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 June 30, 1999
Commission File Number 2-39310


                        INTERCONTINENTAL LIFE CORPORATION




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


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

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



Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                                  YES  X    NO


Number of common shares outstanding ($.22 Par Value) at end of period: 8,792,412

                                      - 1 -

<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES

                                      INDEX

                                                                       Page No.

Part I - Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets
     June 30, 1999 and December 31, 1998..................................... 3

Consolidated Statements of Income
     For the three and six month periods ended
     June 30, 1999 and 1998...................................................5

Consolidated Statements of Cash Flows
     For the three and six month periods ended
     June 30, 1999 and 1998...................................................7

Notes to Consolidated Financial Statements...................................11

Item 2. Management's Discussion and Analysis of
     Financial Conditions and Results of Operations..........................13

Item 3. Quantitative and Qualitative Disclosures
     About Market Risk.......................................................20

Part II

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

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

                                      - 2 -

<PAGE>



               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                            (in thousands of dollars)
<TABLE>
<CAPTION>

                                                               June 30,            December 31,
                                                                1999                  1998
ASSETS                                                       (Unaudited)
<S>                                                              <C>                    <C>
Investments:
Fixed maturities, at
       amortized cost (market value
        approximates $2,669 and $3,059)              $          2,695        $          3,005
Fixed maturities available for sale,
       at market value (amortized cost
       $408,711 and $435,130)                                 411,463                 450,149
Equity securities, at market value
       (cost approximates $338)                                 2,318                   3,121
Policy loans                                                   52,971                  53,614
Mortgage loans                                                 10,232                  10,332
Invested real estate and other invested assets                 11,537                  10,025
Short-term investments                                        193,236                 171,840
                                                     ----------------        ----------------
       Total investments                                      684,452                 702,086
Cash and cash equivalents                                       9,688                  12,206
Notes receivable from affiliates                               44,571                  47,645
Accrued investment income                                       7,686                   7,768
Agent advances and other receivables                           25,975                  20,753
Reinsurance receivables                                        20,673                  18,847
Property and equipment, net                                     3,570                   3,470
Deferred policy acquisition costs                              33,583                  31,953
Present value of future profits of acquired
 businesses                                                    41,778                  43,666
Other assets                                                   12,593                  10,643
Separate account assets                                       464,014                 451,211
                                                     ----------------        ----------------
       Total Assets                                  $      1,348,583        $      1,350,248
                                                     ================        ================
</TABLE>

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

                                      - 3 -

<PAGE>



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

                                                              June 30,             December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY                            1999                   1998
                                                            (Unaudited)
<S>                                                             <C>                     <C>
Liabilities:
Policy liabilities and contractholder
 deposit funds:
Future policy benefits                                 $       132,994         $       135,463
Contractholder deposit funds                                   537,406                 545,908
Unearned premiums                                                2,110                   2,124
Other policy claims and benefits payable                        10,730                  10,856
                                                       ---------------         ---------------
                                                               683,240                 694,351
Other policyholders' funds                                       3,081                   3,056
Deferred federal income taxes                                   26,126                  30,185
Other liabilities                                               24,490                  20,127
Separate account liabilities                                   460,219                 448,294
                                                       ---------------         ---------------
    Total Liabilities                                        1,197,156               1,196,013
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; 10,807,478 and 5,385,739
 shares issued, 8,792,412 and 4,376,706 shares
 outstanding in 1999 and 1998, respectively                      2,378                   1,185
Additional paid-in capital                                       4,445                   4,385
Accumulated other comprehensive income                           3,076                  11,571
Retained earnings                                              144,757                 140,356
                                                       ---------------         ---------------
                                                               154,656                 157,497
Common treasury stock, at cost, 2,015,066 and
1,009,033 in 1999 and 1998,  respectively                       (3,229)                 (3,262)
                                                       ---------------         ---------------
Total Shareholders' Equity                                     151,427                 154,235
                                                       ---------------         ---------------
Total Liabilities and Shareholders' Equity             $     1,348,583         $     1,350,248
                                                       ===============         ===============
</TABLE>

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

                                      - 4 -

<PAGE>

               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
              (in thousands of dollars, except for per share data)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                         June 30,
                                                               1999                  1998

