SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549




                                    FORM 10-Q

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

                         SECURITIES EXCHANGE ACT OF 1934



For the Quarterly Period Ended March 31, 2001
Commission File Number 2-39310


                        INTERCONTINENTAL LIFE CORPORATION
             (Exact Name of Registrant as specified in its charter)



       Texas                              22-1890938
(State of Incorporation)  (I.R.S. Employer Identification Number)


6500 River Place Blvd., Building I
Austin, Texas                                         78730
(Address of principal executive offices)           (Zip Code)

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

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

                           YES  X    NO

Number of common shares outstanding ($.22 Par Value) at end of period: 8,180,407


                                      - 1 -
<PAGE>

                           Forward-Looking Statements

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

                                      - 2 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES

                                      INDEX

                                                                     Page No.

Part I - Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets
     March 31, 2001 and December 31, 2000.................................. 4

Consolidated Statements of Income
     For the three month periods ended
     March 31, 2001 and March 31, 2000......................................6

Consolidated Statements of Cash Flows
     For the three month periods ended
     March 31, 2001 and March 31, 2000......................................7

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

Item 2. Management's Discussion and Analysis of
     Financial Conditions and Results of Operations........................10

Item 3. Quantitative and Qualitative Disclosures
     About Market Risk.....................................................19

Part II

Other Information..........................................................20

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

                                      - 3 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)

<TABLE>
<S>                                                                       <C>                 <C>
                                                                         March 31,            December 31,
                                                                           2001                   2000
ASSETS                                                                  (Unaudited)

Investments:
Fixed maturities, at amortized cost (market value
 approximates $1,014 and $1,386 at March 31,
 2001 and December 31, 2000)                                       $      1,002             $     1,386
Fixed maturities available for sale, at market value
 (amortized cost of $418,020 and $436,997 at
 March 31, 2001 and December 31, 2000)                                  427,360                 440,749
Equity securities, at market value (cost approximates
  $338 at March 31, 2001 and December 31, 2000)                           2,510                   1,764
Policy loans                                                             48,139                  48,449
Mortgage loans                                                            4,824                   4,858
Invested real estate and other invested
 assets                                                                  40,401                  32,969
Short-term investments                                                  143,530                 129,807
       Total investments                                                667,766                 659,982
Cash and cash equivalents                                                10,203                   9,066
Notes receivable from affiliates                                         33,812                  35,349
Accrued investment income                                                 8,552                   8,304
Accounts receivable and other receivables                                26,130                  24,340
Reinsurance receivables                                                  16,606                  17,448
Real estate occupied by the Company                                      20,086                  19,938
Property and equipment, net                                               5,032                   5,005
Deferred policy acquisition costs                                        40,323                  39,395
Present value of future profits of
 acquired businesses                                                     35,446                  36,024
Other assets                                                              7,731                   7,866
Separate account assets                                                 427,659                 444,898
       Total Assets                                                $  1,299,346             $ 1,307,615
</TABLE>


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

                                      - 4 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS, Continued
                            (in thousands of dollars)
<TABLE>
<S>                                                                       <C>                     <C>


                                                                       March 31,              December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY                                     2001                     2000
                                                                      (Unaudited)

Liabilities:
Policy liabilities and contractholder deposit funds:
Future policy benefits                                             $    128,371          $      130,325
Contractholder deposit funds                                            520,797                 520,349
Unearned premiums                                                         1,589                   1,589
Other policy claims and benefits payable                                 10,581                  10,801
                                                                        661,338                 663,064
Other policyholders' funds                                                2,584                   3,015
Deferred federal income taxes                                            29,384                  27,188
Other liabilities                                                        15,741                  10,045
Separate account liabilities                                            422,618                 440,127
    Total Liabilities                                                 1,131,665               1,143,439
Commitments and Contingencies

Redeemable preferred stock:
Class A Preferred, $1 par value,
 5,000,000 shares authorized, issued                                      5,000                   5,000
Class B Preferred, $1 par value,
 15,000,000 shares authorized, issued                                    15,000                  15,000
                                                                         20,000                  20,000
Redeemable preferred stock held in treasury                             (20,000)                (20,000)
                                                                             -0-                     -0-
Shareholders' Equity:
Common Stock, $.22 par value,  15,000,000 shares
 authorized; 10,883,478 and 10,859,478 shares
 issued, 8,180,407 and 8,129,385 shares outstanding in
 2001 and 2000, respectively                                              2,398                   2,389
Additional paid-in capital                                                4,745                   4,561
Accumulated other comprehensive income                                    7,482                   3,365
Retained earnings                                                       163,169                 163,998
                                                                        177,794                 174,313
Common treasury stock, at cost, 2,703,071 and
 2,730,093 in 2001 and 2000,  respectively                              (10,113)                (10,137)
Total Shareholders' Equity                                              167,681                 164,176
Total Liabilities and Shareholders' Equity                         $  1,299,346          $    1,307,615
</TABLE>

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

                                      - 5 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
              (in thousands of dollars, except for per share data)
                                   (unaudited)
<TABLE>
<S>                                                                   <C>                    <C>
                                                                          Three Months Ended
                                                                               March 31,
                                                                       2001                    2000

Revenues:

