after tax or $.07 per share diluted.  CSI also received approximately $854,000
in revenue from one nonstandard auto insurance writer.  Another subsidiary,
Cotton States Marketing Resources, Inc. provides the Company with commission
income from brokerage agreements with other life and health insurance
companies.  These companies supply the Company's multi-line agents with life
and health products that the Company does not want to underwrite.   Marketing
Resources earned $305,086 in 1997, $320,148 in 1996 and $183,010 in 1995.  The
decline in Marketing Resources earnings in 1997 resulted from the utilization
of all of its tax loss carry forwards.

                                      12

Benefits:
Individual benefits as a percentage of individual life premiums and mortality
and expense charges were 66 percent, 66 per cent and 70 percent for 1997, 1996
and 1995, respectively.  The Company expects the ratio to range between 65
percent and 70 percent.

Individual accident and health benefits as a percentage of accident and health
premiums were 130 percent, 123 percent and 19 percent for 1997, 1996 and 1995,
respectively.  Even though experience on this line improved in 1995, the
Company anticipates that even with rate increases, the loss ratio on this
closed block of business will continue to be in the 110-130 percent range.

Operating Expenses:
Operating expenses and amortization of policy acquisition costs as a
percentage of total premium income, mortality and expense charges, and
brokerage income were 41 percent, 45 percent and 41 percent for 1997, 1996 and
1995, respectively.  The increase in 1996 was due to the elimination of
$2,136,000 of group health premiums received from the Company's agents and
employees in 1995.  Even though the ratio increased it did not have an adverse
impact on the Company's earnings.

Federal Income Taxes:
The effective tax rates were 26 percent for 1997, 21 percent for 1996 and 24
percent for 1995.  The effective tax rate increased in 1997 because Marketing
Resources utilized all of its tax loss carry forwards in 1997.  The Company
anticipates that future tax rates will range from 27 per cent to 30 percent.

Quarterly Results:
Quarterly earnings may fluctuate significantly during the year.  These
fluctuations are due primarily to irregular claims occurrences and the timing
of certain investment transactions.


Inflation:
Prolonged inflation can adversely affect insurance operations.  Expenses tend
to increase while premiums are generally fixed for the life of the policy.
Real and nominal interest rates have fluctuated considerably over the years,
causing major swings in investments' market values and their income growth.
In an effort to control these effects, management is continuing to emphasize
cost control and to invest in short-term and intermediate-term investments.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
In January 1997, the Securities and Exchange Commission approved rule
amendments (the Release) regarding disclosures about derivative financial
instruments, other financial instruments and derivative commodity instruments.
The Release requires inclusion in the footnotes to the financial statements of
extensive detail about the accounting policies followed by a registrant in
connection with its accounting for derivative financial instruments and
derivative commodity instruments.  The accounting policy requirements become
effective for all registrants for filings that include financial statements
for periods ending after June 15, 1997.  The Company does not hold any
derivative financial instruments or derivative commodity instruments.

                                      13




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

       COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES
                  Consolidated Balance Sheets

                                                             December 31,
                      Assets                              1997          1996
Investments:                                              ----          ----
 Fixed maturities, held for investment, at amortized
  cost                                                $ 18,104,440   20,245,783
 Fixed maturities, available for sale, at fair value    91,891,271   80,622,249
 First mortgage loans on real estate                     4,215,962    4,770,277
 Policy loans                                            7,976,103    7,037,745
 Short-term investments                                  3,755,294    2,250,551
                                                       -----------  -----------
    Total investments                                  125,943,070  114,926,605
                                                       ===========  ===========

Cash                                                     1,303,739      279,742
Accrued investment income                                1,928,498    1,791,048
Amounts receivable, principally premiums                 3,242,432    2,371,562
Amount due from reinsurers                               2,376,473    2,027,229
Deferred policy acquisition costs                       29,842,783   26,790,307
Refundable Federal income taxes                            166,460      100,439
Other assets                                               533,854      537,255
                                                       -----------  -----------
       $                                               165,337,309  148,824,187
                                                       ===========  ===========
        Liabilities and Shareholders' Equity

Policy liabilities and accruals:
 Future policy benefits                               $104,269,283   96,935,660
 Policy claims and benefits payable                      1,356,308    1,319,416
                                                       -----------   ----------
    Total policy liabilities and accruals              105,625,591   98,255,076

Federal income taxes - deferred                          3,920,376    2,650,383
Other liabilities                                        6,395,329    5,004,876
                                                       -----------  -----------
    Total liabilities                                  115,941,296  105,910,335
                                                       -----------  -----------
Shareholders' equity:
 Common stock of $1 par value.  Authorized 10,000,000
  shares; issued 6,754,504 shares                        6,754,504    6,754,504
 Additional paid-in capital                              1,283,745    1,283,969
 Net unrealized gains on fixed maturities available
  for sale                                               1,285,556      297,609
 Retained earnings                                      41,204,889   35,713,441
 Less treasury stock, at cost (353,629 shares in
  1997 and 354,563 shares in 1996)                      (1,132,681)  (1,135,671)
                                                        -----------  -----------
    Total shareholders' equity                           49,396,013  42,913,852
                                                        ----------- -----------

                                                     $  165,337,309 148,824,187
                                                        =========== ===========
See accompanying notes to consolidated financial statements.

                                      14

     COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

              Consolidated Statements of Earnings


                                                     Years ended December 31,
<TABLE>
<CAPTION>
                                                     <C>           <C>          <C>
                                                     1997          1996         1995
                                                   --------      --------     --------
Revenues:
 Premium income:
  <S>                                           <C>             <C>           <C>
  Life                                          $  8,014,887    6,537,594     5,496,803
  Accident and health                                174,483      165,328     2,345,792
                                                   ---------    ---------     ---------
    Total premium income                           8,189,370    6,702,922     7,842,595

 Mortality and expense charges                     9,430,814    8,697,621     7,218,946
 Net investment income                             8,056,400    7,565,768     7,022,551
 Realized investment gains                           110,699      106,945       139,438
 Brokerage income                                  3,141,695    1,785,761     1,652,046
                                                  ----------   ----------    ----------
    Total revenues                                28,928,978   24,859,017    23,875,576
                                                  ----------   ----------    ----------
Benefits and expenses:
 Life benefits and claims                         11,713,161   10,820,516     9,450,073
 Accident and health benefits and claims             227,428      203,224     2,191,984
 Amortization of deferred policy acquisition costs 2,271,407    2,421,587     1,475,963
 Other operating expenses                          6,239,888    5,290,536     5,430,101
                                                  ----------   ----------    ----------
    Total benefits and expenses                   20,451,884   18,735,863    18,548,121
                                                  ----------   ----------    ----------
    Earnings before Federal income taxes           8,477,094    6,123,154     5,327,455
                                                  ----------   ----------    ----------
Federal income taxes:
 Current                                           1,515,393    1,101,651       579,650
 Deferred                                            657,143      188,926       676,934
                                                   ---------    ---------     ---------
    Total Federal income taxes                     2,172,536    1,290,577     1,256,584
                                                   ---------    ---------     ---------
    Net earnings                                $  6,304,558    4,832,577     4,070,871
                                                   =========    =========     =========
    Basic net earnings per share of
       common stock                             $        .99          .76           .64
                                                        ----         ----          ----
    Diluted net earnings per share of
       common stock                             $        .96          .74           .63
                                                        ----         ----          ----
Weighted average number of shares used in
 computing basic earnings per share (note 1)       6,400,145    6,389,277     6,362,867
                                                   =========    =========     =========

See accompanying notes to consolidated financial statements.
</TABLE>
                                      15

           COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

              Consolidated Statements of Shareholders' Equity


<TABLE>
<CAPTION>
                                                        Years ended December 31,
                                                      <C>          <C>         <C>
                                                      1997         1996        1995

Common stock - balance at beginning and
 <S>                                           <C>              <C>          <C>
 end of year                                   $  6,754,504     6,754,504    6,754,504
                                                  ---------     ---------    ---------
Additional paid-in capital:
 Balance at beginning of year                     1,283,969     1,292,207    1,295,922
 Treasury shares issued                                (224)       (8,238)      (3,715)
                                                  ---------     ---------    ---------
 Balance at end of year                           1,283,745     1,283,969    1,292,207
                                                  ---------     ---------    ---------
Net unrealized gains (losses) on fixed maturities
 available for sale:
  Balance at beginning of year                      297,609     1,354,897   (1,128,107)

  Change in unrealized gains (losses):
    Unrealized gains (losses) during year         1,802,499    (1,998,408)   4,137,852
    Deferred (taxes) benefit                       (612,850)      679,655   (1,106,869)
    Deferred acquisition cost adjustment           (201,702)      261,465     (547,979)
                                                  ---------     ---------    ---------
  Change in unrealized gains (losses), net          987,947    (1,057,288)   2,483,004
                                                    -------     ---------    ---------
  Balance at end of year                          1,285,556       297,609    1,354,897
                                                  ---------      --------    ---------
Retained earnings:
 Balance at beginning of year                    35,713,441    31,528,739   27,919,431
 Net earnings                                     6,304,558     4,832,577    4,070,871
 Dividends of $.126 per share in 1997,
  $.102 in 1996, and $.072 in 1995                 (813,110)     (647,875)    (461,563)
                                                 -----------   ----------   ----------
 Balance at end of year                          41,204,889    35,713,441   31,528,739
                                                 -----------   ----------   ----------
Treasury stock:
 Balance at beginning of year                    (1,135,671)   (1,243,310)  (1,284,930)
 Cost of shares issued (934 shares in 1997,
  33,578 shares in 1996, and 12,802 shares
  in 1995)                                            2,990       107,639       41,620
                                                  ---------     ---------    ---------
 Balance at end of year                          (1,132,681)   (1,135,671)  (1,243,310)
                                                  ---------     ---------    ---------
     Total shareholders' equity (note 9)        $49,396,013    42,913,852   39,687,037
                                                 ==========    ==========   ==========

