|UNITED
      STATESSECURITIES AND EXCHANGE COMMISSIONWashington,
      D.C. 20549                                                                                                                                                                                                                          
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|FORM 10-Q                                                                                                                                                                                                                                                                                                  
|(Mark One)                                                                                                                                                                                                                                                                                                 
|[X] Quarterly report pursuant to Section 13 or 15(d)
      of the Securities Exchange Act of 1934. For the quarterly period ended
      September 30, 2001.                                                                                                                                                
|[ ] Transition report pursuant to Section 13 or
      15(d) of the Securities Exchange Act of 1934. For the transition period
      from N/A to N/A.                                                                                                                                                       
|Commission file number 333-02491*.                                                                                                                                                                                                                                                                         
|KEMPER INVESTORS LIFE INSURANCE COMPANY(Exact name of
      registrant as specified in charter)                                                                                                                                                                                                            
|ILLINOIS(State of Incorporation)                                                                                                                                                                                                                                                                           
|36-3050975(I.R.S. Employer Identification
      Number)                                                                                                                                                                                                                                                    
|1600 McCONNOR PARKWAYSCHAUMBURG, ILLINOIS(Address
      of Principal Executive Offices)                                                                                                                                                                                                                    
|60196-6801(Zip Code)                                                                                                                                                                                                                                                                                       
|Registrant's telephone number, including area code: (847)
      874-4000                                                                                                                                                                                                                                   
|1 KEMPER DRIVELONG GROVE, ILLINOIS 60049-0001 (Former
      Address of Principal Executive Offices)                                                                                                                                                                                                        
|Indicate by check mark whether the registrant (1) has filed all reports
      required to be filed by Section 13 or 15(d) of the Securities
      Exchange Act of 1934 during the preceding 12 months and (2) has been
      subject to such filing requirements for the past 90 days.
      Yes  X      No
|As of November 1, 2001, 250,000 shares of common stock (all held by an
      affiliate, Kemper Corporation) were outstanding. There is no market value
      for any such shares.                                                                                                                          
|* Pursuant to Rule 429 under the Securities Act of 1933, this Form 10-Q also relates to Commission file numbers 333-22389, 333-32632 and 333-54252.                                                                                                                                                        







KEMPER INVESTORS LIFE INSURANCE COMPANYFORM 10-Q







|PART I. FINANCIAL
    STATEMENTS                                                                                                                                                                                                                                   | PAGE NO.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------
|Consolidated Balance Sheets -   September 30, 2001
      and December 31,2000............................                                                                                                                                                          | 3-4     
|Consolidated Statements of Operations -   Nine
      months and three months ended September 30, 2001 and
    2000.....                                                                                                                                            | 5       
|Consolidated Statements of Comprehensive Income
      -   Nine months and three months ended September 30,
      2001 and 2000.....                                                                                                                                | 6       
|Consolidated Statements of Cash Flows -   Nine
      months ended September 30, 2001 and
    2000......................                                                                                                                                            | 7-8     
|Notes to Consolidated Financial
      Statements............................                                                                                                                                                                                       | 9       
|Management's Discussion and Analysis   Results of
      Operations..............................................   Investments........................................................   Liquidity
      and Capital Resources.................................... | 121821  
|PART II. OTHER INFORMATION                                                                                                                                                                                                                                         |         
|ITEM 4. Submission of Matters to a Vote of Security
      Holders..........                                                                                                                                                                                        | 23      
|ITEM 6. Exhibits and Reports on Form
      8-K.............................                                                                                                                                                                                        | 23      
|Signatures............................................................                                                                                                                                                                                             | 24      















-2-



Kemper Investors Life Insurance Company and SubsidiariesConsolidated
Balance Sheets(in thousands, except share data)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                      | September
      302001(unaudited)------------                                                                                                          | December 312000-----------                                                                                                                     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------
|ASSETSInvestments:  Fixed maturities, available for
      sale, at fair value    (amortized cost: September
      30, 2001, $3,200,096; December 31, 2000,
      $3,189,719)  Equity securities (cost: September 30, 2001 and
      December 31, 2000, $65,473)  Short-term
      investments  Joint venture mortgage
      loans  Third-party mortgage loans  Other real
      estate-related investments  Policy
      loans  Other invested assets | $
      3,280,895            68,051      50,601      67,620      64,615       8,233     245,973      22,696  ----------                                | $
      3,157,169            63,879      15,900      67,473      63,476       9,468     256,226      21,792  ----------                        
|Total investments                                                                                                                                                                                                                                                                                                                                                                                                                                     | 3,808,684                                                                                                                                              | 3,655,383                                                                                                                                      
|CashAccrued investment incomeReinsurance
      recoverableDeferred insurance acquisition costsValue of business
      acquiredGoodwillOther intangible assetsDeferred income
      taxesFederal income tax receivableReceivable on sales of
      securitiesOther assets and receivablesAssets held in separate
      accounts                                                                                                                        | 27,933     137,675     242,804     319,720      69,693     181,605       6,450   
        88,32331,318       2,100      21,084  11,651,428 ----------- | 34,101     134,585     310,183     240,801      95,621     191,163       4,531     120,7818,803       8,286      22,766  11,179,639 -----------
|Total assets                                                                                                                                                                                                                                                                                                                                                                                                                                          | $ 16,588,817 ===========                                                                                                                               | $ 16,006,643 ===========                                                                                                                       
|LIABILITIES AND STOCKHOLDER'S EQUITYLiabilities:Future policy
      benefitsOther policyholder benefits and funds payableOther
      accounts payable and liabilitiesLiabilities related to separate
      accounts                                                                                                                                                                                                                                   | $
      3,588,651     430,368     114,638  11,651,428 -----------                                                                                      | $
      3,588,140     399,585     109,152  11,179,639 -----------                                                                              
|Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                     | 15,785,085 -----------                                                                                                                                 | 15,276,516 -----------                                                                                                                         