 Premium                                                           $   2,063               $   2,278
 Net investment income                                                12,337                  12,204
 Earned insurance charges                                              9,894                  10,149
 Other                                                                   643                     768
                                                                      24,937                  25,399
Benefits and expenses:
 Policyholder benefits and expenses                                    6,911                   7,353
 Interest expense on contract holders
  deposit funds                                                        7,391                   7,159
 Amortization of present value of future
  profits of acquired businesses                                         577                     966
 Amortization of deferred policy
  acquisition costs                                                      747                     694
 Operating expenses                                                    4,825                   4,129

                                                                      20,451                  20,301
Income from operations                                                 4,486                   5,098
Provision for federal income taxes                                     1,654                   1,867

Net income                                                         $   2,832               $   3,231

Net income per share
Basic:

Weighted average common stock
  outstanding                                                          8,160                   8,817
Basic earnings per share                                           $    0.35               $    0.37

Diluted:
 Common stock and common stock equivalents                             8,241                   8,824
Diluted earnings per share                                         $    0.34               $    0.37
</TABLE>

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

                                      - 6 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)
                                   (unaudited)
<TABLE>
<S>                                                                     <C>                  <C>

                                                                            Three Months Ended
                                                                                 March 31,
CASH FLOWS FROM OPERATING                                               2001                   2000
ACTIVITIES

Net Income                                                         $   2,832          $        3,231
Adjustments to reconcile net income to
 net cash provided by (used in) operating
 activities:

Amortization of present value of future
 profits of acquired businesses                                          577                     966
Amortization of deferred policy
 acquisition costs                                                       747                     694
Depreciation                                                             426                      59
Changes in assets and liabilities:
Increase in accrued investment income                                   (248)                   (803)
Decrease (increase) in agent advances and
 other  receivables                                                     (948)                  2,878
Policy acquisition costs deferred                                     (1,675)                 (1,513)
Decrease in policy liabilities and
 contractholder deposit funds                                         (1,726)                 (7,676)
(Increase) decrease in other policyholders' funds                       (431)                     13
Increase in other liabilities                                          5,696                   2,679
Increase in deferred federal income taxes                              2,196                   1,068
Decrease (increase) in other assets                                      135                   (800)
Deferred tax on change in comprehensive income                        (2,217)                     0
Accrual for shareholder dividends                                     (3,937)                     0
Other, net                                                              (120)                  (808)
Net cash provided by (used in) operating
 activities                                                        $   1,307               $    (12)

</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                      - 7 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)
                                   (unaudited)
<TABLE>
<S>                                                                 <C>                 <C>

                                                                       Three Months Ended
                                                                             March 31,
CASH FLOWS FROM INVESTING                                              2001                  2000
ACTIVITIES


Investments purchased                                              $ (26,524)              $(32,773)
Proceeds from calls and maturities of investments                     38,776                 12,384
Net change in short-term investments                                 (13,723)                27,267
Purchases and sales of equipment                                        (453)                   (72)
Decrease in notes receivable from affiliates                           1,537                  1,537
Net cash(used in) provided by investing activities                      (387)                 8,343

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock                                                -0-                (5,159)
Issuance of common stock                                                 217                     -0-
Net cash provided by (used in) financing activities                      217                 (5,159)
Net increase in cash and cash equivalents                              1,137                   3,172
Cash and cash equivalents, beginning of period                         9,066                   3,358
Cash and cash equivalents, end of period                           $  10,203               $   6,530
</TABLE>







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

                                      - 8 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The financial  statements  included herein have been presented to conform to the
requirements  of Form 10-Q.  This  presentation  includes year end balance sheet
data which was  derived  from  audited  financial  statements.  The notes to the
financial  statements do not  necessarily  include all  disclosures  required by
generally accepted accounting principles (GAAP). The reader should refer to Form
10-K for the year ended December 31, 2000  previously  filed with the Securities
and Exchange  Commission for financial  statements  prepared in accordance  with
GAAP.  Management  believes the  financial  statements  reflect all  adjustments
necessary to present a fair  statement of interim  results.  Certain  prior year
amounts have been reclassified to conform with current year presentation.

Other Comprehensive Income

The  following is a  reconciliation  of total  accumulated  other  comprehensive
income from December 31, 2000 to March 31, 2001 (in thousands):
<TABLE>
<S>                                        <C>                        <C>                       <C>

                                          Net unrealized
                                           gain on
                                           investments                                          Total
                                           in fixed                    Net                      accumulated
                                           maturities                  appreciation             other
                                           available for               of equity                comprehensive
                                           sale                        securities               income

Balance at December 31, 2000             $   2,438                  $      927                $     3,365
Current period change                        3,633                         484                      4,117
Balance at March 31, 2001                $   6,071                  $    1,411                $     7,482
</TABLE>


Dividends Declared

In March,  2001, ILCO announced that its board of directors approved the payment
of an annual cash  dividend in the amount of $.41 per share.  The  dividend  was
paid on April 12, 2001 to shareholders of record on March 19, 2001. The dividend
has been accrued in other liabilities on the consolidated balance sheet.

New Accounting Pronouncements

In  June,  1998,  the  FASB  issued  FAS No.  133,  'Accounting  for  Derivative
Instruments and Hedging Activities," which establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  (collectively  referred to as derivatives) and for
hedging  activities.  FAS No. 133, as amended by FAS No.  138,  "Accounting  for
Certain Derivative  Instruments and Certain Hedging Activities - An Amendment of
FASB  Statement No. 133", is applicable to financial  statements  for all fiscal
quarters of fiscal years  beginning  after June 15, 2000,  as amended by FAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the  Effective  Date of FAS No. 133".  As the Company does not have  significant
investments in derivative financial instruments, the adoption of FAS 133 did not
have a material  impact on the  Company's  results of  operations,  liquidity or
financial position.