<S>                                                             <C>                   <C>

 Premium                                            $          2,610        $          2,666
 Net investment income                                        12,960                  13,843
 Earned insurance charges                                     10,085                  10,333
 Other                                                         1,038                     685
                                                    ----------------        ----------------
                                                              26,693                  27,527
Benefits and expenses:
 Policyholder benefits and expenses                            8,572                   9,066
 Interest expense on contract holders
     deposit funds                                             8,195                   7,772
 Amortization of present value of future
     profits of acquired businesses                              968                   1,619
 Amortization of deferred policy
     acquisition costs                                           631                     525
 Operating expenses                                            4,165                   3,978
 Interest expense                                                -0-                     246
                                                    ----------------        ----------------
                                                              22,531                  23,206
                                                    ----------------        ----------------
Income from operations                                         4,162                   4,321
Provision for federal income taxes                             1,535                   1,513
                                                    ----------------        ----------------
Net income                                          $          2,627        $          2,808
                                                    ================        ================
Net income per share:
Basic:
        Weighted average common stock
         outstanding                                           8,785                   8,738
                                                    ----------------        ----------------
Basic earnings per share                            $           0.30        $           0.32
                                                    ================        ================
Diluted:
Common stock and common stock equivalents                      8,802                   9,090
                                                    ----------------        ----------------
Diluted earnings per share                          $           0.30        $           0.31
                                                    ================        ================
</TABLE>

                   The accompanying notes are an integral part
                         of these 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>
<CAPTION>
                                                                     Six Months Ended
                                                                         June 30,
                                                               1999                  1998

<S>                                                              <C>                  <C>
Revenues:

 Premium                                             $         5,158        $          5,764
 Net investment income                                        25,875                  27,798
 Earned insurance charges                                     20,147                  20,630
Other                                                          1,783                   1,207
                                                     ---------------        ----------------
                                                              52,963                  55,399
Benefits and expenses:
 Policyholder benefits and expenses                           16,594                  19,422
 Interest expense on contract holders
     deposit funds                                            16,075                  15,002
 Amortization of present value of future
     profits of acquired businesses                            1,888                   2,945
 Amortization of deferred policy
     acquisition costs                                         1,215                     973
 Operating expenses                                            8,354                   8,032
 Interest expense                                                  0                     521
                                                     ---------------        ----------------
                                                              44,126                  46,895
                                                     ---------------        ----------------
Income from operations                                         8,837                   8,504
Provision for federal income taxes                             3,249                   2,977
                                                     ---------------        ----------------
Net income                                           $         5,588        $          5,527
                                                     ===============        ================
Net income per share:
Basic:
        Weighted average common stock
         outstanding                                           8,785                   8,738
                                                     ---------------        ----------------
Basic earnings per share                             $          0.64        $           0.64
                                                     ===============        ================
Diluted:
Common stock and common stock equivalents                      8,803                   8,738
                                                     ---------------        ----------------
Diluted earnings per share                           $          0.64        $           0.63
                                                     ===============        ================
</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>
<CAPTION>


                                                                 Three Months Ended
                                                                      June 30,
CASH FLOWS FROM OPERATING                                    1999                 1998

ACTIVITIES
<S>                                                         <C>                   <C>

Net Income                                     $          2,627        $         2,808
Adjustments to reconcile net income to
       net cash (used in) provided by
       operating activities:
Amortization of present value of future
      profits of acquired businesses                        968                  1,619
Amortization of deferred policy
     acquisition costs                                      631                    525
Net gain on sale of investments                            (222)                   (76)
Depreciation                                                118                     85
Financing costs amortized                                     0                     24
Changes in assets and liabilities:
Decrease in accrued investment income                       408                    280
Increase in agent advances and
     other  receivables                                  (4,928)                (9,266)
Policy acquisition costs deferred                        (1,485)                (1,510)
Decrease in policy liabilities and
contractholder deposit funds                             (5,871)                (6,778)
Increase in other policyholders' funds                      (22)                  (729)
Increase (decrease) in other liabilities                  2,070                 (1,678)
(Decrease) increase in deferred federal
  income taxes                                           (3,180)                   144
Decrease in other assets                                    246                  5,166
Other, net                                                4,788                 (1,158)
                                               ----------------         ---------------
Net cash used in operating activities          $         (3,852)        $      (10,544)
                                               ----------------         ---------------
</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>
<CAPTION>
                                                                         Three Months Ended
                                                                               June 30,
CASH FLOWS FROM INVESTING                                           1999                 1998

ACTIVITIES
<S>                                                               <C>                     <C>

Investments purchased                                  $       (16,232)         $       (1,183)
Proceeds from sales and maturities of
 investments                                                    20,603                  17,355
Net change in short-term investments                              (963)                  1,873
Purchases and retirements of equipment                            (168)                   (389)
Decrease in notes receivable from affiliates                     1,537                   1,537
                                                       ----------------         ---------------
Net cash provided by investing activities                        4,777                  19,193