See accompanying notes to consolidated financial statements.
</TABLE>

                                      16

              COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                          Years ended December 31,
                                                      <C>            <C>          <C>
                                                      1997           1996         1995
Cash flows from operating activities:
 <S>                                             <C>              <C>           <C>
 Net earnings                                    $  6,304,558     4,832,577     4,070,871
 Adjustments to reconcile net earnings to net
  cash provided from operating activities:
    Increase in policy liabilities and accruals     7,370,515     6,947,867     5,166,399
    Increase in deferred policy acquisition costs  (3,254,178)   (2,357,831)   (2,765,527)
    Change in Federal income taxes                    591,122       (62,877)      726,385
    (Increase) decrease in amounts receivable
     and amounts due from reinsurers               (1,220,114)     (436,785)      922,436
    Other, net                                      1,567,988      (543,860)    1,828,589
      Net cash provided from operating              ---------       -------     ---------
        activities                                 11,359,891      8,379,091    9,949,153
                                                   ----------      ---------    ---------
Cash flows from investing activities:
 Purchase of fixed maturities held for investment          --     (1,495,780)          --
 Purchase of fixed maturities available for sale  (18,827,126)   (22,109,575) (33,550,517)
 Sale of fixed maturities available for sale        5,508,045      3,483,374   20,469,828
 Proceeds from maturities of fixed maturities
  held for investment                               2,118,719      1,856,816    1,780,728
 Proceeds from maturity and redemption of
  fixed maturities available for sale               3,765,544      7,027,662    2,876,731
 First mortgage loans originated                     (312,000)      (102,000)    (346,600)
 Principal collected on first mortgage loans          866,315        756,195      838,753
 Net increase in policy loans                        (938,358)      (361,791)    (132,203)
 Other, net                                          (201,946)       147,875     (101,106)
      Net cash used in investing activities        (8,020,807)   (10,797,224)  (8,164,386)
                                                   ----------     ----------    ---------
Cash flows from financing activities:
 Cash dividends paid                                 (813,110)      (647,875)    (461,563)
 Sale of treasury stock                                 2,766         99,401       37,905
                                                      -------        -------      -------
      Net cash used in financing activities          (810,344)      (548,474)    (423,658)
                                                      -------        -------      -------
      Net increase (decrease) in cash and
        cash equivalents                            2,528,740     (2,966,607)   1,361,109

Cash and cash equivalents:
 Beginning of year                                  2,530,293      5,496,900    4,135,791
                                                    ---------      ---------    ---------
 End of year                                     $  5,059,033      2,530,293    5,496,900
Supplemental disclosures of cash paid during        =========      =========    =========
 the year - income taxes                         $  1,292,128      1,353,651      530,000
                                                    =========      =========    =========
See accompanying notes to consolidated financial statements.
</TABLE>
                                      17


     COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

           Notes to Consolidated Financial Statements
               December 31, 1997, 1996, and 1995


(1)  Summary of Significant Accounting Policies
     The accompanying consolidated financial statements have been prepared in
     conformity with generally accepted accounting principles (GAAP), which
     vary in certain respects from reporting practices prescribed or permitted
     by the Insurance Department of the State of Georgia.  The preparation of
     financial statements in conformity with generally accepted accounting
     principles requires management to make estimates and assumptions that
     affect the reported amounts of assets and liabilities and the reported
     amounts of revenues and expenses during the reporting period.  Accounts
     that the Company deems to be acutely sensitive to changes in estimates
     include deferred policy acquisition costs and future policy benefits.  In
     addition, the Company must determine requirements for disclosure of
     contingent assets and liabilities as of the date of the financial
     statements based upon estimates.  In all instances, actual results could
     differ from estimates.

     Following is a description of the most significant risks facing insurers
     and how the Company mitigates those risks:

     Credit Risk is the risk that issuers of securities owned by the Company
     will default, or other parties, including reinsurers which owe the Company
     money, will not pay.  The Company minimizes this risk by adhering to a
     conservative investment strategy and by contracting with reinsuring
     companies that meet certain rating criteria and other qualifications.

     Interest Rate Risk is the risk that interest rates will change and cause
     a decrease in the value of an insurer's investments.  The Company
     mitigates this risk by attempting to match the maturity schedule of its
     assets with the expected payout of its liabilities.  To the extent that
     liabilities come due more quickly than assets mature, an insurer would
     have to sell assets prior to maturity and recognize a gain or loss.

     The significant accounting policies are as follows:

     Consolidation Policy
     The consolidated financial statements include the accounts of Cotton
     States Life Insurance Company, its wholly owned subsidiaries, CSI
     Brokerage Services, Inc.  (CSI) and Cotton States Marketing Resources, Inc.
     (CSMR).  All significant intercompany balances and transactions have been
     eliminated in consolidation.

     Recognition of Premium Income and Mortality and Expense Charges
     Premiums on traditional life and accident and health insurance policies
     are recognized as income when due.  Mortality and expense charges on
     universal life policies are recognized as income when earned.

                                      18



           COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements

     Future Policy Benefits
     Future policy benefits on traditional individual life insurance policies
     are computed using a net level premium method based upon conservative
     assumptions as to investment yields, withdrawals, morbidity, and mortality.
     Future policy benefits on universal life insurance policies and annuities
     represent the contract's accumulated account value plus credited interest.

     Deferred Policy Acquisition Costs
     The costs of acquiring most new individual life business are deferred and
     amortized with interest over the premium-paying period of the related
     policies.  For traditional life policies, such amounts are amortized in
     proportion to the ratio of the annual premium income to the total
     anticipated premium income.  Such anticipated premium income is estimated
     using the same assumptions as used for computing future policy benefits.
     For universal life policies, deferrable costs are amortized in proportion
     to the ratio of the contract's annual gross profits to total anticipated
     gross profits.  First-year excess expense charges are also deferred and
     accreted to income in the same manner as deferrable costs are amortized.
     Total anticipated gross profits are based on assumptions for investment
     margins, surrender charges, mortality charges, and level expense loads.
     The principal expenses deferred are commissions and certain expenses of
     the product development, policy issue, underwriting, and agency
     departments, all of which vary with and are primarily related to the
     production of new business.  Policy acquisition costs deferred were
     approximately $5,526,000 in 1997, $4,780,000 in 1996, and $4,241,000
     in 1995.

     Cash and Cash Equivalents
     For purposes of presenting its statements of cash flows, the Company
     considers all short-term investments to be cash equivalents.  Short-term
     investments have maturity dates of less than three months.

     Investments
     The Company accounts for investments under the provisions of Statement of
     Financial Accounting Standards No. 115 (SFAS No. 115), Accounting for
     Certain Investments in Debt and Equity Securities.

     Fixed maturities held for investment are stated at amortized cost.  Fixed
     maturities available for sale are stated at fair value.  The cost of
     securities sold is determined by the identified certificate method.
     First mortgage loans are stated at their aggregate unpaid balance.
     Policy loans are stated at their aggregate unpaid balance and short-term
     investments are stated at cost.

     Investments deemed to have a loss in value, which is other than
     temporary, are written down to their estimated net realizable value.
     Unrealized gains and losses on fixed maturities available for sale are
     accounted for as direct increases or decreases in stockholders' equity,
     net of deferred taxes and amounts attributable to the Company's universal
     life and annuity products.

                                      19



                 COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES
		    Notes to Consolidated Financial Statements


     Income Taxes
     The Company and CSI Brokerage Services, Inc. and Cotton States Marketing
     Resources, Inc. file a consolidated Federal income tax return.

     Deferred taxes are recognized for the tax consequences of "temporary
     differences" by applying enacted statutory rates applicable to future
     years to differences between the financial statement carrying amounts
     and the tax bases of existing assets and liabilities.  The effect on
     deferred taxes of a change in tax rates is recognized in income in the
     period that includes the enactment date.

     Earnings Per Share
     Basic earnings per share are based on the weighted average number of common
     shares outstanding adjusted for the following stock splits effected in the
     form of a stock dividend.

              January 20, 1998      Three-for-two
              April 30, 1997        Five-for-four
              October 16, 1995      Five-for-four

 The following table summarizes information relating to the calculation of
 basic and diluted earnings per share of common stock:

<TABLE>
<CAPTION>
                                          Year ended December 31,
                       1997                 1996                1995
                      <S>
                      Income         Shares        Income       Shares       Income       Shares
                    (Numerator)  (Denominator)  (Numerator) (Denominator) (Numerator) (Denominator)

<S>                <C>              <C>          <C>           <C>          <C>          <C>
Basic EPS          $ 6,304,558      6,400,145    4,832,577     6,389,277    4,070,871    6,362,867
Effect of dilutive securities:
  Options                   -          82,023            -        59,037            -       37,378
  Restricted stock          -          94,068                     69,609            -       36,643

Diluted EPS        $ 6,304,558      6,576,236    4,832,577     6,517,923    4,070,871    6,436,888
</TABLE>

Stock-Based Compensation
The Company accounts for its various stock-based compensation
in accordance with the provisions set forth in SFAS No. 123,
Accounting for Stock-Based Compensation.  SFAS No. 123
permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date
of the grant or alternatively, continue to apply the
provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related
interpretations and provide pro forma net income and pro forma earnings per
share disclosures for employee stock-based grants as if the fair value-based
method had been applied as defined in SFAS No. 123.  In accordance with APB
Opinion No. 25, compensation expense is recorded on the grant date only to the
extent that the current market price of the underlying stock exceeds the
exercise price on the grant date.

The Company has elected to continue to apply the provisions set forth in APB
Opinion No. 25 and follow the disclosure provisions of SFAS No. 123.  See note
8 for further information.
                                      20

            COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

               Notes to Consolidated Financial Statements


Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. This statement establishes standards
for reporting and displaying comprehensive income and its components in a full
set of general purpose financial statements.  SFAS No. 130 requires all items
that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed in equal prominence with the other financial statements. The
term "comprehensive income" is used in the statement to describe the total of
all components of comprehensive income including net income.  "Other
comprehensive income" refers to revenues, expenses, gains, and losses that are
included in comprehensive income but excluded from earnings under current
accounting standards.  Currently, "other comprehensive income" for the Company
consists of items recorded directly in equity under SFAS No. 115.  SFAS No.
130 is effective for financial statements for interim and annual periods
beginning after December 15, 1997.