                                      - 9 -
<PAGE>

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


       Results of Operations - Three Months Ended March 31, 2001 and 2000

For  the  three-month  period  ended  March  31,  2001,   InterContinental  Life
Corporation's  ("ILCO"  or the  "Company")  net  income  was  $2,832,000  (basic
earnings of $0.35 and diluted earnings of $0.34 per common share) as compared to
$3,231,000  (basic  earnings and diluted  earnings of $0.37 per common share) in
the first three months of 2000. Earnings per share are stated in accordance with
the requirements of FAS No. 128, which  establishes two measures of earnings per
share:  basic earnings per share and diluted earnings per share.  Basic earnings
per share is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding during the period.  Diluted
earnings per share reflect the potential dilution that would occur if securities
or other contracts to issue common stock were converted or exercised.

For the three-month  period ended March 31, 2001, ILCO's income from operations,
before  provision  for  federal  income  taxes was  $4,486,000  on  revenues  of
$24,937,000 as compared to income of $5,098,000 on revenues of  $25,399,000  for
the first three months of 2000.

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

Revenues.

Premium income, net of reinsurance, for the first three months of 2001 was $2.06
million,  as compared to $2.28 million for the first three months of 2000.  This
source of revenues is related to the  traditional  life insurance and accident &
health insurance book of business of ILCO's insurance subsidiaries. The decrease
from March 31, 2000 to March 31,  2001 is  attributable  to the  decrease of the
in-force face amounts of the  traditional  life  insurance book of business from
$131.7  million  at  March  31,  2000 to  $128.4  million  at  March  31,  2001.
Reinsurance  premiums  ceded were $0.15  million for the first  three  months of
2001,  as  compared  to $0.3  million  in the first  three  months of 2000.  The
decrease in the amount of  reinsurance  premiums  ceded is  consistent  with the
decrease in premium from the traditional business.

Net investment  income for the quarter ended March 31, 2001 was $12.3 million as
compared  to  $12.2  million  for the same  quarter  in 2000.  The  increase  in
investment  income is primarily  attributable  to the rental income derived from
the River Place Pointe properties being developed by a subsidiary of ILCO. Since
the properties were in developmental stage during the first quarter of 2000, the
project did not contribute to investment income for that period. The increase in
rental income was partially  offset by a lower level of interest income received
on fixed income and short-term investments.

                                     - 10 -

<PAGE>

Earned  insurance  charges for the three month  period ended March 31, 2001 were
$9.89 million,  as compared to $10.15 million for the same period in 2000.  This
source of revenues is related to the universal  life  insurance and annuity book
of business of the insurance subsidiaries of the Company. The decrease in income
from earned  insurance  charges is attributable to a decrease in the face amount
of in- force  universal  life  insurance  policies.  The face amount of in force
universal life policies was $4.86 billion at March 31, 2000 as compared to $4.60
billion at March 31,  2001.  The  decline in earned  insurance  charges was also
affected by a slight  decrease in the amount of  surrender  charges  received in
connection  with  policy  surrenders  and  partial   withdrawals  from  in-force
policies.

Benefits and Expenses.

Policyholder  benefits and  expenses  for the quarter  ended March 31, 2001 were
$6.91  million,  as  compared to $7.35  million for the quarter  ended March 31,
2000.  The decline is primarily  attributable  to a decrease in benefits paid to
policyholders in connection with the surrender of policies.

Interest  expense on contract  holders  deposit  funds was $7.39 million for the
quarter ended March 31, 2001, as compared to $7.16 million for the quarter ended
March 31, 2000.  This expense  reflects  increases or decreases in cash value or
interest rates of the universal life and annuity books of business. The increase
from the first quarter of 2000 to the first quarter of 2001 reflects higher cash
values of in- force life insurance and annuity policies as of March 31, 2001.

The expense  related to the  amortization  of present value of future profits of
acquired businesses was $0.58 million for the three-month period ended March 31,
2001, as compared to $0.97 million for the same period ended March 31, 2000. The
decrease for the first quarter of 2001 is in line with the expected amortization
of the remaining book of business.

The expense related to the amortization of deferred policy acquisition costs was
$0.75  million for the  three-month  period ended March 31, 2001, as compared to
$0.69  million for the same three month period in 2000.  The slight  increase in
amortization  of  deferred  policy  acquisition  costs  is  attributable  to the
continued  capitalization of expenses incurred in connection with the writing of
new business.

The  operating  expenses of the Company were $4.83 million for the quarter ended
March 31,  2001,  as compared to $4.13  million for the quarter  ended March 31,
2000.

The  provision  for federal  income taxes was $1.65 million in the quarter ended
March 31, 2001 as compared to $1.87 million in the quarter ended March 31, 2000.
The  decrease  is  primarily  attributable  to the lower  level of  income  from
operations.