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of treasury stock                                          33                       0
Purchase of subsidiary                                               0                  (1,322)
Issuance of common stock                                             0                      79
Repayment of debt                                                    0                  (7,400)
                                                       ----------------         --------------
Net cash provided by (used in) financing
 activities                                                         33                  (8,643)
                                                       ----------------         --------------
Net increase in cash and cash equivalents                          958                       6
Cash and cash equivalents, beginning of period                   8,730                   9,614
                                                       ----------------         ---------------
Cash and cash equivalents, end of period               $         9,688          $        9,620
                                                       ================         ===============
</TABLE>

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



                                      - 8 -

<PAGE>


               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)

<TABLE>
<CAPTION>

                                                                        Six Months Ended
                                                                           June 30,
CASH FLOWS FROM OPERATING                                         1999                 1998
ACTIVITIES                                                    (unaudited)

<S>                                                               <C>                  <C>

Net Income                                            $        5,588         $         5,527
Adjustments to reconcile net income to
       net cash (used in) provided by
       operating activities:
Amortization of present value of future
      profits of acquired businesses                           1,888                   2,945
Amortization of deferred policy
     acquisition costs                                         1,215                     973
Net gain on sale of investments                                 (222)                    (76)
Depreciation                                                     227                     208
Financing costs amortized                                          0                      55
Changes in assets and liabilities:
Decrease (increase) in accrued investment
 income                                                           82                    (133)
Increase in agent advances and
     other  receivables                                       (7,048)                 (7,962)
Policy acquisition costs deferred                             (2,845)                 (2,848)
Decrease in policy liabilities and
contractholder deposit funds                                 (11,111)                (17,064)
Increase (decrease) in other policyholders'
 funds                                                            25                    (655)
Increase (decrease) in other liabilities                       4,363                  (3,367)
Decrease in deferred federal income taxes                     (4,059)                   (631)
Increase in other assets                                      (1,950)                   (879)
Other, net                                                     3,709                  (2,345)
                                                      ---------------        ---------------
Net cash used in operating activities                 $      (10,138)        $       (26,252)
                                                      ---------------         ---------------
</TABLE>

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




                                      - 9 -

<PAGE>



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

                                                                           Six Months Ended
                                                                                June 30,
CASH FLOWS FROM INVESTING                                             1999                  1998

ACTIVITIES

<S>                                                                  <C>                    <C>

Investments purchased                                     $        (27,482)        $       (26,772)
Proceeds from sales and maturities of investments                   53,658                  35,462
Net change in short-term investments                               (21,396)                 23,933
Purchases and retirements of equipment                                (327)                   (263)
Decrease in notes receivable        from affiliates                  3,074                   3,073
                                                          ----------------         ---------------
Net cash provided by investing activities                            7,527                  35,433

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of treasury stock                                              33                       0
Purchase of subsidiary                                                   0                  (1,322)
Issuance of common stock                                                60                     120
Repayment of debt                                                        0                  (7,400)
                                                          ----------------         ---------------
Net cash provided by (used in) financing activities                     93                  (8,602)
                                                          ----------------         ---------------
Net (decrease) increase in cash and cash equivalents                (2,518)                    579
Cash and cash equivalents, beginning of year                        12,206                   9,041
                                                          ----------------         ---------------
Cash and cash equivalents, end of period                  $          9,688         $         9,620
                                                          ================         ===============
</TABLE>


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

                                     - 10 -

<PAGE>



               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The financial  statements  included herein reflect all adjustments which are, in
the opinion of management,  necessary to present a fair statement of the interim
results.  The statements  have been prepared to conform to the  requirements  of
Form 10-Q and do not necessarily  include all disclosures  required by generally
accepted accounting  principles (GAAP). The reader should refer to Form 10-K for
the year ended  December  31,  1998  previously  filed with the  Securities  and
Exchange Commission for financial statements prepared in accordance with GAAP.

Acquisition of Subsidiary

On June 30, 1998, ILCO,  through a subsidiary,  acquired Grinnell Life Insurance
Company ("Grinnell Life") for a base purchase price of $16.4 million, subject to
certain post-closing adjustments. As part of the transaction,  Grinnell Life was
immediately merged with and into that subsidiary, with that subsidiary being the
surviving entity.