-3-



Kemper Investors Life Insurance Company and SubsidiariesConsolidated
Balance Sheets (continued)(in thousands, except share data)

|                                                                                                                                                                                                                                                              | September
      302001(unaudited)------------          | December 312000-----------                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | -------------------------------------------------------
|Commitments and contingent liabilitiesStockholder's
      equity:Capital stock-$10 par value, authorized 300,000
      shares;  outstanding 250,000 sharesAdditional paid-in
      capitalAccumulated other comprehensive income (loss)Retained
      deficit | 2,500     804,347      45,673     (48,788) ----------- | 2,500     804,347     (32,718)     (44,002) -----------
|Total stockholder's equity                                                                                                                                                                                                                                    | 803,732 -----------                                    | 730,127 -----------                                    
|Total liabilities and stockholder's equity                                                                                                                                                                                                                    | $16,588,817 ===========                                | $16,006,643 ===========                                

See accompanying notes to consolidated financial
statements.





-4-

Kemper Investors Life Insurance Company and SubsidiariesConsolidated
Statements of Operations(in thousands)(unaudited)

|                                                                                                                                                                                                                                                                                                                                                                                                      | Nine Months
      Ended     September
      30 -------------------                                        | Three Months Ended    September
      30 -------------------                         
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                      | 2001 --------                                                                                             | 2000 --------                                                                        
|REVENUENet investment incomeRealized investment gains
      (losses)Premium incomeSeparate account fees and chargesOther
      income                                                                                                                                                                                                                                                                 | $186,271  12,058     283  49,988  25,845--------                                                          | $193,640 
       (823)  15,898  55,538  21,090--------                               
|Total revenue                                                                                                                                                                                                                                                                                                                                                                                         | 274,445--------                                                                                           | 285,343--------                                                                      
|BENEFITS AND EXPENSESInterest credited to policyholdersClaims
      incurred and other policyholder  benefitsTaxes, licenses
      and feesCommissionsOperating expensesDeferral of insurance
      acquisition costsAmortization of deferred
      insurance  acquisition costsAmortization of value of
      business acquiredAmortization of goodwillAmortization of other
      intangible assets | 118,524  16,833  
      6,858 122,382 50,053(114,532) 
      34,995  17,156   9,558    
      771-------- | 114,812  14,987  19,153 85,502 45,223 (81,532)  15,789  12,426   9,558    245--------
|Total benefits and expenses                                                                                                                                                                                                                                                                                                                                                                           | 262,598--------                                                                                           | 236,163--------                                                                      
|Income (loss) before income tax expense                                                                                                                                                                                                                                                                                                                                                               | 11,847                                                                                                    | 49,180                                                                               
|Income tax expense
      (benefit) Current Deferred                                                                                                                                                                                                                                                                                                                                                   | (5,157)   8,790--------                                                                                   | 20,162  (1,141)--------                                                              
|Total income tax expense (benefit)                                                                                                                                                                                                                                                                                                                                                                    | 3,633--------                                                                                             | 19,021--------                                                                       
|Net income (loss)                                                                                                                                                                                                                                                                                                                                                                                     | $  8,214========                                                                                          | $ 30,159========                                                                     



See accompanying notes to consolidated financial statements.