For the three-month  period ended March 31, 2001, the lapse rate with respect to
universal life insurance  policies  decreased from the lapse rate experienced in
the similar period in 2000. The rate for the 2001 period was 4.86 %, as compared
to 6.96 % in the 2000  period.  The  lapse  rate  with  respect  to  traditional
(non-universal)  life  insurance  policies  slightly  increased  from the levels
experienced  in the first quarter of 2000. The rate for the  three-month  period
ended March 31, 2001 was 7.89 %, as compared to 7.88 % in the similar  period in
2000.  The lapse rates  experienced  during these periods were within the ranges
anticipated  by  management.

                                     - 11 -
<PAGE>

                        Liquidity and Capital Resources

Liquidity  describes the ability of a company to generate  sufficient cash flows
to meet the cash requirements of business operations.  ILCO is a holding company
whose  principal  assets consist of the common stock of Investors Life Insurance
Company of North America  ("Investors-NA")  and its  subsidiary - Investors Life
Insurance Company of Indiana ("Investors-IN").  Historically, our principal cash
flow  sources  have been from  periodic  payment of  principal  and  interest by
Investors-NA,  pursuant to the terms of the Surplus  Debentures.  In addition to
the need for cash flow to meet operating  expenses,  our liquidity  requirements
relate principally to the liabilities associated with our various life insurance
and annuity products.  Our product  liabilities  include the payment of benefits
under life  insurance  and  annuity  products,  as well as the payment of policy
surrenders, withdrawals and policy loans.

Prior to June 30, 2000,  ILCO's principal  source of liquidity  consisted of the
periodic  payment of  principal  and interest by  Investors-NA,  pursuant to the
terms of the Surplus  Debentures.  The Surplus Debentures were originally issued
by Standard Life Insurance  Company and their terms were previously  approved by
the Mississippi  Insurance  Commissioner.  In connection with the 1993 merger of
Standard Life into Investors-NA,  the obligations of the Surplus Debentures were
assumed by Investors-NA.  As of June 30, 2000, the outstanding principal balance
of the Surplus  Debentures  was completely  paid off. For periods  subsequent to
June 30, 2000, ILCO's available source of liquidity is dividends paid to it from
its subsidiaries. Applicable state insurance laws generally restrict the ability
of insurance companies to pay cash dividends in excess of prescribed limitations
without prior approval. The ability of Investors-NA to pay shareholder dividends
is and will  continue to be subject to  restrictions  set forth in the insurance
laws and  regulations  of  Washington,  its  domiciliary  state.  The Washington
insurance law limits how and when Investors-NA can pay shareholder  dividends by
including  the "greater  of" standard for payment of dividends to  shareholders,
and requiring  that prior  notification  of a proposed  dividend be given to the
Washington Insurance  Commissioner and that cash dividends may be paid only from
earned surplus.  Under the "greater of" standard,  an insurer may pay a dividend
in an amount equal to the greater of (i) 10% of the policyholder surplus or (ii)
the insurer's net gain from  operations  for the previous  year. As of March 31,
2001, Investors-NA had earned surplus of $60.7 million.

Investors-IN is domiciled in the State of Indiana.  Under the Indiana  insurance
code, a domestic insurer may make dividend  distributions  upon proper notice to
the  Department  of  Insurance,  as long as the  distribution  is  reasonable in
relation to adequate  levels of  policyholder  surplus and quality of  earnings.
Under Indiana law the dividend must be paid from earned  surplus.  Extraordinary
dividend  approval would be required where a dividend exceeds the greater of 10%
of  surplus  or the  net  gain  from  operations  for  the  prior  fiscal  year.
Investors-IN had earned surplus of $23.4 million at March 31, 2001.

                                     - 12 -

<PAGE>

ILCO's cash and cash equivalents at March 31, 2001 was $10.2 million as compared
to $9.07 million at December 31, 2000.  The $1.13  million  increase in cash and
cash  equivalents  at March 31,  2001 as  compared  to the year end 2000 was due
primarily to $1.8 million of funds  received from a tenant in River Place Pointe
for tenant improvement reimbursement related to the construction of their office
space.

ILCO's  net cash flow  provided  by (used  in)  operating  activities  was $1.31
million  for the  three-month  period  ended  March 31,  2001,  as  compared  to
$(12,000)  for the first  three  months of 2000.  The  change is  related  to an
increase in policy liabilities and  contractholder  deposit funds due to a lower
amount of surrendered policies.

The net cash  provided by (used in) financing  activities  was $0.22 million for
the quarter ended March 31, 2001, as compared to $(5.16) million for the quarter
ended March 31, 2000.  The cash used in financing  activities  for the year 2000
was attributable to ILCO's stock repurchase plan.

Net cash flow (used in) provided by investing  activities was $(0.39)million for
the three months ended March 31, 2001, as compared to $8.34 million for the same
period in 2000.  The decrease in cash flow provided by investing  activities was
due to  reinvestments in other invested assets during the first quarter of 2001,
whereas in the first quarter of 2000 the cash  provided by investing  activities
was used to finance the stock repurchases described above.

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

Investments.

As of March 31, 2001, the book value of the Company's  investment assets totaled
$667.77 million, as compared to $659.98 as of December 31, 2000. Total assets as
of March  31,  2001  ($1.30  billion)  decreased  slightly  from the level as of
December  31, 2000  ($1.31  billion).  The  increase  in  investment  assets was
primarily  attributable  to an increase in short-term  investments as well as an
increase  in  invested  real  estate  and other  invested  assets.  The level of
short-term  investments  at March 31, 2001 was $143.53  million,  as compared to
$129.81 million at the end of 2000. This increase was primarily  attributable to
new  investments  in short-term  assets.  Since interest rates were lower in the
first quarter of 2001,  long-term  investments that matured or were called early
were  primarily  reinvested  in  short-  term  investments,  avoiding  long term
investments at low interest rates.