In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information.  SFAS No. 131 establishes new
standards for the disclosures made by public business enterprises to report
information about operating segments in annual financial statements and
requires those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders.  It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers.  SFAS No. 131 is effective for
financial statements for years beginning after December 15, 1997.  The Company
is assessing the standards of SFAS No.  131 for disclosure in its 1998
financial statements.
                                      21


     COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

           Notes to Consolidated Financial Statements


(2) Investments
    The amortized cost and estimated market values of investments in debt
securities as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
                                                 1997
                                               <S>
                                               Gross      Gross       Estimated
                                Amortized   unrealized  unrealized     fair
                                   cost       gains      losses        value
Held for investment:
U.S. Treasury securities
    and obligations of U.S.
    government corporations
    <S>                       <C>              <C>           <S>     <C>
    and agencies              $  1,497,025     32,975        -       1,530,000
Debt securities issued by
    foreign governments          1,990,736    129,264        -       2,120,000
Corporate securities            14,616,679    353,595     (11,630)  14,958,644
                                ----------    -------     --------  ----------
     Total                    $ 18,104,440    515,834     (11,630)  18,608,644
                                ==========    =======     ========  ==========

Available for sale:
U.S. Treasury securities
    and obligations of U.S.
    government corporations
    and agencies              $  4,387,336     71,489        -       4,458,825
Corporate securities            59,748,584  1,623,073  (84,602)     61,287,055
Mortgage-backed securities      25,402,301    752,133   (9,043)     26,145,391
                                ----------  ---------  -------      ----------
     Total                    $ 89,538,221  2,446,695  (93,645)     91,891,271
                                ==========  =========  =======      ==========
                                               1996
                                             Gross       Gross       Estimated
                                Amortized   unrealized  unrealized     fair
                                  cost        gains      losses       value
Held for investment:
U.S. Treasury securities
    and obligations of U.S.
    government corporations
    and agencies              $  3,119,413     18,774  (23,186)      3,115,001
Debt securities issued by
    foreign governments          1,988,893    121,107       -        2,110,000
Corporate securities            15,137,477    215,306 (180,745)     15,172,038
                                ----------    -------  -------      ----------
     Total                    $ 20,245,783    355,187 (203,931)     20,397,039
                                ==========    =======  =======      ==========
Available for sale:
U.S. Treasury securities
    and obligations of U.S.
    government corporations
    and agencies              $  7,380,868     38,727  (53,383)      7,366,212
Corporate securities            51,021,099    721,105 (578,175)     51,164,029
Mortgage-backed securities      21,669,731    458,829  (36,552)     22,092,008
                                ----------  --------- --------      ----------
     Total                    $ 80,071,698  1,218,661 (668,110)     80,622,249
                                ==========  =========  =======      ==========
</TABLE>
                                      22

                 COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                        Notes to Consolidated Financial Statements


The amortized cost and estimated fair value of debt securities at December 31,
1997, by contractual maturity, are shown below.  Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

                                                  Amortized    Estimated
                                                   cost       fair value

 Held for investment:
      Due in one year or less                 $  1,501,619     1,505,000
      Due after one year through five years      9,051,249     9,390,143
      Due after five years through 10 years      7,551,572     7,713,501
                                                ----------    ----------
       Total                                  $ 18,104,440    18,608,644
                                                ==========    ==========

                                                  Amortized   Estimated
                                                   cost      fair value

 Available for sale:
      Due after one year through five years   $  20,556,256   21,084,265
      Due after five years through 10 years      33,527,546   34,373,215
      Due after 10 years                         10,052,118   10,288,400
      Mortgage-backed securities                 25,402,301   26,145,391
                                                 ----------   ----------
       Total                                  $  89,538,221   91,891,271
                                                 ==========   ==========

Bonds with amortized cost of approximately $1,800,000 at December 31, 1997 were
on deposit with state regulatory authorities in accordance with statutory
requirements.
                                      23

             COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


Realized and unrealized gains and losses on investments for the years ended
December 31, were as follows:
<TABLE>
<CAPTION>

                                                <C>        <C>       <C>
                                                1997       1996      1995
Realized gains (losses) on sales and
   redemptions of investments:
    Fixed maturities held for investment:
     <S>                                   <C>      <C>    <C>           <S>
     Gross gains                           $        _      1,041         -
     Gross losses                             (18,719)      (581)        -
      Net realized gains (losses)             (18,719)       460         -

     Fixed maturities available for sale:
      Gross gains                             129,418    133,069   452,383
      Gross losses                                  -    (26,584) (312,945)
                                              -------    -------   -------
       Net realized gains                     129,418    106,485   139,438
                                              -------    -------   -------
       Total                                  110,699    106,945   139,438
                                              -------    -------   -------
Changes in unrealized gains (losses):
     Fixed maturities held for investment     352,948   (693,042) 3,145,389
     Fixed maturities available for sale    1,802,499 (1,998,408) 4,137,852
                                            =========  =========  =========
        Net unrealized gains (losses)       2,155,447 (2,691,450) 7,283,241
                                            ---------  ---------  ---------
        Total realized and unrealized
           gains (losses)                  $2,266,146 (2,584,505) 7,422,679
                                            =========  =========  =========
</TABLE>
The Company wrote down certain securities to current market value in 1995 by
recognizing losses of $300,000.  In 1996, these securities were sold and a
corresponding net gain of $51,200 was recognized.

Details of net investment income are as follows:
<TABLE>
<CAPTION>
                                              <C>          <C>         <C>
                                              1997         1996        1995

Investment income:
    <S>                                   <C>           <C>         <C>
    Fixed maturities held for investment  $ 1,244,735   1,395,312   1,504,117
    Fixed maturities available for sale     5,917,054   5,371,791   4,627,543
    First mortgage loans                      395,235     429,312     498,084
    Policy loans                              527,493     480,635     434,184
    Short-term investments                    285,267     257,926     298,553
                                            ---------   ---------   ---------
    Total investment income                 8,369,784   7,934,976   7,362,481

    Less investment expenses                  313,384     369,208     339,930
                                              -------     -------     -------
     Net investment income                $ 8,056,400   7,565,768   7,022,551
                                            =========   =========   =========
</TABLE>
                                      24
             COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


(3) Disclosures about Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is
practicable to estimate that value:

Cash and Short-Term Investments
The carrying amount of cash and short-term investments is a reasonable
estimate of fair value.

Investment Securities
For investment securities (which include fixed maturities held for
investment and fixed maturities available for sale), fair values are based
on quoted market prices or dealer quotes.  If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
securities.

Mortgage Loans
The fair value of mortgage loans is estimated using the quoted market
prices for securities backed by similar loans, adjusted for differences in
loan characteristics.

Policy Loans
The carrying amount of policy loans is a reasonable estimate of fair value.

Universal Life and Annuity Benefits
The carrying amount of universal life and annuity benefits is a reasonable
estimate of fair value since credited interest approximates current market
rates.

The estimated fair values and carrying value of the Company's financial
instruments at December 31, 1997 and 1996 are the same except for
investment securities which are detailed in footnote 2 and mortgage loans
as follows:

                           Mortgage loans
                      Carrying         Fair
                       amount          value

 1997              $  4,215,962     4,325,740
 1996              $  4,770,277     4,864,411
                      =========     =========
                                      25

       COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

              Notes to Consolidated Financial Statements


(4) Future Policy Benefits and Reinsurance

    The composition of future policy benefits, and the significant
assumptions used in their development are as follows:
<TABLE>

                     <S>
                     Future policy                               Assumptions
                   benefits            Years
<S>                 <C>        <C>     <S>
Line of business    1997       1996    of issue  Interest rates          Mortality         Withdrawals
                  ($000 omitted)
Life:
  <S>             <C>          <C>     <S><C>        <C>            <S><C>  <S>
  Individual      $  4,273     4,401   l956-65       4%             l955-60 Basic Table    Company
                                                                    Select and Ultimate    experience

  Individual         8,892     9,030   l966-79      6.5% -  5% (A)  Same as above          Same as above

  Individual         5,490     5,510   l980-88      7.5% -  6% (A)  l965-70 Basic Table    Same as above
                                                                    Select and Ultimate

  Individual         7,761     5,550   1989-96      7.5% -  6% (A)  1975-80 Basic Table    Same as above
                                                                    Select and Ultimate

  Individual         3,789     3,688   Various      3.5% -  2.5%    Statutory                   -

  Annuities and
   universal life   74,012    68,701   Various      6.25% - 4.5%    Accumulated
                                                                    account value               -

  Group                  5         5   Various            -         Unearned premiums           -
                   104,222    96,885

Accident and health -                                                    -                      -
  individual             47       51   Various       3%

   Total future
    policy
    benefits     $  104,269   96,936
                    =======   ======
(A) Interest rates are graded to the ultimate rate in 25 years.
</TABLE>
                                      26

             COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


The Company participates in certain business assumed from federally sponsored
group pools.  Further, it is the Company's general policy to reinsure
individual life insurance in excess of $100,000, group life insurance in
excess of $50,000, major medical payments in excess of $35,000 annually per
individual, accidental deaths, and certain disability income coverage. Amounts
ceded under reinsurance agreements become liabilities of the Company should
the reinsurers be unable to meet their obligations under the reinsurance
agreements.  The effect of reinsurance assumed and ceded on certain financial
statement accounts is as follows:
<TABLE>
<CAPTION>
                                        <C>           <C>          <C>
                                        1997          1996         1995
					                                   ----          ----         ----
 Premium income:
      <S>                        <C>  <C>           <C>          <C>
      Direct premiums            $    8,816,115     7,102,032    8,248,692
      Reinsurance assumed               666,034       712,170      677,928
      Reinsurance ceded              (1,292,779)   (1,111,280)  (1,084,025)
                                      ---------     ---------    ---------
       Net premium income        $    8,189,370     6,702,922    7,842,595
                                      =========     =========    =========
 Mortality and expense charges:
      Direct charges             $   11,249,640    10,288,322    8,804,143
      Reinsurance ceded              (1,818,826)   (1,590,701)  (1,585,197)
                                      ---------     ---------    ---------
       Net mortality and expense
          charges                $    9,430,814     8,697,621    7,218,946
                                      =========     =========    =========
 Benefits and claims:
      Reinsurance assumed        $      641,005       696,986      655,789
                                       =======        =======      =======
      Reinsurance ceded          $    4,149,310     2,756,838    1,475,011
                                      =========     =========    =========
                                      27
</TABLE>
           COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements


(5) Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying values of assets and liabilities for financial reporting
purposes and Federal income tax purposes.  The net deferred tax liability at
December 31, 1997 and 1996 is composed of the tax-effected temporary
differences related to the following amounts:
<TABLE>
<CAPTION>
                                                           <C>         <C>
                                                           1997        1996
 Deferred tax assets:                                     ------      ------
       <S>                                            <C>           <C>
       Deferred policy acquisition costs - tax        $ 1,330,770   1,230,104
       Life insurance reserves                          4,697,802   4,458,050
       Unearned mortality and expense charges             709,504     713,282
       Postretirement health benefits liability           105,759     107,815
       Deferred compensation                              139,869      71,060
       Capital loss carryforward                          129,012     231,005
       Other, net                                          93,255      26,644
                                                           ------      ------
           Total deferred tax assets                    7,205,971   6,837,960