-5-

Kemper Investors Life Insurance Company and SubsidiariesConsolidated
Statements of Comprehensive Income (in thousands)(unaudited)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Nine Months Ended    September
      30------------------ | Three Months Ended    September
      30------------------
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ----------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2001--------                                              | 2000--------                                              
|Net income (loss)Other comprehensive income (loss), before
      tax: Unrealized holding gains (losses) on   investments
      arising during period:   Unrealized holding gains on
      investments   Adjustment to value of business
      acquired   Adjustment to deferred insurance
      acquisition    costs                                                                                                                                                                                                                                                                      | $
      8,214 97,914 (9,581)   (704)-------               | $30,15911,398 (2,754) (1,955)-------                      
|Total unrealized holding
      gains on      investments arising during
      period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 87,629-------                                             | 6,689-------                                              
|Less reclassification adjustments for itemsincluded in net income
      (loss):  Adjustment for gains included
      in realized   investment gains
      (losses)  Adjustment for amortization of premium
      on   fixed maturities included in net
      investment   income  Adjustment for (gains)
      losses included   in amortization of value of
      business acquired  Adjustment for (gains) losses included in
        amortization of deferred insurance acquisition
      costs    Total reclassification adjustments
      for items     included in net
      income | (9,227) (4,307)   (809)    (86)-------  (14,429)-------   | (10,058) (3,537)    187 (1,756)-------  (15,164)-------   
|Other comprehensive income, before  related income tax
      benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 102,058                                                   | 21,853                                                    
|Related income tax expense (benefit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 23,667-------                                             | (1,100)-------                                            
|Other comprehensive income, net of tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 78,391-------                                             | 22,953-------                                             
|Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $86,605=======                                            | $53,112=======                                            







-6-

Kemper Investors Life Insurance Company and SubsidiariesConsolidated
Statements of Cash Flows(in thousands)(unaudited)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Nine Months Ended
                 September
      30     ------------------------                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 2001     --------                                                                                                                                                                           
|Cash flows from operating activities  Net
      income  Reconciliation of net income to net cash
      provided:    Realized investment (gains)
      losses    Interest credited and other
      charges    Deferred insurance acquisition costs,
      net    Amortization of value of business
      acquired    Amortization of
      goodwill    Amortization of net discount/premium
      on investments    Amortization of other intangible
      assets    Deferred income
      taxes    Net change in current federal income
      taxes    Benefits and premium taxes due related to
      separate     account business-owned life
      insurance    Payable to
      affiliates    Other, net | $    
      8,214     (12,058)     124,529     (79,537)      17,156       9,558       4,307         771     
      8,792     (22,515)
      29,679     (28,663)     
      3,296  ----------
|Net cash flow from operating
      activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 63,529  ----------                                                                                                                                                                          
|Cash flows from investing activities  Cash from
      investments sold or matured:    Fixed maturities
      held to maturity    Fixed maturities sold prior to
      maturity    Equity
      securities    Mortgage loans, policy loans and
      other invested     assets
      Cost of investments purchased or loans
      originated:    Fixed
      maturities    Equity
      securities    Mortgage loans, policy loans and
      other
      invested     assets    Investment
      in subsidiaries    Short-term investments,
      net    Net change in receivable and payable for
      securities     transactions    Net
      change in other assets                                       | 137,668   1,117,769        -     
      45,853      (1,258,585)        -     (33,332)        (748)     (34,701)      28,212       
      (227)  ----------                                  
|Net cash from investing
activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 1,909  ----------                                                                                                                                                                           





-7-

Kemper Investors Life Insurance Company and SubsidiariesConsolidated
Statements of Cash Flows (continued)(in thousands)(unaudited)

|                                                                                                                                                             | Nine Months Ended
                 September
      30     ------------------------
|------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------
|                                                                                                                                                             | 2001     --------                                                                 
|Cash flows from financing activities  Policyholder
      account
      balances:    Deposits    Withdrawals  Dividends
      paid to parent  Cash overdrafts | 506,576    (563,214)     (13,000)     
      (1,968)  ----------                  
|Net cash used in financing activities                                                                                                                        | (71,606)  ----------                                                              
|Net increase (decrease) in cashCash, beginning of
      periodCash, end of period                                                                            | (6,168)      34,101  ---------- $    27,933  ==========                           

See accompanying notes to consolidated financial statements.























-8-

Kemper Investors Life Insurance Company and SubsidiariesNotes to
Consolidated Financial Statements (unaudited)

1. Kemper Investors Life Insurance Company is incorporated under the
  insurance laws of the State of Illinois and is licensed in the District of
  Columbia and all states, except New York. Zurich Kemper Life Insurance Company
  of New York, a newly formed, wholly-owned subsidiary, received its license
  from the state of New York early in 2001 and began writing business in May of
  2001. Kemper Investors Life Insurance Company and its subsidiaries
  (collectively, "KILICO" or "the Company"), is a wholly-owned subsidiary of
  Kemper Corporation ("Kemper"), a non-operating holding company.
2. In the opinion of management, all necessary adjustments consisting of
  normal recurring accruals have been made for a fair statement of the results
  of KILICO for the periods included in these financial statements. These
  financial statements should be read in conjunction with the financial
  statements and related notes in the 2000 Annual Report on Form 10-K.
  The accompanying consolidated financial statements have been prepared in
  conformity with accounting principles generally accepted in the United States
  of America.
3. The Company, Federal Kemper Life Assurance Company ("FKLA"), Zurich Life
  Insurance Company of America ("ZLICA"), and Fidelity Life Association ("FLA"),
  operate under the trade name Zurich Life ("ZL"), formerly known as Zurich
  Kemper Life. For purposes of operating segment disclosure, Zurich Life also
  includes the operations of Zurich Direct, Inc., an affiliated direct marketing
  agency and excludes FLA, as it is a mutual insurance company owned by its
  policyholders.