Comprehensive Income

Total  comprehensive  (loss)  income for the six months  ended June 30, 1999 and
June 30, 1998 is $(2.9) million and $5.0 million, respectively.

The  following is a  reconciliation  of total  accumulated  other  comprehensive
income from December 31, 1998 to June 30, 1999 (in thousands):

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

Balance at December 31, 1998   $    9,762        $   1,809          $  11,571
Current period change              (7,973)            (522)            (8,495)
                               ----------       ----------          ----------
Balance at June 30 1999        $    1,789        $   1,287          $   3,076
                               ==========        =========          ==========


                                     - 11 -

<PAGE>



               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Pronouncements

In December 1997, the Accounting  Standards Executive Committee issued Statement
of Position  ("SOP") 97-3,  "Accounting by Insurance and Other  Enterprises  for
Insurance-Related  Assessments,"  which  provides  guidance  on  accounting  for
insurance-related assessments. The Company adopted SOP 97-3 effective January 1,
1999.  The adoption of SOP 97-3 did not have a material  impact on the Company's
results of operations, liquidity or financial position.

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 133 No. 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 FASB Statement No. 133." The operations of the
Company are not affected by the provisions of FAS No. 133.




                                     - 12 -

<PAGE>



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


For  the   six-month   period  ended  June  30,  1999,   InterContinental   Life
Corporation's  ("ILCO") net income was  $5,588,000  (basic  earnings and diluted
earnings of $0.64 per common share) as compared to $5,527,000 (basic earnings of
$0.64 per common  share,  or diluted  earnings of $0.63 per common share) in the
first six  months of 1998.  For the 1998  period,  earnings  per share have been
adjusted to give  effect to the stock  dividend  (one share of common  stock for
each  outstanding  share of common  stock)  which  was paid on March  17,  1999.
Earnings per share are stated in  accordance  with the  requirements  of FAS No.
128, which  establishes  two measures of earnings per share:  basic earnings per
share and diluted  earnings per share.  Basic  earnings per share is computed by
dividing income available to common  shareholders by the weighted average number
of common  shares  outstanding  during the period.  Diluted  earnings  per share
reflect the potential dilution that would occur if securities or other contracts
to issue common stock were converted or exercised.


                              Results of Operations

For the  six-month  period  ended June 30, 1999,  the  Company's  income  before
federal  income taxes was  $8,837,000 on revenues of  $52,963,000 as compared to
income of  $8,504,000  on  revenues of  $55,399,000  for the first six months of
1998.

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.

Premium income,  net of  reinsurance,  for the first six months of 1999 was $5.2
million,  as  compared  to $5.8  million  for the  first  six  months  of  1998.
Reinsurance  premiums  ceded were $1.5 million for the first six months of 1999,
as compared to $1.9 million in the first six months of 1998.

Earned insurance charges for the six-month period ended June 30, 1999 were $20.1
million,  as compared to $20.6 million for the same period in 1998.  This source
of revenues  is related to the  universal  life  insurance  and annuity  book of
business of Investors Life Insurance Company of North America ("Investors-NA").

The Company's  senior loan was fully  discharged  effective  September 30, 1998,
accordingly,  there was no interest expense for the first six months of 1999, as
compared to interest  expense in the amount of $521,000 for the first six months
of 1998.

As of June 30, 1999, the market value of the fixed maturities available for sale
segment was $411.5 million as compared to an amortized  cost of $408.7  million,
or an unrealized gain of $2.8 million. The increase reflects unrealized gains on
such investments related to changes in interest rates subsequent to the purchase
of such  investments.  There is no assurance that this  unrealized  gain will be
realized in the future.  The net of tax effect of this increase ($1.8 million at
June 30, 1999) is included in "Accumulated  other  comprehensive  income" on the
Consolidated   Balance   Sheets  and  has  been   recorded  as  an  increase  in
shareholders'  equity.  As required  under the  provisions  of FAS No. 130,  the
determination of "Accumulated  other  comprehensive  income"  includes  separate
identification of the change in values which occurred during the current period.

For the  three-month  period ended June 30, 1999, the lapse rate with respect to
universal life insurance  policies  decreased from the lapse rate experienced in
the similar period in 1998. The rate for the 1999 period was 7.03%,  as compared
to 7.95% in the  1998  period.  The  lapse  rate  with  respect  to  traditional
(non-universal) life insurance policies increased from the levels experienced in

                                     - 13 -

<PAGE>



the second quarter of 1998. The rate for the  three-month  period ended June 30,
1999 was 9.88%,  as compared to 7.78% in the similar  period in 1998.  The lapse
rates  experienced  during these periods were within the ranges  anticipated  by
management.