                                     - 13 -
<PAGE>

As of March 31, 2001,  the market value of the fixed  maturities  available  for
sale  segment was $427.36  million as compared to an  amortized  cost of $418.02
million,  or  an  unrealized  gain  of  $9.34  million.  The  increase  reflects
unrealized  gains on such  investments  related  to changes  in  interest  rates
subsequent  to the  purchase  of such  investments.  To reduce the  exposure  to
interest rate changes,  portfolio  investments  are selected so that  diversity,
maturity  and  liquidity   factors   approximate   the  duration  of  associated
policyholder liabilities.  The net of tax effect of this increase ($6.07 million
at March 31, 2001) is included in "Accumulated other  comprehensive loss" on the
Consolidated Balance Sheets and has been recorded as a decrease in shareholders'
equity.  As required under the provisions of FAS No. 130, the  determination  of
"Accumulated other comprehensive income" includes separate identification of the
change in values which occurred during the current period.

Invested real estate and other invested  assets  increased from $33.0 million at
December  31,  2000 to $40.4  million as of March 31,  2001.  This  increase  is
related to the  development  of the River Place  Pointe  project  ("River  Place
Pointe") by Investors-NA.  In October, 1998,  Investors-NA purchased River Place
Pointe,  two adjoining  tracts of land located in Austin,  Texas totaling 47.995
acres. The aggregate purchase price for these tracts was $8.1 million.  Prior to
the closing of the transaction,  Investors-NA obtained a Site Development Permit
for the tracts from the City of Austin.  The Site Development  Permit allows for
the  construction of seven office  buildings  totaling 600,000 square feet, with
associated parking,  drives and related improvements.  Construction on the first
phase of the Project,  which  consists of two office  buildings,  an  associated
parking garage, and related infrastructure was completed during 2000. The second
phase of construction, which includes two more office buildings, is in progress.
Investors-NA  began receiving  rental income on the entire third building during
March,  2001 and expects  completion  of the remaining  office  building in this
phase by the end of May, 2001.

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

The Company's fixed maturities portfolio (including short-term investments),  as
of March  31,  2001,  included  a  non-material  amount  (0.7%  of  total  fixed
maturities and short-term  investments) of debt securities  which, in the annual
statements  of the  companies as filed with state  insurance  departments,  were
designated under the National  Association of Insurance  Commissioners  ("NAIC")
rating system as "3" (medium  quality) or below. For the year ended December 31,
2000, the comparable  percentage was also 0.7%.  This number is  attributable to
mortgage  bonds which the  Company's  insurance  subsidiaries  own in California
utilities,  which were downgraded to a "5" (lower quality) rating by the NAIC as
of December,  2000.  Investors-NA  owns mortgage bonds in Pacific Gas & Electric
which were  purchased for $1.031  million and had a market value as of March 31,
2001 of $830,000  and as of December  31,  2000 of  $720,000,  and owns bonds in
Southern  California  Edison which were  purchased  for $1.96  million and had a
market  value as of March 31, 2001 of $1.64  million and as of December 31, 2000
of $1.48 million.  Investors-IN  also owns bonds in Southern  California  Edison
which were purchased for $488,085 and had a market value as of March 31, 2001 of
$410,000 and as of December 31, 2000 of $370,000.

                                     - 14 -

<PAGE>

The investment objective of the Company's insurance subsidiaries  emphasizes the
selection of short to medium term high quality  fixed income  securities,  rated
Baa-3  (investment  grade) or better by Moody's  Investors  Service,  Inc. As of
March 31,  2001,  only 5.02% of the  Company's  total  assets  were  invested in
mortgage loans or real estate.  Non-affiliated  corporate debt  securities  that
were  non-investment  grade represented only 0.2 % of the Company's total assets
at March 31, 2001. The Company had  investments in debt securities of affiliated
corporations  aggregating  $ 33.8 million as of March 31,  2001,  as compared to
$35.3 million as of December 31, 2000.

Investments  in  mortgage-backed  securities  included  collateralized  mortgage
obligations ("CMOs") of $173 million and mortgage-backed pass-through securities
of $39.4  million at March 31, 2001.  Mortgage-backed  pass-through  securities,
sequential CMOs and support bonds,  which comprised  approximately  56.2% of the
book value of the Company's  mortgage-backed  securities at March 31, 2001,  are
sensitive to prepayment and extension risks. The Company has reduced the risk of
prepayment  associated with  mortgage-backed  securities by investing in planned
amortization  class  ("PAC")  instruments,  target  amortization  class  ("TAC")
instruments, accretion directed bonds and scheduled bonds. These investments are
designed to amortize in a predictable  manner by shifting the risk of prepayment
of the  underlying  collateral to other  investors in other  tranches  ("support
classes")  of the  CMO.  PAC and TAC  instruments  and  accretion  directed  and
scheduled  bonds  represented  approximately  43.8% and  sequential  and support
classes  represented  approximately  37.7%  of the book  value of the  Company's
mortgage-backed  securities at March 31, 2001. In addition,  the Company  limits
the risk of prepayment of CMOs by not paying a premium for any CMOs. The Company
does not invest in  mortgage-backed  securities with increased  prepayment risk,
such as  interest-only  stripped  pass-through  securities  and inverse  floater
bonds.  ILCO did not have  any z-  accrual  bonds  as of  March  31,  2001.  The
prepayment  risk that  certain  mortgage-backed  securities  are  subject  to is
prevalent in periods of declining  interest rates,  when mortgages may be repaid
more rapidly than  scheduled as individuals  refinance  higher rate mortgages to
take   advantage  of  the  lower  current  rates.   As  a  result,   holders  of
mortgage-backed  securities may receive large  prepayments on their  investments
which cannot be  reinvested  at an interest  rate  comparable to the rate on the
prepaying mortgages.