Zurich Life is segregated by Strategic Business Unit ("SBU"). The SBU concept
has each SBU concentrate on a specific customer market. The SBU is the focal
point of Zurich Life because it is at the SBU level that Zurich Life can clearly
identify customer segments and then work to understand and satisfy the needs of
each customer. The contributions of Zurich Life's SBUs to consolidated revenues,
operating results and certain balance sheet data pertaining thereto, are shown
in the following tables on the basis of accounting principles generally accepted
in the United States of America.

Zurich Life is segregated into the Life Brokerage, Financial Institutions
("Financial"), Retirement Solutions Group ("RSG") and Direct SBUs. The SBUs are
not managed at the legal entity level, but rather at the Zurich Life level.
Zurich Life's SBUs cross legal entity lines, as certain similar products are
sold by more than one legal entity. The vast majority of KILICO's business is
derived from the Financial and RSG SBUs.







-9-

Summarized financial information for Zurich Life's SBUs are as follows:

As of and for the period ending September 30, 2001:(in
thousands)

|                                                                                                            | Life Brokerage                   | Financial                           | RSG                                  | Direct                  | Total                               
|----------------------------------------------------------------------------------------------------------- | -------------------------------- | ----------------------------------- | ------------------------------------ | ----------------------- | ------------------------------------
|Total revenuesNet income (loss)
      Future policy benefitsLiabilities
       related to separate accounts | $197,286$29,340$1,905,736$20,894 | $204,041$16,636$2,957,327$9,652,059 | $116,625$(1,711)$1,361,701$1,978,475 | $48,872$(487)$135,882$- | $566,824$43,778$6,360,646$11,651,428



|                                                                                                                                                                                                                                                                           | Revenue                          | Net
        Income  (Loss)   | Future  Policy Benefits         | Liabilities Related
      to  Separate  Accounts
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ---------------------------- | ------------------------------- | ------------------------------------------------
|Total revenue, net income, future policy benefits
      and liabilities related
      to separate accounts, respectively, of ZL from
      above:                                                                                                                          | $  566,824                       | $ 43,778                     | $6,360,646                      | $11,651,428                                     
|Less: Revenue, net income &
      selected  liabilities of FKLA Revenue, net
      income & selected  liabilities of
      ZLICA Revenue, net loss &
      selected  liabilities of Zurich Direct Totals
      per the
      Company's  consolidated financial  statements | 214,617    45,201 32,561$274,445 | 28,276  14,983 (7,695)$8,214 | 2,409,806   362,189 -$3,588,651 | -      - -$11,651,428                           



As of and for the period ending September 30, 2000:(in
thousands)

|                                                                                                         | Life Brokerage                   | Financial                           | RSG                                | Direct                 | Total                               
|-------------------------------------------------------------------------------------------------------- | -------------------------------- | ----------------------------------- | ---------------------------------- | ---------------------- | ------------------------------------
|Total revenuesNet income (loss)Future
      policybenefitsLiabilities related to
      separate accounts | $258,228$26,403$2,004,252$24,510 | $177,518$19,097$2,551,464$8,445,984 | $117,428$8,399$1,491,148$2,821,904 | $47,885$1,739$58,482$- | $601,059$55,638$6,105,346$11,292,398



-10-



|                                                                                                                                                                                                                                                                           | Revenue                         | Net
        Income  (Loss)    | Future  Policy Benefits         | Liabilities Related
      to  Separate  Accounts
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | ----------------------------- | ------------------------------- | ------------------------------------------------
|Total revenue, net
      income, future policy benefits and
      liabilities related to separate accounts, respectively,
      of ZL from above:                                                                                                                          | $ 601,059                       | $ 55,638                      | $6,105,346                      | $11,292,398                                     
|Less: Revenue, net income &
      selected  liabilities of FKLA Revenue, net
      income & selected  liabilities of
      ZLICA Revenue, net loss &
      selected  liabilities of Zurich Direct Totals
      per the Company's  consolidated
      financial  statements | 241,637   39,352 34,727$285,343 | 26,729   6,371 (7,621)$30,159 | 2,290,843   324,384 -$3,490,119 | -      - -$11,292,398                           





1. On April 1, 2001, the Emerging Issues Task Force pronouncement 99-20 (EITF
  99-20), Recognition of Interest Income and Impairment on Purchased and
  Retained Beneficial Interests in Securitized Financial Assets, became
  effective. EITF 99-20 establishes new income and impairment recognition
  standards for interests in many financial securitized assets.