                        Liquidity and Capital Resources:

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

As of December 31, 1997, the outstanding principal balance of ILCO's senior loan
obligations was $11.0 million,  which reflected the prepayment by the Company of
the payment originally  scheduled for January 1, 1998. A regular payment, in the
amount of $3.7  million,  was made on April 1, 1998 and a prepayment of the July
1, 1998 installment,  in the amount of $3.7 million,  was made on June 30, 1998.
The  outstanding  principal  balance of ILCO's senior loan  obligations was $3.6
million at June 30, 1998. The final  installment  on the senior loan  obligation
scheduled  for October 1, 1998,  was prepaid on September 30, 1998. As a result,
the senior loan obligation of ILCO was fully discharged  effective September 30,
1998.

On March 17, 1999,  the Company paid a stock dividend (one share of common stock
for each outstanding share of common stock). As a result,  Financial  Industries
Corporation   ("FIC")  currently  owns,  directly  and  indirectly  through  its
subsidiary Family Life Insurance Company,  3,932,692 shares  (approximately 45%)
of ILCO's common stock.

Prior to the  discharge of ILCO's  senior loan  obligation,  FIC held options to
acquire (on a pre- dividend basis) an additional 1,702,155 shares of ILCO common
stock. The options were granted under an option  agreement  between FIC and ILCO
which was entered into in March, 1986 ("Option Agreement"). The Option Agreement
provided that it continued in effect as long as FIC guaranteed  indebtedness  of
ILCO.  Since the senior loan was fully discharged by ILCO on September 30, 1998,
FIC's rights under the Option Agreement expired on September 30, 1998.

ILCO's  principal  source of  liquidity  consists  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, 1999,  the  outstanding  principal  balance of the
Surplus  Debentures  was $4.0  million  and $6.9  million,  respectively.  Since
Investors-NA  is  domiciled  in the  State  of  Washington,  the  provisions  of
Washington  insurance law apply to the Surplus Debentures.  Under the provisions
of the Surplus  Debentures  and current law, no prior approval of the Washington
Insurance Commissioner is required for Investors-NA to pay interest or principal
on the Surplus Debentures;  provided that, after giving effect to such payments,
the statutory  surplus of Investors-NA is in excess of $10 million (the "surplus
floor").  However,  Investors-NA  has  voluntarily  agreed  with the  Washington
Insurance Commissioner that it will provide at least five days advance notice of
payments  which it will make under the surplus  debenture.  As of June 30, 1999,
the statutory surplus of Investors-NA was $66.4 million, an amount substantially
in excess of the surplus floor.  The funds required by  Investors-NA to meet its
obligations  to the  Company  under  the  terms of the  Surplus  Debentures  are
generated  from  operating   income  generated  from  insurance  and  investment
operations.

In addition to the payments under the terms of the Surplus Debentures,  ILCO has
received dividends from its subsidiaries.  Washington's  insurance code includes
the "greater of"  standard for payment of dividends to  shareholders,  but has a
requirement  that  prior  notification  of a proposed  dividend  be given to the
Washington Insurance  Commissioner and that cash dividends may be paid only from
earned surplus.  Under the "greater of" standard,  an insurer may pay a dividend
in an amount equal to the greater of (i) 10% of the policyholder surplus or (ii)
the insurer's  net gain from  operations  for the previous  year. As of June 30,
1999, Investors-NA had earned surplus of $39.1 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


                                     - 14 -

<PAGE>



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 $16.6  million at June 30,  1999.  In June,
1999,  Investors-IN  paid a  dividend  in the  amount of $3  million to its sole
shareholder, Investors-NA. The amount of the dividend was less than the net gain
from  operations  for the prior fiscal year.  Advance  notice of the payment was
provided  to the  Indiana  Department  of  Insurance,  in  accordance  with  the
provisions of the Indiana Insurance Code.

ILCO's net cash flow used in operating  activities  was $(10.1)  million for the
six-month  period  ended June 30, 1999,  as compared to $(26.3)  million for the
first six months of 1998.

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

                                   Investments

As of June 30, 1999, the Company's  investment assets totaled $684.5 million, as
compared to $702.3 million as of June 30, 1998. Total assets as of June 30, 1999
($1.35  billion)  decreased  slightly  from the level as of June 30, 1998 ($1.37
billion).

The level of  short-term  investments  at June 30, 1999 was $193.2  million,  as
compared to $140.7 million at June 30, 1998.