The Company does not invest in non-agency mortgage-backed securities, which have
a greater credit risk than that of agency mortgage-backed securities.


                                     - 15 -
<PAGE>

ILCO does not make new mortgage  loans on commercial  properties.  Substantially
all of the Company's mortgage loans were made by its subsidiaries prior to their
acquisition by the Company.  At March 31, 2001,  none of the mortgage loans held
by the Company had  defaulted as to principal or interest for more than 90 days,
and none of the Company's mortgage loans were in foreclosure.

Another  key  element of the  Company's  investment  strategy  is to avoid large
exposure in other investment  categories which the Company believes carry higher
credit or liquidity risks,  including private placements,  partnerships and bank
participations.  These  categories  accounted  for  approximately  0.2%  of  the
Company's invested assets at March 31, 2001.

The  consolidated  balance  sheets of the Company as of March 31,  2001  include
$33.8 million of "Notes receivable from  affiliates",  represented by (i) a loan
of $22.5 million from Investors-NA to Family Life Corporation and a $2.5 million
loan from Investors-CA to Financial  Industries  Corporation (which is now owned
by Investors-NA as a result of the merger of Investors-CA into Investors-NA) and
$2.0 million of additions to the $2.5 million note made in  accordance  with the
terms of such  note;  these  loans  were  granted  in  connection  with the 1991
acquisition of Family Life Insurance Company by a wholly-owned subsidiary of FIC
(ii) a loan of $30 million by  Investors-NA to Family Life  Corporation  made in
July,  1993,  in  connection  with the  prepayment  by the FIC  subsidiaries  of
indebtedness  which had been  previously  issued to Merrill Lynch as part of the
1991 acquisition and (iii) a loan of $4.5 million by Investors-NA to Family Life
Insurance  Investment  Company made in July,  1993, in connection  with the same
transaction described above.

As of June 12, 1996, the provisions of the notes from  Investors-NA  to FIC, FLC
and FLIIC were  modified as follows:  (a) the $22.5  million note was amended to
provide for twenty  quarterly  principal  payments,  in the amount of $1,125,000
each, to commence on December 12, 1996; the final quarterly principal payment is
due on September 12, 2001; the interest rate on the note remains at 11%, (b) the
$30 million note was amended to provide for forty quarterly  principal payments,
in the amount of $163,540 each for the period December 12, 1996 to September 12,
2001;  beginning with the principal payment due on December 12, 2001, the amount
of the principal payment increases to $1,336,458;  the final quarterly principal
payment is due on September  12, 2006;  the interest rate on the note remains at
9%,  (c) the $4.5  million  note was  amended  to  provide  for forty  quarterly
principal  payments,  in the amount of $24,531 each for the period  December 12,
1996 to September 12, 2001; beginning with the principal payment due on December
12, 2001, the amount of the principal payment  increases to $200,469;  the final
quarterly  principal  payment is due on September 12, 2006; the interest rate on
the note  remains at 9%, (d) the $2.5  million  note was amended to provide that
the  principal  balance  of  the  note  is  to be  repaid  in  twenty  quarterly
installments  of  $125,000  each,  commencing  December  12, 1996 with the final
payment due on September 12, 2001;  the rate of interest  remains at 12% and (e)
the Master PIK note,  which was  issued to  provide  for the  payment in kind of
interest  due under the terms of the $2.5  million  note prior to June 12, 1996,
was amended to provide that the principal  balance of the note, in the amount of
$1,977,119,  is to be paid in twenty quarterly principal payments, in the amount
of $98,855.95 each, to commence  December 12, 1996 with the final payment due on
September 12, 2001; the interest rate on the note remains at 12%.

                                     - 16 -

<PAGE>


In December, 1998, FLIIC was dissolved. In connection with the dissolution,  all
of the assets and  liabilities  of FLIIC became the  obligations of FLIIC's sole
shareholder (FIC). Accordingly, the obligations under the provisions of the $4.5
million note described above are now the obligations of FIC.

The NAIC continued its rating of "3" to the "Notes  receivable from affiliates",
as amended.  These loans have not been included in the preceding  description of
NAIC rating percentages.

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


                          New Accounting Pronouncements

In  June,  1998,  the  FASB  issued  FAS No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities," which establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts,  (collectively  referred to as derivatives) and for
hedging  activities.  FAS No. 133, as amended by FAS No.  138,  "Accounting  for
Certain Derivative  Instruments and Certain Hedging Activities - An Amendment of
FASB  Statement No. 133", is applicable to financial  statements  for all fiscal
quarters of fiscal years  beginning  after June 15, 2000,  as amended by FAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the  Effective  Date of FAS No. 133".  As the Company does not have  significant
investments in derivative financial instruments, the adoption of FAS 133 did not
have a material  impact on the  Company's  results of  operations,  liquidity or
financial position.