Upon initial adoption of EITF 99-20, impairment losses are recognized as a
change in accounting principle. Impairment losses recognized after April 1, 2001
must be included in earnings. Impairment losses are recognized if the fair value
of the security is below book value and the net present value of expected future
cash flows is less than the net present value of expected future cash flows at
the most recent (prior) estimation date. Based on this impairment recognition
criteria, the Company recorded impairment losses of $7.3 million in the third
quarter of 2001 as part of realized investment gains (losses).













-11-

MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

Kemper Investors Life Insurance Company and subsidiaries (collectively,
"KILICO", "the Company", "we", "our" or "us") recorded net income of $8.2
million in the first nine months of 2001, compared with net income of $30.2
million for the first nine months of 2000.

The following table reflects the components of net income:

Net income(in millions)

|                                                                                                                                                                                         | Nine Months
      Ended       September
      30    -------------------
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------
|                                                                                                                                                                                         | 2001   -------                                                         
|Operating earnings before amortization of goodwill  and
      other intangiblesAmortization of goodwill and other
      intangiblesNet realized capital gains (losses)  Net
      income | $ 10.7    (10.3)      7.8    -----   $ 
      8.2    =====             



The largest driver of the negative variance to prior year relates directly to
the significant downturn in the stock market in 2001, compared to 2000. The
S&P 500 declined 21.2% through the first nine months of 2001, compared to a
decline of 2.1% through the same period of 2000. The market-related impacts
include accelerated amortization of DAC and VBA, Guaranteed Minimum Death
Benefit reserve increases and reductions in separate account fees, net of DAC
and VBA impacts. These results will vary with the performance of the stock
market over the remainder of the year.



















-12-

The following table reflects the major components of net realized capital
gains and losses included in net income:

Net realized capital gains (losses)(in millions)

|                                                                                                                                                                                                                       | Nine Months
      Ended     September
      30  ------------------       | Three Months Ended    September
      30 ------------------                        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | -----------------------------------------------------------------------------------
|                                                                                                                                                                                                                       | 2001 --------                                                            | 2000 --------                                                                      
|Fixed maturitiesFixed maturity writedownsEquity
      securitiesReal estate-related investments
      and otherRealized investment gains (losses)Income tax
      expense (benefit)Net realized capital gains (losses) | $ 18.8(7.3)    
      -     .5   ----   12.0    4.2   ---- $  7.8   ==== | $ (2.7)(2.0)     .2    3.7   ----   
      (.8)    (.3)   ---- $ 
      (.5)   ====

``

Operating earnings before amortization of goodwill decreased to $10.7 million
in the first nine months of 2001, compared with $40.5 million in the first nine
months of 2000. This decrease was primarily due to (including stock market
impacts):

- a decrease in spread revenue (net investment income less interest credited
  to policyholders)
- a decrease in premium income
- a decrease in separate account fees
- an increase in claims incurred and other policyholder benefits
- an increase in commissions and operating expenses, net of the deferral of
  insurance acquisition costs, and
- an increase in the amortization of deferred insurance acquisition costs
  and value of business acquired, offset by
- an increase in other income
- a decrease in taxes, licenses and fees, and
- a decrease in income tax expense.





-13-

The following table reflects our sales:Sales and reinsurance
assumed(in millions)

|                                                                                                                                                                                                            | Nine Months
      Ended     September
      30  ------------------ | Three Months EndedSeptember
      30 ------------------      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------------------------------------------------
|                                                                                                                                                                                                            | 2001 --------                                                      | 2000 --------                                                
|Annuities:  Variable  Fixed     Total
      annuities                                                                                                                                                       | $ 1,628.6    103.7  -------  1,732.3  -------                      | $  865.9   116.8 -------   982.7 -------                     
|Life insurance:  Separate account business-owned
      life   insurance ("BOLI")  Separate account
      variable universal   life insurance  Term
      life  Interest-sensitive
      life     Total life | 318.0          20.8       .9       .9  -------    340.6  -------   | 771.4    27.8    15.6      .7 
      -------   815.5  -------
|Total sales                                                                                                                                                                                                 | $ 2,072.9  =======                                                 | $1,798.2 =======                                             

Sales of annuity products consist of total deposits received, which are not
recorded as revenue within the consolidated statements of operations. Variable
annuity deposits, including deposits under the fixed account option, increased
$762.7 million in the first nine months of 2001, compared with the first nine
months of 2000. The increase in the variable annuity deposits is primarily due
to continued strong sales of our DESTINATIONS

Fixed annuity deposits decreased $13.1 million in the first nine months of
2001, compared with the first nine months of 2000, as certain investors seek out
a more competitive return on their investments during a time of declining
interest rates.