Invested real estate and other  invested  assets  increased from $1.5 million at
June 30, 1998 to $11.5 million as of June 30, 1999.  This increase is related to
the purchase by  Investors-NA  of the 47.995 acres of land in Austin,  Texas for
the  development  of the River Place Pointe  project.  The land was purchased in
October, 1998 by Investors-NA,  for an aggregate purchase price of $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.
Development  of the  initial  phase of the  project  commenced  during the first
quarter of 1999.  When  completed,  the first  phase will  consist of two office
buildings,  a parking  garage and the  infrastructure  for the  entire  project.
Investors-NA  plans to  commence  development  of the  additional  stages of the
project following completion and leasing of Phase One.

The fixed  maturities  available for sale portion of invested assets at June 30,
1999 was $411.5 million.  The amortized cost of the fixed  maturities  available
for sale  segment as of June 30,  1999 was $408.7  million,  representing  a net
unrealized  gain of $2.8 million.  This  unrealized  gain  principally  reflects
changes  in  interest  rates  from  the  date the  respective  investments  were
purchased.   To  reduce  the  exposure  to  interest  rate  changes,   portfolio
investments  are  selected so that  diversity,  maturity and  liquidity  factors
approximate the duration of associated policyholder liabilities.

The  assets  held  by  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

                                     - 15 -

<PAGE>



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 portfolio includes investments in mortgage-backed  securities which includes
collateralized   mortgage   obligations   ("CMOs")   of   $188.4   million   and
mortgage-backed  pass-through  securities  of $27.2  million  at June 30,  1999.
Mortgage-backed  pass-through  securities,  sequential  CMOs and support  bonds,
which  comprised  approximately  51.7%  of  the  book  value  of  the  Company's
mortgage-backed  securities at June 30, 1999,  are  sensitive to prepayment  and
extension risks. The Company has reduced the risk of prepayment  associated with
this portion of the  investment  portfolio by investing in planned  amortization
class ("PAC"),  target  amortization  class ("TAC")  instruments,  and scheduled
bonds.  These  investments  are designed to amortize in a predictable  manner by
shifting the risk of prepayment of the underlying  collateral to other investors
in other tranches  ("support  classes") of the CMO. PAC and TAC  instruments and
scheduled  bonds  represented  approximately  48.3% and  sequential  and support
classes  represented  approximately  39.1%  of the book  value of the  Company's
mortgage-backed securities at June 30, 1999. 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. 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 did not make  additional  investments in CMOs
during  1998  and the  first  two  quarters  of  1999.  The  current  investment
objectives of the Company do not  contemplate  additions to the portfolio of CMO
investments during the remainder of 1999.

The Company's fixed maturities portfolio (including short-term investments),  as
of June 30,  1999,  included  a  non-material  amount  ( 0.61%  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.  As of June 30,  1998,  the
comparable  percentage was 0.63%.  Of these  non-investment  grade  investments,
0.49%  are  concentrated  in the low  quality  (or  "4")  category,  with  0.11%
receiving an NAIC rating of "5" (lowest quality).

The consolidated balance sheets of the Company as of June 30, 1999 include $44.6
million of "Notes  receivable  from  affiliates",  represented  by (i) a loan of
$22.5 million from  Investors-NA to Family Life  Corporation  ("FLC") and a $2.5
million loan from  Investors-CA to Financial  Industries  Corporation  ("FIC") -
which  loan  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  ("FLIIC") 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 Family Life Insurance Investment Company ("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

                                     - 16 -

<PAGE>



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%,  (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
($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%.

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.

                              Year 2000 Compliance

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

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

The Plan calls for a  conversion  of certain  systems  onto the  Company's  CK/4
System;  a  system  which  is  designed  to be Y2K  compliant  according  to the
representations  of the vendor.  Those systems  which are not converted  will be
upgraded  by  changing  individual  lines of  computer  code in order to  modify
current operating software such that it will become Y2K compliant.