                               Other Developments

Agreement and Plan of Merger.

On January 17, 2001,  ILCO  entered  into an  Agreement  and Plan of Merger (the
"Agreement") with FIC and ILCO Acquisition Company ("ILCO Acquisition"), a Texas
corporation  and  wholly-owned  subsidiary  of FIC.  In general,  the  Agreement
provides that,  following the approval of the Agreement by the  shareholders  of
ILCO and the  approval  of the  issuance  of  shares  of FIC  common  stock  and
amendment to FIC's articles of  incorporation by the shareholders of FIC and the
satisfaction  or  waiver  of the  other  conditions  to  the  merger:  (1)  ILCO
Acquisition  will merge with and into ILCO; and (2) ILCO  Acquisition will cease
to  exist  and  ILCO  will  continue  as  the  surviving  corporation  and  as a
wholly-owned subsidiary of FIC following the merger.

                                     - 17 -
<PAGE>

Upon the consummation of the merger:  (1) each share of ILCO common stock issued
and  outstanding  immediately  prior to the  merger,  other than  shares of ILCO
common  stock  held as  treasury  shares by ILCO (but  excluding  shares of ILCO
common  stock  held by any of ILCO's  subsidiaries,  whether  or not  treated as
treasury  shares  of ILCO  on a  consolidated  basis  under  generally  accepted
accounting  principles)  or shares of ILCO  common  stock  held by FIC,  will be
converted into the right to receive 1.1 shares of FIC common stock.  However, in
the event of any change in FIC common  stock  and/or ILCO common  stock prior to
the   merger,   such   as  a   stock   split,   stock   dividend,   subdivision,
reclassification, recapitalization, combination, exchange of shares or the like,
the number and class of shares of FIC common stock to be issued and delivered in
the merger in exchange for each  outstanding  share of ILCO common stock will be
adjusted so as to maintain the relative  proportionate  interests of the holders
of ILCO common stock and FIC common stock;  (2) each share of ILCO common stock,
series A  preferred  stock and series B  preferred  stock of ILCO,  in each case
which is held as treasury shares by ILCO prior to the merger  (excluding  shares
of ILCO common stock held by any of ILCO's subsidiaries,  whether or not treated
as treasury  shares of ILCO on a  consolidated  basis under  generally  accepted
accounting principles), and each share of ILCO common stock which is held by FIC
(excluding  any shares of ILCO common stock owned by any of FIC's  subsidiaries)
prior to the merger,  will be cancelled  and  retired;  (3) each share of common
stock of ILCO Acquisition issued and outstanding immediately prior to the merger
will be  converted  into one share of common  stock of ILCO and such shares will
represent all of the issued and outstanding  capital stock of ILCO following the
merger; and (4) shares of FIC common stock outstanding  immediately prior to the
merger  (including  shares of FIC common stock held by any  subsidiary of FIC or
ILCO)  will  remain  outstanding  and  will  be  unaffected  by the  merger.  No
fractional  shares of FIC common stock will be issued in the merger. A holder of
ILCO common stock who would otherwise be entitled to receive  fractional  shares
of FIC  common  stock  as a  result  of the  merger  will  receive,  in  lieu of
fractional  shares,  cash in an amount  equal to the average  closing  price per
share of FIC  common  stock for the 30  trading  days  immediately  prior to the
merger  multiplied  by the  fraction  to which the  holder  would  otherwise  be
entitled.  FIC will make  available to First Union  National  Bank,  as exchange
agent,  from  time to time  sufficient  cash  amounts  to  satisfy  payment  for
fractional  shares  and First  Union  will  distribute  such  proceeds,  without
interest, to the holders of the fractional interests.

The consummation of the merger remains subject to various  conditions  precedent
set forth in the  Agreement,  including  the approval of certain  matters by the
shareholders  of FIC and ILCO.  The  shareholder  meetings  for  approval of the
merger  and  related  matters  are set for May  18,  2001.  For a more  detailed
description of the Agreement,  see the complete copy of the Agreement,  attached
as an annex to the S-4 filed by FIC with the Securities and Exchange  Commission
on  February  1, 2001,  as amended by the S-4/A  filed on March 13, 2001 and the
S-4/A filed on April 3, 2001.

Unsolicited  Verbal  Inquiries   Concerning  Possible  Purchase  of  Post-Merger
Company.

On  March  8,  2001,  FIC  announced  that it has  received  unsolicited  verbal
indications of interest from a few companies that may be interested in acquiring
FIC after  completion  of the merger with ILCO.  The press release did not state
any price ranges or other material terms. In conjunction  with such  indications
of interest,  FIC has retained Philo Smith Capital  Corporation as its financial
advisor to  explore  the  possibility  of a  post-merger  sale of FIC with these
companies and to further  solicit  indications of interest from other  companies
that may have similar  interests.  As indicated on the Form 424B3 filed with the
Securities  and  Exchange  Commission  on May 9,  2001,  FIC  has  received  one
indication of interest  that it intends to pursue  through  further  discussions
with the third party  submitting such indication of interest.  However,  FIC has
still not determined whether it will sell the company,  and no price or material
terms on which it would agree to sell the company  have been  determined  by the
board of directors of FIC or agreed upon with any third party.