`The decrease in BOLI sales in 2001 was primarily due to the nature of the BOLI product - high dollar volume per sale, low frequency of sales.`

-14-

The following table reflects our assets under management:

Assets Under Management(in millions)



|                                                                                | September
      30     2001  ----------                                 | December
      31     2000  -----------                                 | September
      30     2000  ----------                          
|------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ----------------------------------------------------------------------- | -----------------------------------------------------------------
|General accountSeparate account - BOLISeparate account - non
      BOLI   Total | $   3,836.6     7,265.7     4,385.7    -------- $  15,488.0    ======== | $   3,689.5     6,905.9     4,273.7    -------- $  14,869.1    ======== | $  3,598.8    6,733.4    4,559.0   -------- $ 14,891.2   ========



Total assets under management increased $618.9 million from
December 31, 2000, to September 30, 2001, primarily reflecting the increase in
sales. The increase was somewhat mitigated by the depreciation in the equity
markets, as well as policyholder surrenders, withdrawals and death benefits for
the period.

Premium income decreased $15.6 million in the first nine months of 2001,
compared with the same period in 2000, mainly due to the recapture of a
reinsurance agreement by Federal Kemper Life Assurance Company ("FKLA") in the
fourth quarter of 2000.

Spread revenue decreased in the first nine months of 2001, compared with the
same period in 2000, due to a decrease in investment income and an increase in
interest credited to policyholders. The decrease in investment income was
primarily due to a declining invested asset base, excluding unrealized gains
(losses), and the reinvestment of 2000 and 2001 sales proceeds, maturities and
prepayments in lower yielding securities due to the lower interest rate
environment. The declining invested asset base is attributable to an increase in
acquisition expenses supporting the increase in sales, the transfer of assets to
FKLA related to the recaptured reinsurance agreement and dividends paid to the
parent
company.                                The
increase in interest credited in the first nine months of 2001, compared with
the same period in 2000, was due to an increase in average interest crediting
rates, primarily due to new business issued, as well as higher average
policyholder account balances.















-15-



Separate account fees and charges consist of the following as of September
30, 2001 and 2000:(in millions)

|                                                                                                                                                                                                                    | Nine Months Ended    September
      30 ------------------- | Three Months EndedSeptember
      30 -------------------
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | --------------------------------------------------------
|                                                                                                                                                                                                                    | 2001 --------                                               | 2000 -------                                            
|Separate account fees on non-BOLI variable life and
      annuitiesBOLI cost of insurance charges and fees -
      directBOLI cost of insurance
      charges- ceded(1)BOLI premium tax expense
      loads(2)Total | $ 49.5      117.8    (122.0)    4.7  ----- $ 50.0  =====    | $ 47.6      123.9    (131.3)   15.3  ----- $ 55.5  =====

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

(1)

(2)

Separate account fees on non-BOLI variable life and annuities increased in
the first nine months of 2001, compared with the first nine months of 2000,
primarily due to the volume of new sales during 2000 and 2001. This increase was
significantly offset by a decrease in fees related to the drop in the stock
market, as the fees are primarily asset-based.







-16-

Policyholder surrenders, withdrawals and death benefits were as
follows:(in millions)

|                                     | Nine Months
      Ended      September
      30   ------------------ | Three Months
      Ended      September
      30   ------------------
|------------------------------------ | -------------------------------------------------------------------- | ---------------------------------------------------------------------
|                                     | 2001  --------                                                       | 2000  --------                                                       
|General accountSeparate accountTotal | $ 287.1    368.3   ------  $ 655.4   ======                          | $ 452.4    308.9   ------  $ 761.3   ======                          



Reflecting the current interest rate environment and other competitive market
factors, we adjust our crediting rates on interest-sensitive products over time
in order to manage spread revenue and policyholder surrender and withdrawal
activity. Spread revenue can also improve over time by increasing investment
income.

General account surrenders, withdrawals and death benefits decreased $165.3
million in the first nine months of 2001, compared with the first nine months of
2000, reflecting a decrease in death benefits as well as a decrease in overall
surrenders and withdrawals as equity markets remained volatile. The decrease in
death benefits resulted primarily from the recapture of the reinsurance
agreement by FKLA, as previously mentioned.

Separate account surrenders, withdrawals and death benefits increased $59.4
million in the first nine months of 2001, compared with the first nine months of
2000. The increase is due to an $84.4 million surrender of a BOLI contract in
the first quarter of 2001.

Claims incurred and other policyholder benefits increased $1.8 million for
the period ended September 30, 2001, compared to the same period in 2000. The
increase is primarily due to an increase in reserves of $8.5 million over the
prior year. This increase in reserves is largely attributable to the stock
market downturn in 2001 and its related impact on the Guaranteed Minimum Death
Benefit feature offered on several of our products. The increase in reserves is
somewhat offset by a decrease in death benefits, as mentioned above.

Taxes, licenses and fees decreased $12.3 million in the first nine months of
2001, compared with the same period in 2000. The majority of the decrease is
attributable to the decline in BOLI premium over the same period.