Under the Plan,  the Company will utilize its own personnel and personnel of its
affiliated company, FIC Computer Services, Inc., acquire Y2K compliant operating
software,  and engage the  assistance of outside  consultants  to facilitate the
systems  conversions  and  modifications.  The Company is in the process of this
systems conversion and anticipates that the project will be completed in advance
of the year 2000.  The Company has increased  the budget for the  implementation


                                     - 17 -

<PAGE>



and  completion  of the Plan from the prior years  estimate.  As of December 31,
1997, the Company had budgeted approximately $470,000 for implementing the Plan.
Based on its current analysis, the Company expects that the cost of implementing
and  completing  the Plan will result in an after-tax  expense of  approximately
$587,000 for the three-year (1997 - 1999) conversion period. For the three month
period  ended June 30, 1999,  the Company has  incurred an after-tax  expense of
approximately  $60,000 in connection  with the  completion of the Plan.  Between
January 1, 1997 and June 30, 1999, the Company has expended approximately 73% of
the three-year  expected  after-tax cost discussed  above. In the event that the
Plan does not achieve full  compliance  by the target  dates,  or if  unforeseen
matters  involving Y2K appear before or after January 1, 2000,  the Company will
utilize the staff of FIC  Computer  Services,  Inc. to identify and resolve such
issues as and if they arise.

In order to continuously  evaluate the  effectiveness of the  modifications  and
conversions  made to the various  systems,  FIC  Computer  Services has acquired
testing  software to simulate  dates on or after January 1, 2000.  Additionally,
FIC Computer  Services  runs the systems  through  model office  cycles and also
conducts visual  inspections of screen displays to determine whether the systems
are functioning in a Y2K compliant manner.

As of June 30, 1999, FIC Computer Services, Inc. estimated that it had completed
the necessary conversions and modifications on the administrative  systems which
process  approximately  69% of the  insurance  policies for the  Company and its
subsidiaries.  This included the  conversion  of the ALIS System  (administering
approximately  42,000 active policies) to CK/4 in February,  1998, the System 38
(administering approximately 9,400 active policies) conversion in January, 1997,
the TI System (administering  approximately 5,240 active policies) conversion to
CK/4 in  July,  1998 and the  conversion  of the  Lifecomm-B  system  (which  is
responsible for  approximately  17,000 policies assumed after the acquisition of
State  Auto  Life)  in  February,1999.  The  conversion  of the  Life 70  system
(administering  approximately  15,300  active  policies  for  Investors-IN)  was
completed in May, 1999. The conversion of the Lifecomm-A  system  (administering
approximately   57,140  active  policies  for  Investors-NA)  is  scheduled  for
completion  in  September  of 1999.  The  modification  of one of the  Company's
smaller  systems  which  administers  approximately  2,320  active  credit  life
policies  was  completed on schedule in December  1998.  The  modification  of a
smaller system which  administers  approximately  15,470 active  industrial life
policies was completed in June of 1999.

The various  software  applications  described above are licensed to the Company
under agreements which permit the Company's  subsidiaries to process business on
its computer systems utilizing such software.

In 1997,  FIC Computer  Services,  Inc.  purchased  new  mainframe  hardware and
accompanying  operating  software,  which the vendor has  represented  to be Y2K
compliant.  FIC Computer  Services,  Inc. has  completed  the  installation  and
testing of such new  mainframe  hardware and software  for  compliance  with the
requirements of the Year 2000 conversion. In addition, FIC Computer Services has
purchased  certain  third-party  software  which is run on the  mainframe.  This
software has been  represented  by the vendor as being in  compliance  with Year
2000 requirements. Testing is currently being done on such third-party software,
which  testing is expected to be completed by September 1, 1999.  The  telephone
system,  which includes both PBX and voice mail systems,  has been tested by the
maintenance  provider  for that system and the Company has  received  assurances
that the telephone system is Y2K compliant.

With respect to non-centralized  systems (i.e., desktop computers),  the Company
has obtained  updated  software  releases  and new  hardware  designed to be Y2K
compliant according to the  representations of the vendors.  The Company expects
that the effort  needed to correct for Y2K problems on such systems will be less
time intensive than the effort needed to achieve  compliance for its centralized
systems.  The installation of such new PC hardware and software was commenced in
early 1999 and is expected to be completed by September 1, 1999.

The Company  also faces the risk that one or more of its  external  suppliers of
goods  or  services  ("third  party  providers")  will not be in a  position  to
properly  interact  with the  Company due to the  inability  of such third party
provider to resolve its own Y2K  issues.  Pursuant to the Plan,  the Company has
completed an inventory of its third party  provider  relationships.  In order to
assess  the Y2K  readiness  of such  third  party  providers,  the  Company  has
developed  and  forwarded a detailed  questionnaire  to such  providers.  As the
responses to the  questionnaires  are  received,  the Company will  evaluate the
overall Y2K readiness of its third party provider relationships. However, the

                                     - 18 -

<PAGE>



Company does not have  sufficient  information  at the current time to determine
whether the computer  systems of its third party providers will be in compliance
with the Y2K requirements as the year 2000 approaches.