                                     - 18 -
<PAGE>

Dividend.

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

                                     General

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

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

The primary market risk to the Company's  investment  portfolio is interest rate
risk. The Company does not use derivative financial instruments.

                               Interest Rate Risk

Assuming an immediate  increase of 100 basis points in interest  rates,  the net
hypothetical  loss in fair market  value  related to the  financial  instruments
segment of the Company's balance sheet is estimated to be $19.4 million at March
31, 2001 and $21.1  million at December 31, 2000.  For purposes of the foregoing
estimate,  the following  categories of the Company's  fixed income  investments
were  taken into  account:  (i) fixed  maturities,  including  fixed  maturities
available for sale, (ii) short-term  investments and (iii) notes receivable from
affiliates.  The  approximate  market value of such assets was $605.7 million at
March 31, 2001 and $607.3 million at December 31, 2000.

                                     - 19 -
<PAGE>

The fixed income  investments  of the Company  include  certain  mortgage-backed
securities.  The market value of such securities was $220.8 million at March 31,
2001 and $ 223.6 million at December 31, 2000. Assuming an immediate increase of
100 basis points in interest rates, the net hypothetical loss in the fair market
value related to such mortgage-backed securities is estimated to be $9.3 million
at March 31, 2001 and $11.1 million at December 31, 2000.

Fixed income investments held in separate accounts have not been included, since
gains and losses on those  assets  generally  accrue to the  policyholders.  The
hypothetical  effect of the interest  rate risk on fair values was  estimated by
applying a commonly used model.  The model  projects the impact of interest rate
changes on a range of factors, including duration and potential prepayment.

Part II. Other Information

Item 1.  Legal Proceedings

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

Universal Life Litigation:

ILCO and  Investors-NA  are  defendants in a lawsuit which was filed in October,
1996, in Travis County, Texas. CIGNA Corporation,  an unrelated Company, is also
a named  defendant in the lawsuit.  The named  plaintiffs in the suit (a husband
and wife), allege that the universal life insurance policies sold to them by INA
Life Insurance  Company (a company which was merged into  Investors-NA  in 1992)
utilized unfair sales  practices.  The named  plaintiffs seek reformation of the
life  insurance  contracts  and an  unspecified  amount  of  damages.  The named
plaintiffs  also seek a class action as to similarly  situated  individuals.  In
April, 2001, the named plaintiffs filed an amended  complaint,  so as to include
various post-sale  allegations,  including  allegations related to the manner in
which  increases  in the cost of  insurance  were  applied,  the  allocation  of
portfolio  yields to the  universal  life  policies  and  changes  in the spread
between the earned rate and the  credited  rate.  The Company  filed a motion to
strike  the  amended  Complaint,  which  motion  was  denied  by the  Court.  No
certification  of a class has been  granted as of the date  hereof.  The Company
believes that the suit is without  merit and intends to  vigorously  defend this
matter.


                                     - 20 -
<PAGE>

Litigation Relating to the FIC/ ILCO Merger:

On the day that FIC and ILCO each publicly  announced the formation of a special
committee to evaluate a potential  merger,  two class action lawsuits were filed
against  ILCO,  FIC and the officers and directors of ILCO.  The actions  allege
that a cash  consideration  in the proposed merger is unfair to the shareholders
of ILCO,  that it would prevent the ILCO  shareholders  from  realizing the true
value of ILCO,  and that FIC and the named  officers and  directors had material
conflicts of interest in approving the transaction.

In their initial pleadings,  the plaintiffs sought certification of the cases as
class actions and the named plaintiffs as class representatives, and among other
relief, requested that the merger be enjoined (or, if consummated, rescinded and
set  aside)  and that the  defendants  account  to the class  members  for their
damages.

Recently,  the  plaintiffs  initiated  discovery in this matter.  The defendants
believe that the lawsuits are without merit and intend to vigorously contest the
lawsuits.  Management  is unable  to  determine  the  impact,  if any,  that the
lawsuits may have on the results of operations of the Company.

Other Litigation:

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

Item 2.  Changes in Securities

                  None

Item 3.  Defaults Upon Senior Securities

                  None

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

                  None


Item 5.  Other Information

                  None

                                     - 21 -
<PAGE>


Item 6.  Exhibits and Reports on Form 8-K

        (a)    Exhibits

               Form 10-K Annual Report of Registrant for the year ended December
               31, 2000  heretofore  filed by Registrant with the Securities and
               Exchange  Commission,  which is hereby incorporated by reference.

        (b)    Reports on Form 8-K

               On January 22, 2001, the  Registrant  filed a report on Form 8-K.
               The report  pertained to the  announcement by the Registrant that
               it had entered  into a  definitive  agreement  whereby  Financial
               Industries Corporation ("FIC") would acquire the remaining common
               shares  (approximately  52%) of ILCO which FIC does not currently
               own. The terms and provisions of the transaction are set forth in
               an  Agreement  and Plan of Merger  dated as of January 17,  2001,
               among the Registrant, FIC and ILCO Acquisition Company. A copy of
               the  Agreement  and Plan of Merger is  attached  to the Report of
               Form 8-K.

                                     - 22 -
<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES





                                    SIGNATURE


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


INTERCONTINENTAL LIFE CORPORATION


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







Date: May 15, 2001


                                     - 23 -
<PAGE>