Commissions expense and the deferral of insurance acquisition costs increased
in the first nine months of 2001, compared with the first nine months of 2000,
due to the higher level of sales, excluding BOLI. Commission expense related to
broker-dealer operations increased approximately $2.4 million in the first nine
months of 2001, compared with the same period in 2000, primarily due to the
inclusion of PMG's operating results, as mentioned earlier.



-17-



Amortization of deferred insurance acquisition costs and the value of
business acquired increased $23.9 million in the first nine months of 2001,
compared with the first nine months of 2000, primarily due to the decline in
market value of the separate account assets. This decline in market value was
driven by the downturn in the stock market, as previously mentioned. The decline
in value decreases estimated future gross profits and thereby accelerates
amortization of the capitalized expenses and value of business
acquired. Somewhat mitigating this increase is the expected future
profitability of new business written in 2001.

Operating expenses increased $4.8 million in the first nine months of 2001,
compared with the same period in 2000, primarily due to the inclusion of $2.7
million of operating expenses of the newly formed New York company in the first
nine months of 2001. Also contributing to the increase was an increase in
salaries and related benefits, the majority of which is due to the inclusion of
PMG's operating expenses, which increased approximately $1.5 million in the
first nine months of 2001, compared with the same period in 2000. Income
tax expense decreased in the first nine months of 2001, compared with the same
period in 2000, primarily due to the release of tax contingency reserves
previously established and the recognition of prior period federal and state tax
recoveries.



INVESTMENTS

Our principal investment strategy is to maintain a balanced, well-diversified
portfolio supporting the insurance contracts written. We make shifts in our
investment portfolio depending on, among other factors:

- our evaluation of risk and return in various markets
- consistency with our business strategy and investment guidelines approved
  by the board of directors
- the interest rate environment
- liability durations, and
- changes in market and business conditions.











-18-

Invested assets and cash(in millions)

|                                                                                                                                                                                                                                                                                                                                                           | September 30,
      2001   ------------------                                                                                                       | December 31,
      2000  ------------------                                                          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------
|Cash and short-term investmentsFixed
      maturities:  Investment
      grade:    NAIC (1) Class
      1    NAIC (1) Class 2  Below
      investment
      grade:    Performing    Non-performingEquity
      securitiesJoint venture mortgage loansThird-party mortgage
      loansOther real estate-related investmentsPolicy
      loansOther    Total | $     78        2,378      794          107
              2       68       68       65        8      246       23
         ------ $  3,837   ====== | 2.0%   62.0   20.7    2.8    
      -    1.8    1.8    1.7    0.2    6.4    0.6  -----  100.0%  =====

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

(1)



Fixed maturities

We carry our fixed maturity investment portfolio, which is considered
available for sale, at estimated fair value. The aggregate unrealized
appreciation is recorded as a component of accumulated other comprehensive
income (loss), net of any applicable income tax expense. The aggregate
unrealized appreciation on fixed maturities, net of tax, at September 30, 2001
was $52.5 million. The aggregate unrealized depreciation on fixed maturities at
December 31, 2000 was $32.6 million. We do not record tax benefits related to
aggregate unrealized depreciation on investments. Fair values are sensitive to
movements in interest rates and other economic developments and can be expected
to fluctuate, at times significantly, from period to period.

At September 30, 2001 investment-grade fixed maturities, cash and short-term
investments accounted for 84.7 percent of invested assets and cash,
compared with 83.9 percent at December 31, 2000.

At September 30, 2001, approximately 16.6 percent of investment-grade fixed
maturities were mortgage-backed securities, down from 18.9 percent at December
31, 2000, due to sales and paydowns during 2001. We plan to continue to reduce
our holdings of such investments over time.



-19-

Approximately 15.2 percent of the investment-grade fixed maturities at
September 30, 2001 consisted of corporate asset-backed securities, compared with
15.1 percent at December 31, 2000. The majority of investments in asset-backed
securities were backed by commercial mortgage-backed securities, home equity
loans, manufactured housing loans and collateralized loan and bond
obligations.



Real estate-related investments

The $140.5 million real estate portfolio, consisting of joint venture
and third-party mortgage loans and other real estate-related investments,
constituted 3.7 percent of cash and invested assets at September 30, 2001,
compared with $140.4 million, or 3.7 percent, at December 31, 2000.



Real estate outlook

Loans to a master limited partnership (the "MLP") between subsidiaries of
Kemper and subsidiaries of Lumbermens Mutual Casualty Company, a former
affiliate, amounted to $55.8 million (net of reserves) at September 30, 2001.
The MLP's underlying investment primarily consists of a water development
project located in California's Sacramento River Valley. On February 15, 2001,
the State of California's State Water Resources Control Board ("SWRCB") approved
the project's water right permit. The SWRCB issued the permit in July 2001.
Additional permits must be obtained before development on this project can
proceed. These additional permits are expected to be received during 2002. The
final resolution of this permit process will impact the long-term economic
viability of the project. Loans to the MLP were placed on nonaccrual status at
the beginning of 1999 to ensure that book value of the MLP did not increase over
net realizable value.