In the event that a major administrative system fails to operate properly due to
the Y2K  problem,  or the  Company  does  not  complete  the  necessary  systems
conversions  prior to January 1,  2000,  the  Company  has  developed  a plan to
respond to such a  contingency.  FIC  Computer  Services  has  assigned  certain
personnel to be members of an emergency  response team to resolve Y2K operations
problems. Additionally, insurance policies would be administered manually if the
necessary  systems  conversions  were not completed prior to January 1, 2000, or
subsequent Y2K operational  problems arise. Manual policy  administration  would
require  additional  personnel.   If  substantial  additional  personnel  become
necessary for manual policy administration,  the training and salary expenses of
such personnel  could  materially  affect the Company's  business and results of
operations.  The  Company is not able to  estimate  the  likelihood  that manual
administration  will be needed or the amount of any expense which it would incur
in connection with such manual administration.


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

Except  for  historical  factual  information  set  forth  in this  Management's
Discussion  and  Analysis,  certain  statements  made in this report are forward
looking and contain  information about financial results,  economic  conditions,
Y2K risks and other  risks and known  uncertainties.  The Company  cautions  the
reader that actual results could differ materially from those anticipated by the
Company, depending upon the eventual outcome of certain factors,  including: (1)
heightened  competition for new business,  (2)  significant  changes in interest
rates, (3) adverse  regulatory  changes  affecting the business of insurance and
(4) adverse changes in the Y2K readiness of the Company or its significant third
party providers.


                             Accounting Developments

In December, 1997, the Accounting Standards Executive Committee issued Statement
of Position  ("SOP") 97-3,  "Accounting by Insurance and Other  Enterprises  for
Insurance-Related  Assessments",  which  provides  guidance  on  accounting  for
insurance-related  assessments.  The Company adopted SOP 97-3, effective January
1,  1999.  The  adoption  of SOP  97-3  did not have a  material  impact  on the
Company's results of operations, liquidity or financial position.

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


                                     - 19 -

<PAGE>



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 $23.8 million at June
30, 1999 and $17.1  million at December 31, 1998.  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 market value of such assets was $652.0 million at June 30, 1999
and $672.6 million at December 31, 1998.

The fixed income  investments  of the Company  include  certain  mortgage-backed
securities.  The market value of such  securities was $219.1 million at June 30,
1999 and $250.8 million at December 31, 1998.  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 $12.8
million at June 30, 1999 and $7.1 million at December 31, 1998.

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.


                                     - 20 -

<PAGE>



               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES

Part II. Other Information

Item 1.  Legal Proceedings

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

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

Item 2.  Changes in Securities

                  None

Item 3.  Defaults Upon Senior Securities

                  None

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

         The  Annual  Meeting  of  Shareholders  was held on May 18,  1999.  The
         matters voted on at the meeting were: (1) the election of directors and
         (2) the approval of the  Intercontinental  Life  Corporation 1999 Stock
         Option Plan.  All of the nominees  were  reelected  as  directors,  and
         Proposal No. 2 was approved by the shareholders.

         The voting tabulation as to each nominee was as follows:

                    Name                   In Favor                  Withheld

                  Bender, Robert           7,485,141                 545,616
                  Demgen, Jeffrey H.       7,485,141                 545,616
                  Fleron, Theodore A.      7,485,141                 545,616
                  Gilcrease, W. Lewis      7,464,949                 569,808
                  Grace, James M.          7,485,141                 545,616
                  Kosson, Richard          7,465,039                 569,718
                  Mitte, Roy F.            7,485,141                 545,616
                  Nash, Elizabeth          7,465,867                 568,890
                  Payne, Dr. Eugene E.     7,485,141                 545,616
                  Pruner, H. Gene          7,467,749                 567,008
                  Schmitt, Steven P.       7,485,141                 545,616

         The voting tabulation as to Proposal No. 2 was as follows:

                  In Favor                  Against                   Abstain
                  5,738,348                 1,473,294                 7,492


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, 1998  heretofore  filed by  Registrant  with the
                  Securities   and   Exchange   Commission,   which  is   hereby
                  incorporated by reference.

         (b)      Reports on Form 8-K:

                  Form 8-K dated June 29, 1999 as filed by  Registrant  with the
                  Securities   and   Exchange   Commission,   which  is   hereby
                  incorporated by reference.

                                     - 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 thereunto duly authorized.



                              INTERCONTINENTAL LIFE CORPORATION



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







Date: August 13, 1999

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