       Valuation allowance                                     --     (81,000)
           Net deferred tax assets                      7,205,971   6,756,960
                                                        ---------   ---------
     Deferred tax liabilities:
       Fixed maturities available for sale                808,803     187,894
       Deferred policy acquisition costs - financial
           statements                                  10,237,548   9,131,128
       Due and unpaid premiums                             58,112      70,382
       Other, net                                          21,884      17,939
                                                           ------      ------
           Total deferred tax liabilities              11,126,347   9,407,343
                                                       ----------   ---------
           Net deferred tax liability                 $ 3,920,376   2,650,383
                                                        =========   =========
</TABLE>
SFAS No. 109, Accounting for Income Taxes,  specifically identifies certain
temporary differences for which deferred tax liabilities are not recognized
unless it becomes apparent that those temporary differences will reverse in
the foreseeable future.  The Company has not recorded a deferred tax
liability for one such item entitled "policyholders' surplus" created by
Federal income tax regulations in effect prior to 1984.  Certain untaxed
income accumulated in this special memorandum tax account will become
taxable if distributions, other than stock dividends, are made in excess of
certain amounts accumulated in another special memorandum tax account
entitled  "shareholders' surplus."  The balance in the "policyholders'
surplus" account at December 31, 1997 was $4,203,000.  The balance in the
"shareholders' surplus" account at December 31, 1997 was $34,938,000.  The
Company does not anticipate any of the "policyholders' surplus" account
becoming taxable in the foreseeable future.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized.  Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment.
                                      28

                COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                     Notes to Consolidated Financial Statements


Federal income tax expense is less than amounts determined by multiplying
earnings before Federal income taxes by the Federal tax rate of 35 percent.
The reason for such difference and the tax effect of each are as follows:
<TABLE>
<CAPTION>
                                                     <C>       <C>       <C>
                                                     1997      1996      1995

 <S>                                          <C>          <C>       <C>
 Federal income tax expense at statutory rate $2,966,983   2,143,104 1,864,609
 Special deductions available to small life
      insurance companies                       (565,318)  (547,625)  (610,107)
 Net gains of subsidiaries not currently
      includable                                 (70,068)   (80,552)   (64,054)
 Change in valuation allowance                   (81,000)  (169,000)   (50,000)
 Tax rate differential                                --         --    134,214
 Surtax exemption                                (66,617)   (42,928)   (34,481)
 Other, net                                      (11,444)   (12,422)    16,403
                                                 --------   --------   --------
       Total Federal income taxes             $2,172,536  1,290,577  1,256,584
                                               =========  =========  =========
</TABLE>
                                      29

(6) Postretirement Benefits Other than Pensions
The Company has a plan which provides for postretirement health care and
life insurance benefits for certain employees.  These benefits include
major medical insurance with deductible and coinsurance provisions.
The Company accrues benefits on a current basis and the plan is not
funded.  The components of the net periodic postretirement benefit
cost for the years ended December 31 are as follows:

                                                    1997    1996      1995

 Service cost                                   $    351      350    8,124
 Interest cost                                    13,631   10,883   22,000
 Amortization of unrecognized gain                (6,741)  (9,370)    (997)
                                                  -------  -------  -------
       Net periodic postretirement benefit cost $  7,241    1,863   29,127
                                                   =====    =====   =======
The following table sets forth the plan's funded status reconciled with the
amount shown in the Company's balance sheet at December 31, 1997 and 1996:

                                                      1997          1996

      Accumulated postretirement benefit obligation:
        Retirees                                    $184,642       180,396
        Other active participants                     12,458        10,269
           Accumulated postretirement benefit        -------       -------
             obligation in excess of plan assets     197,100       190,665

      Unrecognized net gain                          113,956       126,438
                                                     -------       -------
           Accrued postretirement benefit cost      $311,056       317,103
                                                     =======       =======
                                      29

               COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                     Notes to Consolidated Financial Statements


The postretirement benefit obligation was determined by application of
the terms of the plan using relevant actuarial assumptions.  Health care
costs are projected to increase at annual rates ranging from 0 percent in
1998 up to 5 percent in 2004 and thereafter.  A 1 percent annual increase
in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation at December 31, 1997 by approximately
$17,500 and the service and interest cost components of the net periodic
postretirement benefit cost for 1997 by approximately $1,300.  The assumed
discount rate used in determining the accumulated postretirement
obligation was 7.25 percent at December 31, 1997 and 7.50 percent at
December 31, 1996.

(7) Transactions with Affiliates

Cotton States Mutual Insurance Company, through its wholly owned
subsidiary, Shield
Insurance Company, controls approximately 34 percent of the Company's
outstanding common stock.  Most officers and directors of the Company hold
similar positions with Cotton States Mutual.

Certain general expenses are allocated to the Company by Cotton States Mutual.
These expenses, such as salaries, advertising, rents, etc., represent the
Company's share of expenses initially paid by Cotton States Mutual and are
allocated based on specific identification or, if undeterminable, generally on
the basis of each company's premium income.  Expenditures allocated to the
Company amounted to $2,467,408 in 1997, $2,469,691 in 1996, and $1,915,305 in
1995.  Effective January 1, 1996, the Company and Cotton States Mutual moved
their employee and agent health plans to an outside health provider.  Prior to
this time, coverage was provided by Cotton States Life Insurance Company.
During 1995, premiums earned on group policies with Cotton States Mutual and
its agents were $1,576,074.  Premiums on the Cotton States Mutual policies
were based on actual claims experience plus an expense and profit allowance of
10 percent.  At December 31, 1997 and 1996, the Company owed Cotton States
Mutual $1,064,682 and $405,665, respectively.

Included in other assets are deferred software costs relating to various system
development projects of the Company and Cotton States Mutual that were
amortized over five years, and were fully amortized as of December 31, 1996.
Rent for use of the software of approximately $106,216, $448,000, and $644,000
in 1997, 1996, and 1995, respectively, has been charged to Cotton States
Mutual and Shield.  The Company recorded amortization expense of approximately
$-0- in 1997, $342,000 in 1996, and $625,000 in 1995.

                                      30

             COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                      Notes to Consolidated Financial Statements


(8)  Stock Options

The Company has various stock option plans for the Company's officers and key
employees, as well as directors.  Under the employee plan, options may be
granted to purchase up to 937,500 shares of the Company's stock at a per share
price of not less than 100 percent of fair market value at date of grant.
Under the directors' plan, options are granted based on the level of
directors' fees at a per share price of 50 percent of fair market value at
date of grant.  The employee and directors' options have a term of 10 years
and are not subject to any vesting requirements.  The weighted- average
remaining contractual life on options outstanding at December 31, 1997 is four
years.  The weighted-average grant date fair value of options granted during
1997 and 1996 was $8.24 and $4.53, respectively.

A summary of options follows:

<TABLE>
<CAPTION>
                                                                     <S>
                                                                     Weighted-
                                                                     average
                                                                     exercise
                          1997     1996       1995   Option price    price
                          ----     ----       ----   ------------    ---------
<S>                    <C>       <C>        <C>      <C>             <C>
Shares under option    128,124   115,067    127,327  $ 1.92-3.80     2.94
Options exercisable    128,124   115,067    127,327    1.92-3.80     2.94
Options granted         13,991    21,318         --    1.92-3.80     2.90
Options exercised          934    33,578     12,802         2.96     2.96
</TABLE>
In addition to the stock options described above, the Company has awarded
nontransferable, restricted shares of Company common stock to various key
executives under key executive restricted stock bonus plans.  The market value
of the common stock at the date of issuance is recorded as compensation
expense using the straight- line method over the vesting period of the awards.
The Company awarded 24,459, 32,966, and 36,643 shares of restricted stock
under such plans during 1997, 1996, and 1995, respectively.  The
weighted-average grant date fair value of such shares was $7.43, $4.50, and
$3.63, respectively.  Aggregate compensation expense with respect to the
foregoing restricted stock awards was approximately $151,000, $106,000, and
$53,000 in 1997, 1996, and, 1995, respectively.

In accordance with APB Opinion No. 25, approximately $204,000 and $147,300
in compensation expense has been recorded in 1997 and 1996, respectively, for
the various stock option and restricted stock awards granted in 1997 and 1996.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options and restricted stock awards under SFAS No.
123, the Company's net earnings and basic net earnings per share would have
been reduced to the pro forma amounts indicated below:

                                        Years ended December 31,
                                      1997         1996        1995
Net income:
   As reported                  $ 6,304,558     4,832,577    4,070,871
   Pro forma                      6,218,558     4,776,458    4,014,752

Basic net earnings per share:
   As reported                        .99           .76         .64
   Pro forma                          .97           .75         .63

Diluted net earnings per share:
   As reported                        .96           .74         .63
   Pro forma                          .95           .73         .62
                                      31

            COTTON STATES LIFE INSURANCE COMPANY AND SUBSIDIARIES

                  Notes to Consolidated Financial Statements


The per share weighted-average fair value of stock options and restricted
stock granted was estimated using an option pricing model with the following
weighted average assumptions:  expected life of five years for options and
three years for restricted stock for all years, expected dividend yield of 2.1
percent for all years, risk-free interest rate of 5.5 percent for 1997 grants
and 6.0 percent for 1996 and 1995 grants, and an expected volatility of 52
percent for 1997 grants and 30 percent for 1996 and 1995 grants.

(9) Statutory Financial Statements

Accounting practices used to prepare statutory financial statements
for regulatory filings of stock life insurance companies differ from
GAAP.  Material differences resulting from these accounting
practices include:  deferred policy acquisition costs, deferred
Federal income taxes and statutory non-admitted assets are
recognized under GAAP accounting; statutory investment valuation
reserves are not recognized under GAAP accounting; premiums for
universal life and investment-type products are recognized as
revenues for statutory purposes and as deposits to policyholders'
accounts under GAAP; different assumptions are used in calculating future
policyholders' benefits; and different methods are used for calculating
valuation allowances for statutory and GAAP purposes.

Net earnings and shareholders' equity, as reported to regulatory
authorities in conformity with statutory accounting practices for
each of the years in the three-year period ended December 31, 1997
are as follows:

                                     1997        1996        1995

Statutory net earnings         $  2,488,573   2,539,179    2,147,387
                                  =========   =========   ==========
Statutory shareholders' equity $ 27,393,213  23,977,514   21,057,615


The Georgia Insurance Code limits dividends in any one year to the greater
of statutory earnings, excluding realized capital gains, or 10 percent of
statutory surplus, unless the expressed permission of the Georgia Insurance
Department is obtained.  Dividend payments to shareholders are further limited
by the Georgia Insurance Code to unassigned statutory surplus, which at
December 31, 1997 was approximately $22,500,000.  The excess of retained
earnings determined in accordance with generally accepted accounting
principles over unassigned statutory surplus is not available for payment of
dividends.  The Company may pay a dividend amounting to $2,488,573 in 1998
without approval.