Troubled real estate-related investments consisted of loans on nonaccrual
status, before reserves and write-downs, totaling $85.3 million at September 30,
2001 and $86.3 million at December 31, 2000. Loans on nonaccrual status, after
reserves and write-downs, amounted to $63.3 million at September 30, 2001 and
$64.3 million at December 31, 2000.



Net investment income

Pre-tax net investment income totaled $186.3 million in the first nine months
of 2001, compared with $193.6 million in the first nine months of 2000. This
includes our share of operating gains and losses from equity investments in real
estate consisting of other income less depreciation, interest and other
expenses. Such operating results exclude interest expense on loans that are on
nonaccrual status.







-20-

Total foregone investment income before tax on both nonaccrual real
estate-related investments and nonperforming fixed maturities was as follows:



|                                                            | Nine Months
      Ended      September
      30   ------------------
|----------------------------------------------------------- | --------------------------------------------------------------------
|                                                            | 2001  --------                                                      
|Real estate-related investmentsFixed maturities
      Total | $  6.3    
      .7   ------  $ 
      7.0   ======                 



Foregone investment income is primarily due to certain real estate-related
investments that have been placed on nonaccrual status. Any increase in
nonperforming securities and either worsening or stagnant real estate
conditions, would increase the expected adverse effect on future investment
income and realized investment results.

Interest rates

In the first nine months of 2001, the Federal Open Market Committee lowered
the federal funds rate eight times in an attempt to stimulate the economy. The
declining interest rates contributed to an increase in unrealized fixed maturity
investment gains and, in general, lower investment income on the fixed maturity
portfolio as maturities, prepayments, sales and incoming cash flows are
reinvested in a lower interest rate environment. Interest rate fluctuations can
cause significant fluctuations in both future investment income and future
realized and unrealized investment gains and losses.



LIQUIDITY AND CAPITAL RESOURCES

We carefully monitor cash and short-term investments to maintain adequate
balances for timely payment of policyholder benefits, expenses, taxes and
policyholder's account balances. In addition, regulatory authorities establish
minimum liquidity and capital standards. The major ongoing sources of liquidity
are deposits for fixed annuities, investment income, separate account fees,
other operating revenue and cash provided from maturing or sold
investments.

`-21-

Ratings`

In September 2001, Standard & Poor's announced that it was
downgrading several insurance groups based on the potential catastrophic losses
from the September 11, 2001 terrorist attacks on the United States of America,
and the subsequent fall in equity markets. The Company was downgraded from "AA+"
to "AA", Standard & Poor's third highest rating. Our current ratings are as
follows:



Current Rating



A.M. Best Company . . . . . . . . . . . A+ (Superior)

Moody's Investors Service . . . . . . . Aa3 (Excellent)

Standard & Poor's . . . . . . . . . . . AA (Very Strong)







































PART II. OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security
Holders        At a Special
Meeting of the Sole Shareholder of KILICO held
on        January 2, 2001, the
following directors were
elected:           Martin
D. Feinstein,
Chairman           Gale
K.
Caruso           Frederick
L.
Blackmon           Eliane
C.
Frye           James
E.
Hohmann           Debra
P. Rezabek

At the Annual Meeting of the
Sole Shareholder of KILICO held
on        May 8, 2001, the following
directors were elected:

Martin D.
Feinstein,
Chairman           Gale
K.
Caruso           Frederick
L.
Blackmon           Eliane
C.
Frye           Debra
P.
Rezabek           George
Vlaisavljevich        At a
Special Meeting of the Sole Shareholder of KILICO held
on        June 28, 2001, an
amendment to the Amended Articles
of        Incorporation to change
the principal office address
was        approved and became
effective August 1, 2001.ITEM 6.  Exhibits and Reports on
Form
8-K.           (a)  EXHIBIT
INDEX.           No
exhibits were filed during the three months ended September
30,           2001.           (b)  REPORTS
ON FORM
8-K.           No
reports on Form 8-K were filed during the three
months           ended
September 30, 2001.











-23-



|Kemper Investors Life
      Insurance CompanyFORM 10-QFor the fiscal period ended September
      30,
      2001--------------------------------------------SIGNATURES
      Pursuant to the requirements of the Securities Exchange Act of 1934,
      the Registrant has duly caused this report to be signed on its behalf by
      the undersigned, thereunto duly authorized.
      Kemper Investors Life Insurance
      Company(Registrant)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date:Date:                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|By: /s/FREDERICK L.
      BLACKMON---------------------------------Frederick L.
      BlackmonExecutive Vice President, ChiefFinancial Officer and
      Director                                                                                                                                                                                                                                                                                 



























-24-