(10)Litigation

The Company is a defendant in various actions incidental to the conduct of its
business.  While the ultimate outcome of these matters cannot be estimated
with certainty, management does not believe the actions will result in any
material loss to the Company.

                                      32



Independent Auditors' Report



The Board of Directors and Shareholders
Cotton States Life Insurance Company:


We have audited the accompanying consolidated balance sheets of Cotton States
Life Insurance Company and subsidiaries (the "Company") as of December 31, 1997
and 1996, and the related consolidated statements of earnings, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cotton States Life
Insurance Company and subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.






/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Atlanta, Georgia
February 24, 1998


                                      33

Management's Report to Shareholders of Cotton States Life Insurance
Company and Subsidiaries

The accompanying consolidated financial statements for Cotton States Life
Insurance Company and subsidiaries ("Company") were prepared by management,
which is responsible for the objectivity and integrity of these statements.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and, where appropriate, are based on
management's best estimates and judgements.  Other financial data about the
Company contained in this annual report is consistent with that presented in
the consolidated financial statements.

The Company's consolidated financial statements have been audited by
independent auditors, KPMG Peat Marwick LLP.  Their role is to audit the
consolidated financial statements in accordance with generally accepted
auditing standards and render an independent and professional opinion on
management's consolidated financial statements.  The auditors' report on the
Company's consolidated financial statements appears above.

The Board of Directors, through its audit committee composed of outside
directors, monitors management's financial reporting.  The independent
auditors have direct access to the audit committee and meet with the committee
periodically to discuss the scope of each audit, the results of the audit and
other matters which they believe should be brought to the committee's
attention.





         J. Ridley Howard              Gary W. Meader, CPA
         =====================         =======================
         Chairman of the Board,        Chief Financial Officer
          President and
         Chief Executive Officer





                                      34



Quarterly Results
The Following is a summary of the quarterly results of operations for the
three years ended December 31, 1997.
<TABLE>
<CAPTION>

<C>  <S>                                    <C>   <C>   <C>  <C>  <C>       <C>  <C>      <C>
1997 quarter ended                          March 31    June 30   September 30   December 31
--------------------------------------------------------------------------------------------
<S>                                        <C>         <C>           <C>           <C>
Premium income                             $1,778,758  1,780,168     1,969,344     2,661,100
Mortality and expense charges earned        2,317,145  2,308,049     2,481,680     2,323,940
Net investment income, realized
  investment gains and other income         2,317,194  2,785,897     2,580,460     3,621,243
Total revenue                              $6,417,097  6,874,114     7,031,484     8,606,283
Benefits and expenses                      $4,606,463  4,774,836     5,008,764     6,061,821
Net earnings                               $1,431,300  1,552,380     1,627,901     1,692,977
Basic earnings per share of common stock   $      .22        .24           .26           .27
Diluted earnings per share of common stock $      .22        .23           .25           .26
--------------------------------------------------------------------------------------------
1996 quarter ended                          March 31    June 30   September 30   December 31
--------------------------------------------------------------------------------------------
Premium income                             $1,373,288  1,375,889     1,585,757     2,367,988
Mortality and expense charges earned        2,144,976  2,096,955     2,265,965     2,189,725
Net investment income, realized
  investment gains and other income         2,244,454  2,233,997     2,307,744     2,672,279
Total revenue                              $5,762,718  5,706,841     6,159,466     7,229,992
Benefits and expenses                      $4,125,037  4,354,847     4,483,049     5,772,930
Net earnings                               $1,275,972  1,105,422     1,229,658     1,221,525
--------------------------------------------------------------------------------------------
Basic earnings per share of common stock    $     .20        .18           .19           .19
Diluted earnings per share of common stock $      .20        .17           .19           .18
--------------------------------------------------------------------------------------------
1995 quarter ended                          March 31    June 30   September 30   December 31
--------------------------------------------------------------------------------------------
Premium income                             $1,906,915  1,845,851     1,862,046     2,227,783
Mortality and expense charges earned        1,614,811  1,704,283     1,941,909     1,957,943
Net investment income, realized
  investment gains and other income         2,069,235  2,012,850     2,129,451     2,602,499
Total revenue                              $5,590,961  5,562,984     5,933,406     6,788,225
Benefits and expenses                      $4,135,594  4,204,056     4,605,037     5,603,434
Net earnings                               $1,048,446  1,021,489     1,022,798       978,138
--------------------------------------------------------------------------------------------
Basic earnings per share of common stock   $      .17        .16           .16           .15
Diluted earnings per share of common stock $      .16        .16           .16           .15
--------------------------------------------------------------------------------------------
Earnings per share amounts have been adjusted for the April 1997 and January
1998 five-for four and three-for-two stock splits, respectively.

The fourth quarter results for the three years include participation in
federally sponsored group pools as follows:
                                 <C>        <C>       <C>
                                 1997       1996      1995
---------------------------------------------------------------
Premiums                       $ 666,034   712,170     677,928
---------------------------------------------------------------
Benefits                       $ 641,005   696,986     655,789
---------------------------------------------------------------
See previous discussion on Results of Operations.
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
                           NONE.

                                      35
                             PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

Identification of Directors

Each director is elected to hold office for a term of three years or until
his or her successor has been duly elected and has qualified or until he or
she attains the age of 72.


Terms Expiring 1998 Annual Meeting - Nominated for Re-Election
--------------------------------------------------------------
-----------------------------------------------------------------------------

J. RIDLEY HOWARD
Director Since 1989
Age 50


Mr. Howard is Chairman, President and Chief Executive Officer of the Company,
Cotton States Mutual Insurance Company and Shield Insurance Company.  Mr.
Howard held various other offices with the Company and its affiliates prior to
January 1, 1989.  Mr. Howard is a member of the Executive Committee and the
Investment Committee of the Board of Directors of the Company.

-----------------------------------------------------------------------------


F. ABIT MASSEY
Director Since 1965
Age 70

Mr. Massey is Chairman of the Board of Directors of Gainesville Bank and
Trust and is Executive Director of Georgia Poultry Federation, Inc., a trade
association working to improve the competitive position of the Georgia poultry
industry.  Mr. Massey is a member of the Investment Committee and the Audit
Committee of the Board of Directors of the Company.  Mr. Massey will be unable
to fulfill his entire three year term if re-elected to the Board of Directors.
Mr. Massey will be required to retire effective December 1, 1999.  The vacancy
occurring due to the retirement of Mr. Massey may be filled for the unexpired
term by the affirmative vote of the majority of the Board of Directors
remaining in office.

-----------------------------------------------------------------------------

CAROL DREADIN CHERRY
Director Since 1996
Age 50

Ms. Cherry is Chairman of the Board of Shop'n Chek, Inc., an international
marketing service company providing clients with information relative to the
verbal and physical presentation of their products and/or services at the
retail level.  Ms. Cherry is a member of the Compensation Committee and the
Investment Committee of the Board of Directors of the Company.
                                      36

Terms Expiring 1999 Annual Meeting
----------------------------------
-----------------------------------------------------------------------------

GAYLORD O. COAN
Director Since 1995
Age 62

Mr. Coan is the Chief Executive Officer of Gold Kist Inc., where he also
serves as the Chairman of the Management Executive Committee.  Mr. Coan is a
member of the Compensation Committee, the Audit Committee and effective March
1, 1998, he will become Chairman of the Executive Committee of the Board of
Directors of the Company.  Mr. Coan serves on the boards of SunTrust Banks of
Georgia, Inc., SunTrust Bank, Atlanta, Archer- Daniels-Midland Company,
Georgians for Better Transportation, and Alfred C. Toepfer International of
Hamburg, Germany.

-----------------------------------------------------------------------------

E. JENNER WOOD, III
Director Since 1991
Age 46

Mr. Wood is  Executive Vice President, Trust and Investment Services, of
SunTrust Banks, Inc. Mr. Wood was the Executive Vice President, Trust and
Investment Management, of SunTrust Bank, Atlanta prior to October, 1993.  Mr.
Wood is Chairman of the Audit Committee and serves as a member of the
Executive Committee of the Board of Directors of the Company.  Mr. Wood also
serves as a director of Oxford Industries and Crawford & Company.

-----------------------------------------------------------------------------

MATHEWS D. SWIFT
Director Since 1997
Age 50

Mr. Swift is the President and Chief Operating Office of W. C. Bradley Co.,
Real Estate Division and President of Developers-Investors, Inc., a subsidiary
of W. C. Bradley Co.   Mr.  Swift is a member of the Audit Committee and
Investment Committee of the Board of Directors of the Company.  Mr. Swift is a
member of the Board of Directors of Swift-IIIges Foundation and Northstar
Industries, Inc.  Mr. Swift also serves as a director of the Advisory Board of
Columbus Bank & Trust Company, a affiliate of Synovus Financial Corporation.

Terms Expiring 2000 Annual Meeting
----------------------------------
-----------------------------------------------------------------------------

ROBERT C. McMAHAN
Director Since 1987
Age 57

Mr. McMahan is President and Chief Executive Officer of Golden Point Group,
Inc.  Mr. McMahan was President and CEO of Fernbank, Inc., d/b/a Fernbank
Museum of Natural History through November, 1994.  Mr. McMahan was Vice
Chairman of First Union National Bank of Georgia through September 1993.  Mr.
McMahan was Chairman, Chief Executive Officer and a director of DF
Southeastern Inc., prior to January 15, 1993 and of Decatur Federal Savings &
Loan Association prior to March 1, 1993, and was President of each entity
prior to April, 1989.  Mr. McMahan is Chairman of the Compensation Committee
and serves as a member of the Executive Committee of the Board of Directors
of the Company.  Mr. McMahan also serves as a director of First Union National
Bank of Georgia, First Southern Bank, Nova Financial Corporation, Legacy
Homes, Inc., and Golden Point Group, Inc.

-----------------------------------------------------------------------------
                                      37
THOMAS A. HARRIS
Director Since 1995
Age 49

Mr. Harris is the President and Chief Executive Officer of Merchant Capital
Investments, Inc., a Montgomery, Alabama investment and merchant banking firm.
Mr. Harris is Chairman of the Investment Committee and a member of the
Executive Committee and the Audit Committee of the Board of Directors of the
Company.   Mr. Harris also serves on the Board of Directors of Corral
Southeast, Eufaula Bankcorp and is Chairman of Southern Bank of Commerce in
Montgomery, Alabama.
-----------------------------------------------------------------------------


There are no family relationships among the directors or between any director
and any executive officer of the Company.  All directors have served
continuously since their first election or appointment.




OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES

During 1997, the Board of Directors held four meetings.  Each director
attended at least 75 percent of the aggregate meetings of the Board of
Directors and meetings of committees of which he or she was a member.  The
Board of Directors has four standing committees.  Certain information
regarding the function of the Board's committees, their present membership,
and the number of meetings held by each committee during 1997 is presented
below.

Audit Committee

The Audit Committee annually reviews and recommends to the Board of Directors
the firm to be engaged as independent auditors of the Company for the next
calendar year, reviews the plan and results of the audit engagement with the
independent auditors, inquires as to the adequacy of the Company's internal
accounting controls, and considers each professional service provided by the
independent auditors and whether the providing of each service impairs the
independence of the auditors.   During 1997, the Audit Committee held three
meetings.


Compensation Committee

The Compensation Committee periodically reviews the compensation and other
benefits provided to officers of the Company and advises the Board of
Directors with respect to compensation for the officers of the Company.
During 1997, the Compensation Committee held two meetings.


Investment Committee

The Investment Committee reviews the Company's investments and advises the
Board of Directors with respect to such investments.   During 1997, the
Investment Committee held four meetings.


Executive Committee

The Executive Committee is authorized to act on behalf of the Board of
Directors on all matters that may arise between regular meetings of the Board
of Directors upon which the Board of Directors would be authorized to act,
including the nomination of directors.   During 1997, the Executive Committee
held five meetings.

                                      38

Identification of Executive Officers.

The executive officers of the Company, their respective ages and all positions
and offices with the Company held by each are as follows:


                           Year Elected
    Name           Age     as an Officer    Position or Office

J. Ridley Howard    50        1984           Chairman of the Board/President
		    			     and Chief Executive Officer

Gary W. Meader      51        1976           Chief Financial Officer/Treasurer

Robert L. Fincher   55        1979           Senior Vice President


Each of the foregoing executive officers has been an officer with the Company
or its affiliates, Mutual and Shield, during the previous five years.

Officers are elected at the meeting of the Board of Directors following the
Annual Meeting of Shareholders to serve for one year or until their successors
are elected.



ITEM 11.  EXECUTIVE COMPENSATION
Cash Compensation

                       Summary Compensation Table

                                                Long Term Compensation
                                                ----------------------
                       Annual Compensation                      Shares
Name and                                         Restricted     Underlying
Principal Position     Year   Salary  Bonus      Stock Awards   Options(#)
---------------------------------------------------------------------------
J. Ridley Howard, CEO  1997  $33,000 $75,150       $88,087(1)
                       1996  $31,250               $96,427(1)       --
                       1995  $30,200 $30,800       $77,139(1)       --


Mr. Howard's salary is prorated among the Company, Mutual and Shield based
upon the premium income of each entity.

(1) The aggregate restricted stock holdings at the end of 1997 for Mr. Howard
    were 50,405 shares (adjusted for the January 20, 1998 three-for-two
    stock split) with a value of $768,676, based upon the value of the
    Company's common stock at the end of 1997.  Dividends on stock
    awards are paid at the same rate as paid to all share owners.  All
    restrictions on the 1995 grant will lapse and the shares will vest
    between April 23, 1998 and 2002.  All restrictions on 1996 grants will
    lapse and the shares will vest between February 27, 1999 and 2003.  All
    restrictions on 1997 grants will lapse and the shares wil vest between
    February 24, 2000 and 2004.


                                      39


                Aggregated Option Exercises in Last Fiscal Year
                                     and
                               FY-End Option Values

The following table shows stock options exercised by the named executive
officer during 1997, including the aggregate value of gains on the date of
exercise.  In addition, this table includes the number of shares covered by
both exercisable and non-exercisable options as of December 31, 1997.  Also
reported are the values for "In-the-Money" options, which represent the
positive spread between the exercise price of any such existing options and
the year end price of the Common Stock of the Company.

                                                            Value of
                                           Number of        Unexercised
                                           Unexercised      In-the-Money
		  Number of     Value      Options          Options at
		  Shares        Realized   12/31/97         12/31/97
		  Acquired on   Upon 	   Exercisable/     Exercisable/
Name 		  Exercise      Exercise   Unexercisable(1) Unexercisable
--------------------------------------------------------------------------

J. Ridley Howard                              33,769/0           415,021/0

(1) Adjusted for the January 20, 1998 three-for-two stock split.

Compensation Pursuant to Plans

Pension Plan

The Company is a participating employer in the Cotton States Employee
Retirement Income Plan (the "Plan"), which is a qualified pension plan
sponsored jointly with Mutual.  The Plan covers all of the Company's
salaried employees.  The Plan as adopted, was amended and restated effective
January 1, 1989 in order to bring it into compliance with the Tax Reform Act
of 1986.  The IRS made a favorable determination for continued qualification,
approving the amended Plan on January 5, 1995.

The Plan provides a retirement income benefit at age 65 which is based on the
employee's number of years of service (maximum 35 years) and average earnings
during the five consecutive years (in the last 10 years of employment) in
which the earnings are highest.  Age 65 retirement benefit is derived as the
sum of (a) the product of the number of years of service times .85 percent of
average earnings and (b) the product of the number of years of service times
 .55 percent of "excess average earnings".  Excess average earnings is the
amount, if any, by which the average earnings for a participant exceeds the 35
year average maximum social security taxable wage base for all persons born in
the same year as the participant.  The Plan also provides an early retirement
benefit after age 55, with no reduction in benefit entitlement due to age,
when the sum of the employee's age and years of credited service equals or
exceeds 85.  If the employee has not obtained 85 points at retirement, the
benefits are reduced 5 percent for each year the retiree's age is less than
65.  The Plan also contains a death benefit for the surviving spouse of an
employee (who had at least five years of credited service) which is equal to
50 percent of the deceased employee's accrued benefit.  If the death occurs
after termination from employment and prior to an early retirement date, the
spouse's benefit is reduced as for early retirement income benefits.  Accrued
benefits under the Plan vest after the employee accrues five years of service.

                                      40

Supplemental Executive Retirement Plan

The Company adopted the Cotton States Supplement Executive Retirement Plan
("SERP") effective January 1, 1992 in order to provide for a supplement
pension plan to replace pension benefits which were affected as a result of
amendments to the Internal Revenue Code of 1986, as amended ("IRC").  The SERP
is an agreement between the Company and employees meeting the qualification
provisions of the SERP in which the Company provides benefits in excess of the
limitations on benefits imposed by the IRC regarding highly compensated
employees.  The SERP also replaces the pension accruals set forth under the
Plan as a result of the new benefit formulas mandated by the IRC which resulted
in amendments to the Plan.  The SERP incorporates all of the terms and
conditions of the Plan and future amendments to the Plan.

The following table sets forth the estimated annual benefits payable upon
retirement at age 65 under the plans.

    PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN INCOME
          ANNUAL BENEFITS PAYABLE UPON RETIREMENT AT AGE 65

Final Average Remuneration from
the Company and Mutual for the           Years of Service with the
highest five years                           Company and Mutual
                                  15          20         25       30
         $120,000              $26,019     34,692     43,365   52,038
         $140,000               31,019     41,359     51,698   62,038
         $160,000               36,019     48,025     60,032   72,038
         $180,000               41,019     54,692     68,365   82,038
         $200,000               46,019     61,359     76,698   92,038
         $250,000               58,519     78,025     97,532  117,038
         $300,000               71,019     94,692    118,365  142,038
         $400,000               96,019    128,025    160,032  192,038
         $500,000              121,019    161,359    201,698  242,038

The benefits reflected in the preceding table are in addition to an employee's
social security benefits.

The estimated annual retirement benefits under the Plans for all executive
officers of the Company as a group from the participating companies aggregate
$550,796.  This estimate assumes no change from 1997 salaries, retirement at
age 65, and continuous employment with the Company.  Estimated annual
retirement benefits under the Plans attributable solely to service with the
Company cannot be stated due to the allocation of service and compensation
among the Company and its affiliates.

The Company is allocated its proportionate share of retirement costs for the
officers it shares with Mutual and Shield.

Incentive Savings Plan
The Company participates in the Cotton States Incentive Savings and
Investment 401(k) Plan (the "401(k) Plan").  The 401(k) Plan is a qualified
savings incentive plan sponsored by the same companies that sponsor the
Company's Plan.  The 401(k) Plan is open to all employees that have completed
one year of service and have reached their twenty-first birthday.  Eligible
employees may contribute from 2 percent to 10 percent of their compensation to
the 401(k) Plan.  The Company will make its matching contribution based only
on the first 6 percent of an employee compensation not to exceed a maximum
contribution of $9,500 per employee.  The match will be based on the return on
equity for all sponsoring companies.  The Company's contribution will not be
less than 20 percent nor more than 60 percent of the employees contribution
eligible for matching.  Employees are fully vested in the Company's
contribution after five years of service.  Employees are not permitted to
withdraw their account before age 59 1/2 except in the event of death,
disability, termination of employment or financial hardship.
                                      41
Incentive Stock Options
The Company has a qualified incentive stock option plan for its officers and
key employees and those of its subsidiaries, CSI and CSMRI (the "ISO Plan").
During 1997, no options were granted under the ISO plan.

During 1997, 934 options were exercised pursuant to the ISO Plan. At December
31, 1997, options to purchase 92,815 shares at $2.96 per share were
outstanding.

As of December 31, 1997, the following executive officers held options with
regard to the stated number of shares:
                                         Number of
            Name                     Options (Shares)
            J. Ridley Howard               33,769
            Robert L. Fincher              22,887
            Gary W. Meader                 26,265


Directors' Discounted Stock Option Plan
The Company has a Directors' Discounted Stock Option Plan (the "DSOP").  The
DSOP is designed to assist the Company in attracting, retaining and
compensating highly qualified individuals who are not employees of the Company
for service as members of the Board and to provide them with a proprietary
interest in the common stock of the Company.  The Board believes the DSOP will
be beneficial to the Company and its shareholders by encouraging and enabling
non-employee directors to have a personal financial stake in the Company, in
addition to emphasizing their common interest with the shareholders in
increasing the value of the common stock in the long term.

The DSOP provides for automatic yearly grants of options to purchase shares
of common stock of the Company to each director who elects to participate in
the DSOP.  Each director who is not an employee of the Company or any of its
subsidiaries or affiliates may participate by filing with the Company an
irrevocable election to receive the grant of a stock option in lieu of part or
all of the fees which the director would have been entitled to receive for the
immediately preceding year for his or her service on the Board.  Options will
be granted automatically on the date of the annual meeting of the Board as to
any director who, prior to the date of such annual meeting, has filed with the
Company the irrevocable election to participate in the DSOP.

The number of shares of common stock of the Company subject to each option
granted to a director shall be determined by dividing (I) the director's fee
due to a director, by (ii) the fair market value of the common stock of the
company  on the date of grant, minus the option exercise price.  The fair
market value of the common stock of the Company under the DSOP shall be the
closing price as reported on the Nasdaq National Market and the option
exercise price for each option granted shall be 50 percent of the fair market
value, on the date the option is granted, to be paid in cash by the director
upon exercise.  All options granted under the DSOP will expire 10 years after
the date of grant, subject to DSOP provisions relating to the retirement of
the director because of death, disability, or age.  That portion of an option
granted under the DSOP which is attributable to any portion of the directors'
fees which is not earned due to termination as a director, shall automatically
abate and be canceled.  In the event of the death of the holder of any
unexercised option, all of the holder's outstanding options will become
immediately exercisable upon the date of death by his or her legal
representative.  No option may be exercised under the DSOP before the 12 month
anniversary of the date of grant.

A total of 281,250 shares of Company common stock is reserved for issuance
under the Plan (subject to adjustment for subsequent stock splits, stock
dividends and certain other changes in the common stock of the Company).   The
Company has granted 35,309 options under the plan, including 13,911 options to
be granted automatically at the 1998 Annual Meeting.  Upon the exercise of an
option, the Company will issue authorized but unissued shares.  If an option
issued under the Plan is terminated or canceled without having been exercised,
the shares which were not purchased thereunder will again become available for
issuance under the Plan.
                                      42

Adjustments will be made in the number of shares subject to the DSOP and in the
purchase price of outstanding options in the event of any change in the number
of shares of common stock of the Company outstanding as a result of a stock
split or stock dividend, recapitalization, merger, consolidation, or other
similar corporate change.

Performance Share Awards Plan
The Company has adopted a Performance Share Awards Plan (the "PAR Plan").
The PAR Plan is designed to reward employees of the Company, its subsidiaries
and affiliates for services performed on behalf of the Company, to stimulate
employees' efforts on the Company's behalf, to encourage such employees to
remain with the Company, and to provide them with an ownership interest in the
common stock of the Company.  The Board believes the PAR Plan will be
beneficial to the Company and its shareholders by encouraging and enabling
employees to have personal financial stake in the Company.

The PAR Plan authorizes the Compensation Committee of the Board of Directors
to grant awards of shares of common stock of the Company to regular employees
of the Company designated by the Compensation Committee.   The Compensation
Committee may grant performance share awards in shares of the common stock if
the performance of the Company, or any subsidiary, division or affiliate of
the Company selected by the Compensation Committee meets certain goals
established by the Compensation Committee during an award period.  The
Compensation Committee would determine the goals, the maximum payment value of
an award, and the length of an award.  In order to receive payment, a
recipient of a performance share award must remain in the employ of the
Company until the completion of the award period, except that the Compensation
Committee may provide for a partial payment where it determines that an
exception is necessary or appropriate.

An aggregate of 281,250 shares of common stock of the Company is subject to
the PAR Plan.  Adjustments will be made in the number of shares subject to an
award in the event of any change in the number of shares of common stock
outstanding as a result of a stock split or stock dividend, recapitalization,
merger, consolidation, or other similar corporate change.  The Company has
granted 94,070 shares under the Plan.  In the event of a change of control of
the Company, as defined in the PAR Plan, all awards granted prior to the
change of control shall immediately vest and the shares subject to the award
shall be issued to the recipient of the award.


Other Compensation
Each executive officer is provided the use of one automobile by the Company,
Mutual and Shield, but is required to reimburse the Company, Mutual and Shield
for the personal use of the automobile.  Three officers are reimbursed for
country club dues.  The Company, Mutual and Shield are allocated these
expenses under the same formula on which salaries are prorated.  The total
cost of these expenses does not exceed 10 percent of any executive officer's
cash compensation.


Compensation of Directors
During 1997, no director of the Company received any remuneration from the
Company in his capacity as a director except for fees, or options to receive
common stock in lieu of fees pursuant to the DSOP, and reimbursement for
expenses incurred in connection with attending directors' and committee
meetings.  No director received cash compensation in excess of $19,300 for
his services as a director during 1997.  Each director, other than William W.
Gaston, III and J. Ridley Howard, is paid an annual stipend of $6,000.  Mr.
Gaston received an annual stipend of $10,000 in 1997.  Mr. Howard did not
receive an annual stipend in 1997.  In addition, each director was paid $700
plus travel expenses for each meeting of directors and $550 for each committee
meeting of directors attended.  Each committee member receives an additional
$2,000 as an annual stipend and each committee chairman receives $3,500 as an
annual stipend.  The aggregate directors' fees for 1997 totaled $114,150.
There were no retirement benefits accrued or set aside during the year for any
director for his services as director.  Upon reaching the mandatory retirement
age of 72, directors of the Company become directors emeritus and receive
stipends ranging from $600 to $4,000 annually for periods ranging from 15
years to life after the date of retirement.
                                      43

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

Security Ownership of Certain Beneficial Owners
The table below sets forth certain information about persons or entities
known by the Company to own beneficially more than 5 percent of the Company's
common stock, as of December 31, 1997.

                                                          Percent
Name and Address               Number of Shares Owned     of Class
-------------------            ----------------------     --------
Shield Insurance Company          2,198,385 (1)(2)          34.3
244 Perimeter Center Parkway
Atlanta, Georgia  30346

Marvin Schwartz                     595,192 (2)              9.3
605 Third Avenue
New York, New York 10158

(1) Shield Insurance Company is a wholly owned subsidiary of Mutual.
    The Board of Directors of Mutual is identical to the Board of Directors
    of the Company. (2) Adjusted for the January 1998 three-for-two stock split.


Security Ownership of Management
The following table sets forth certain information about beneficial
ownership of the Company's common stock of each director and executive officer
of the Company and directors and officers as a group as of January 1, 1998.
All shares are owned outright without shared voting and investment power
except as set forth below.  All share amounts have been adjusted to account
for the three-for-two stock split effective January 20, 1998.

                             Amount and Nature of
Name of Beneficial Owner     Beneficial Ownership    Percent of Class(1)
-----------------------      --------------------    -------------------
Directors
Carol D. Cherry                       375  (2)              N/A
Gaylord O. Coan                         0  (3)              N/A
Thomas A. Harris                      187  (4)              N/A
J. Ridley Howard                   25,100  (5)              N/A
F. Abit Massey                     12,757  (6)              N/A
Robert C. McMahan                   2,109  (7)              N/A
Mathews D. Swift                      375  (8)              N/A
E. Jenner Wood, III                 1,405                   N/A

Executive Officers

Robert L. Fincher                  12,018  (9)              N/A
Gary W. Meader                     20,280 (10)              N/A

All Officers and Directors as a Group
(16 persons)                       90,640 (11)              1.4




(1) All stock and all options have been adjusted for the 5 for 4 stock split
    effective April 30, 1997 and for the 3 for 2 stock split effective January
    20, 1998.  (2) Less than 1 percent not applicable.

(3) Does not include options to acquire 934 shares previously granted or
    options to acquire 1,706 shares to be granted automatically at the 1998
    Annual Meeting under the Directors' Discounted Stock Option Plan.

                                      44

(4) Does not include options to acquire 5,318 shares previously granted or
    options to acquire 3,272 shares to be granted automatically at the 1998
    Annual Meeting under the Directors' Discounted Stock Option Plan.

(5) Does not include options to acquire 3,763 shares previously granted or
    options to acquire 2,151 shares to be granted automatically at the 1998
Annual Meeting under the Directors' Discounted Stock Option Plan.

(6) Does not include options to acquire 33,769 shares previosuly granted
    under the Incentive Stock Option Plan or 50,405 shares plus accrured
    dividends awarded under the PAR Plan that have not vested.

(7) Does not include options to acquire 7,436 shares previously granted or
    options to acquire 3,418 shares to be granted automatically at the 1998
    Annual Meeting under the Directors' Discounted Stock Option Plan.

(8) Does not include options to acquire 3,867 shares previously granted or
    options to acquire 1,948 shares to be granted automatically at the 1998
    Annual Meeting under the Directors' Discounted Stock Option Plan.

(9) Does not include options to acquire 1,496 to be granted automatically at
    the 1998 Annual Meeting under the Directors' Discounted Stock Option Plan.

(10)Does not include options to acquire 22,887 shares under Incentive Stock
    Option Plan  or 10,443 shares plus accrued dividends awarded under the
    PAR Plan that have not vested.

(11)Does not include either options to acquire 26,265 shares under Incentive
    Stock Option Plan or 14,917 shares plus accrued dividends awarded under
    the PAR Plan that have not vested.

(12)Does not include either options to acquire 92,815 shares under Incentive
    Option plan, which would increase the percentage of outstanding shares for
    all officers and direcors as a group to 2.9 percent, or 94,068 shares plus
    accrued dividends awarded under the PAR plan that have not vested which
    would increase the percentage of outstanding shares for all officers and
    directors as a group to 4.3 percent.  Also does not include options to
    acquire 21,318 shares previously granted or options to acquire 13,991
    shares to be granted automatically at the 1998 Annual Meeting under the
    Directors' Discounted Stock Option Plan.

Changes in Control

         None.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others
Shield, which is wholly owned by Mutual, owns 2,198,385 shares (after giving
effect to the January 1998 three-for-two stock split) or 34.3 percent of the
outstanding Common Stock of the Company.  See Item 12.

Certain general expenses are allocated to the Company by Mutual.  These
expenses such as salaries, advertising, rents, and related expenses, represent
the Company's share of expenses initially paid by Mutual and are allocated
based on specific identification or, if indeterminable, generally on the basis
of each company's premium income.  Expenditures allocated to the Company
amounted to $2,467,408 in 1997.  See Item 1.

Gaylord O. Coan, a director of the Company, is CEO of Gold Kist Inc. ("Gold
Kist"), where he also serves as the Chairman of the Management Executive
Committee.  Gold Kist owns no stock of the Company.  The Company shares
offices with Mutual and Shield in a building owned by a partnership of Mutual
and Gold Kist.  The Company is not a partner in the partnership which owns the
building and has no equity interest in the building.

Gaylord O. Coan, a director of the Company, serves as a director of SunTrust
Banks, Inc., E. Jenner Wood, III, a director of the Company, serves as an
executive officer of SunTrust Banks, Inc.  SunTrust Banks, Inc., received fees
from the Company in 1997 for services rendered as the transfer agent of the
Company.  SunTrust Bank, Atlanta, a subsidiary of SunTrust Banks, Inc.,
received fees from the Company in 1997 for investment and custodial services
and leases of computer hardware.

                                      45

                                   PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.



Financial Statements

The following consolidated financial statements and independent auditors'
report have been incorporated by the reference in Part II, Item 8 of this
report:

       Independent Auditors' Report
       Consolidated Balance Sheets, December 31, 1997 and 1996
       Consolidated Statements of Earnings, Years ended
        December 31, 1997, 1996 and 1995
       Consolidated Statements of Shareholders' Equity, Years ended
        December 31, 1997, 1996 and 1995
       Consolidated Statements of Cash Flows, Years ended
        December 31, 1997, 1996 and 1995
       Notes to Consolidated Financial Statements


Financial Statement Schedules

The following consolidated financial statement schedules and independent
auditors' report thereon are included herein:

        Independent Auditors' Report on Financial Statement Schedules
        Schedule I - Consolidated Summary of Investments,
          December 31, 1997
        Schedule III - Supplementary Insurance Information,
          Years ended December 31, 1997, 1996 and 1995
        Schedule IV - Reinsurance, Years ended December 31, 1997,
          1996 and 1995

All other schedules are omitted as the required information is inapplicable,
or the information is presented in the consolidated financial statements or
related notes.


Exhibits

21.  Subsidiaries of the registrant.
23.  Consents of experts and counsel.
27.  Financial Data Schedule (for SEC only)
     All other exhibits are omitted as the required documents are
     inapplicable.



Report on Form 8-K

No report on Form 8-K was filed for the fourth quarter of 1997.

                                      46



The Board of Directors and Shareholders
Cotton States Life Insurance Company


Under date of February 24, 1998, we reported on the consolidated balance
sheets of Cotton States Life Insurance Company and subsidiaries (the
"Company") as of December 31, 1997 and 1996, and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
years in the three year period ended December 31, 1997, as contained in the
1997 annual report to shareholders.  Those consolidated financial statements
and our report theron are incorporated by reference in the annual report on
Form 10-K for the year 1997.  In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related financial statements and schedules as listed in item 14.  The
financial statement schedules are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.



/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Atlanta, Georgia

February 24, 1998


                                      47




                                                                  Schedule I


         Cotton States Life Insurance Company and Subsidiaries
                  Consolidated Summary of Investments
                           December 31, 1997

<TABLE>
<CAPTION>
                                                            Amount at which
                                                             shown on the
<S>
Type of Investments                                 Cost         Value      Balance Sheet
                                                 ---------- --------------- -------------
Fixed maturities, held for investment:
 Bonds:
   United States government and government
    <S>                                         <C>            <C>             <C>
    agencies and authorities                    $ 1,497,025    1,530,000       1,497,025
      Foreign governments                         1,990,736    2,120,000       1,990,736
      Public utilities                            4,850,921    4,891,500       4,850,921
      All other corporate bonds                   9,765,758   10,067,144       9,765,758
                                                 ----------   ----------      ----------
     Total fixed maturities held for investment  18,104,440   18,608,644      18,104,440

Fixed maturities, available for sale:
 Bonds:
   United States government and government
    agencies and authorities                      9,296,474    9,531,395       9,531,395
      Foreign governments                         2,035,550    2,050,000       2,050,000
      Public utilities                            8,561,436    8,794,895       8,794,895
      All other corporate bonds                  69,644,761   71,514,981      71,514,981
                                                 ----------   ----------      ----------
      Total fixed maturities available for sale  89,538,221   91,891,271      91,891,271

First mortgage loans on real estate               4,215,962    4,325,740       4,215,962

Policy loans                                      7,976,103    7,976,103       7,976,103

Short-term investments                            3,755,294    3,755,294       3,755,294
                                                -----------  -----------     -----------
      Total investments                        $123,590,020  126,557,052     125,943,070
                                                ===========  ===========     ===========
See accompanying auditors report.
</TABLE>

                                      48
                                                                Schedule III


         Cotton States Life Insurance Company and Subsidiaries
                  Supplementary Insurance Information
                       December 31, 1997 and 1996



                         Deferred                    Policy
                         Policy         Future       Claims and
                         Acquisition    Policy       Benefits
Segment                  Costs          Benefits     Payable
                         -----------    --------     ----------

At December 31, 1997

   Individual            $29,842,783  104,222,549     1,306,308
   Group                           -       46,734        50,000
                               -----       ------        ------
   Total                 $29,842,783  104,269,283     1,356,308
                          ==========  ===========     =========

At December 31, 1996

   Individual            $26,790,307   96,889,885     1,115,782
   Group                           -       45,775       203,634
                               -----       ------       -------
   Total                 $26,790,307   96,935,660     1,319,416
                          ==========   ==========     =========

                                      49

                                                          Schedule III - Cont.

             Cotton States Life Insurance Company and Subsidiaries
                      Supplementary Insurance Information
                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                               <S>
                               Premium                                                Amortization
                               Income and     Net           Brokerage     Benefits    of Policy       Other
                               Other          Investment    and Other     and         Acquisition     Operating
                               Consideration  Income (1)    Income        Claims      Costs           Expenses
                               -------------  ----------    ---------     --------    -----------     ---------

Year ended December 31, 1997

  <S>                          <C>             <C>                      <C>             <C>            <C>
  Individual insurance         $16,946,473     8,029,366                11,214,540      2,271,407      5,182,057
  Group Insurance                  673,711                                 726,049                        10,424
  Brokerage and
    other income                                 137,733     3,141,695                                 1,047,407
                                 ---------       -------     ---------   ---------      ---------      ---------
     Total                     $17,620,184     8,167,099     3,141,695  11,940,589      2,271,407      6,239,888
                                ==========     =========     =========  ==========      =========      =========

Year ended December 31, 1996

  Individual insurance         $14,688,373     7,591,541                10,326,754      2,421,587      4,583,369
  Group Insurance                  712,170                                 696,986                        11,224
  Brokerage and
    other income                                  81,172     1,785,761                                   695,943
                                  --------        ------     ---------    --------       --------        -------
     Total                     $15,400,543     7,672,713     1,785,761  11,023,740      2,421,587      5,290,536
                                ==========     =========     =========  ==========      =========      =========

Year ended December 31, 1995

  Individual insurance         $12,237,178     7,161,989                 8,936,276      1,475,963      4,513,330
  Group Insurance                2,824,363                               2,705,781                        77,590
  Brokerage and
    other income                                             1,652,046                                   839,181
                                  --------     ---------     ---------    --------        -------        -------
     Total                     $15,061,541     7,161,989     1,652,046  11,642,057      1,475,963      5,430,101
                                ==========     =========     =========  ==========      =========      =========
</TABLE>
                                      50


(1) Net investment income is allocated to the insurance segments based upon
 the relative cash flow of each segment.  Net investment income includes
 realized investment gains (losses).

See accompanying auditors report.
                                      50

                                                                   Schedule IV


              Cotton States Life Insurance Company and Subsidiaries
                                   Reinsurance
                  Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
                                                                                         Percentage
                                                <S>
                                                Ceded to      Assumed                     of Amount
                                  Gross         Other         from Other       Net        Assumed
                                  Amount        Companies     Companies(1)     Amount     to Net(1)
                                 -------        ---------     -----------      ------     ----------

Year ended December 31, 1997

  <S>                        <C>               <C>            <C>           <C>               <C>
  Life insurance inforce     $ 3,845,361,000   936,616,000    700,173,000   3,608,918,000     19.4
                               -------------   -----------    -----------   -------------     ----
  Premiums:
    Life insurance(2)        $    18,027,701     1,248,034        666,034      17,445,701
    Accident/health insurance        219,228        44,745                        174,483
                                     -------        ------        -------         -------
     Total                   $    18,246,929     1,292,779        666,034      17,620,184
                                  ==========     =========        =======      ==========

Year ended December 31, 1996

  Life insurance inforce     $ 3,533,033,000   884,504,000    705,066,000   3,353,595,000     21.0
                               -------------   -----------    -----------   -------------     ----
  Premiums:
    Life insurance(2)        $15,594,122         1,071,077        712,170      15,235,215
    Accident/health insurance    205,531            40,203           -            165,328
                                 -------            ------        -------         -------
     Total                   $15,799,653         1,111,280        712,170      15,400,543
                              ==========         =========        =======      ==========
Year ended December 31, 1995

  Life insurance inforce     $3,257,632,000    801,111,000    639,487,000   3,096,008,000     20.7
                              -------------    -----------    -----------   -------------     ----
  Premiums:
    Life insurance(2)        $12,764,204           726,383        677,928      12,715,749
    Accident/health insurance  2,703,434           357,642             -        2,345,792
                               ---------           -------        -------      ----------
     Total                   $15,467,638         1,084,025        677,928      15,061,541
                              ==========         =========        =======      ==========

(1)  All reinsurance assumed results from participation in federally sponsored
     group pools.

(2)  Includes mortality and expense charges earned on universal life contracts.

See accompanying auditors report.
</TABLE>
                                      51






                 SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


COTTON STATES LIFE INSURANCE COMPANY



John Ridley Howard      02/25/98         Gary Warrington Meader   02/25/98
--------------------------------         ---------------------------------
Chairman of the Board of Directors/      Chief Financial and Accounting Officer
President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


Carol Dreadin Cherry    02/25/98           Francis Abit Massey     02/25/98
--------------------------------           --------------------------------
Director			           Director


Gaylord Owen Coan       02/25/98           Robert Chandler McMahan  02/25/98
--------------------------------           ---------------------------------
Director                                   Director


Thomas Ashley Harris    02/25/98           Mathews Dismuke Swift    02/25/98
--------------------------------           ---------------------------------
Director                                   Director


John Ridley Howard      02/25/98           Edward Jenner Wood, III  02/25/98
--------------------------------           ---------------------------------
Director                                   Director



                                        52