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 September 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: 8,805,912

                                      - 1 -


<PAGE>






               INTERCONTINENTAL LIFE CORPORATION AND SUBSIDIARIES

                                      INDEX

                                                             PAGE NO.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

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

Consolidated Statements of Cash Flows
     For the three and nine month periods ended
     September 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............................................................22

Signature Page...............................................................24

                                      - 2 -


<PAGE>




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

                                                 September 30,          December 31,
                                                     1999                    1998
                                                  (Unaudited)
<S>                                                    <C>                     <C>

   ASSETS

Investments:

Fixed maturities, at
       Amortized cost (market value
        Approximates $3,066 and $3,059)          $      3,090       $         3,005

Fixed maturities available for sale,
       at market value (amortized cost
       $410,036 and $435,130)                         409,415               450,149

Equity securities, at market value
       (cost approximates $338)                         1,889                 3,121

Policy loans                                           52,711                53,614

Mortgage loans                                         10,016                10,332

Invested real estate and other invested
       assets                                          13,838                10,025

Short-term investments                                190,016               171,840
                                              ---------------       ---------------

       Total investments                              680,975               702,086

Cash and cash equivalents                              11,583                12,206

Notes receivable from affiliates                       43,034                47,645

Accrued investment income                               8,080                 7,768

Agent advances and other receivables                   20,867                20,753

Reinsurance receivables                                18,064                18,847

Property and equipment, net                             3,620                 3,470

Deferred policy acquisition costs                      34,659                31,953
Present value of future profits of
  acquired businesses                                  40,783                43,666

Other assets                                           11,711                10,643

Separate account assets                               443,404               451,211
                                              ---------------       ---------------

       Total assets                           $     1,316,780       $     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>

                                                              September30,              December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY                              1999                      1998
                                                               (Unaudited)
<S>                                                                <C>                      <C>

Liabilities:

Policy liabilities and contractholder
 deposit funds:
Future policy benefits                                   $          133,861        $        135,463

Contractholder deposit funds                                        533,700                 545,908

Unearned premiums                                                     2,104                   2,124
Other policy claims and benefits payable                              9,631                  10,856
                                                         ------------------        ----------------
                                                                    679,296                 694,351

Other policyholders' funds                                            3,065                   3,056

Deferred federal income taxes                                        25,129                  30,185

Other liabilities                                                    17,425                  20,127

Separate account liabilities                                        439,737                 448,294
                                                         ------------------        ----------------
    Total Liabilities                                             1,164,652               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                  15,000
                                                         ------------------        ----------------
    15,000,000 shares authorized, issued                             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; 10,819,478 and 5,385,739
    shares issued, 8,805,912 and 4,376,706
    shares outstanding in 1999
    and 1998, respectively                                            2,381                   1,185

Additional paid-in capital                                            4,465                   4,385

Accumulated other comprehensive income                                  604                  11,571

Retained earnings                                                   147,890                 140,356
                                                         ------------------        ----------------
                                                                    155,340                 157,497

Common treasury stock, at cost, 2,013,566 and
  1,009,033 in 1999 and 1998,  respectively                          (3,212)                 (3,262)
                                                         ------------------        ----------------

Total Shareholders' Equity                                          152,128                 154,235
                                                         ------------------        ----------------

Total Liabilities and Shareholders' Equity               $        1,316,780        $      1,350,248
                                                         ==================        ================
</TABLE>

        The accompanying notes are an integral part of the part of these
                        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
                                                          September 30,
                                                     1999                   1998

<S>                                                   <C>                     <C>
Revenues:


 Premium                                   $          2,446       $          2,629


 Net investment income                               12,209                 13,939


 Earned insurance charges                            10,161                 10,176
 Other                                                  483                    525
                                           ----------------       ----------------
                                                     25,299                 27,269

Benefits and expenses:

 Policyholder benefits and expenses                   7,048                  8,604

 Interest expense on contract holders
     deposit funds                                    7,524                  8,026

 Amortization of present value of future
     profits of acquired businesses                     995                  1,457


 Amortization of deferred policy
     acquisition costs                                  461                    407

 Operating expenses                                   4,328                  4,074

 Interest Expense                                       -0-                    124
                                           ----------------       ----------------
                                                     20,356                 22,692
                                           ----------------       ----------------
Income from operations                                4,943                  4,577

Provision for Federal Income Taxes                    1,808                  1,748
                                           ----------------       ----------------

Net Income                                 $          3,135       $          2,829
                                           ================       ================

Net income per share:
Basic:

    Weighted Average Common Stock
    outstanding                                       8,791                  8,750
                                           ----------------      -----------------

Basic Earnings Per Share                   $           0.36       $           0.33
                                           ================      =================

Diluted:
Common stock and common stock equivalents             8,817                  8,800
                                           ----------------      -----------------
 Diluted earnings per share                $           0.36       $           0.32
                                           ================      =================
</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>
                                                              Nine Months ended
                                                                September 30,
                                                         1999                  1998

<S>                                                       <C>                    <C>
Revenues:

 Premium                                     $           7,604        $         8,393

 Net investment income                                  38,084                 41,737

 Earned insurance charges                               30,308                 30,806
 Other                                                   2,266                  1,732
                                             -----------------        ---------------
                                                        78,262                 82,668


Benefits and expenses:

 Policyholder benefits and expenses                     23,642                 28,026
 Interest expense on contract holders
     deposit funds                                      23,599                 23,028
 Amortization of present value of future
     profits of acquired businesses                      2,883                  4,402
 Amortization of deferred policy
     acquisition costs                                   1,676                  1,380

 Operating expenses                                     12,682                 12,106

 Interest expense                                          -0-                    645
                                             -----------------        ---------------
                                                        64,482                 69,587
                                             -----------------        ---------------

Income from operations                                  13,780                 13,081

Provision for federal income taxes                       5,057                  4,725
                                             -----------------        ---------------
Net income                                   $           8,723        $         8,356
                                             =================        ===============
Net income per share (Note 14):
Basic:

        Weighted average common stock
         Outstanding                                     8,791                  8,750
                                            ------------------       ----------------

Basic Earnings Per Share                    $             0.99       $           0.95
                                            ==================       ================
Diluted:
Common stock and common stock equivalents                8,817                  8,800
                                            ------------------       ----------------

Diluted earnings per share                  $             0.99       $           0.95
                                            ==================       ================

</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
                                                                     September
CASH FLOWS FROM OPERATING                                    1999                  1998
ACTIVITIES
<S>                                                          <C>                    <C>

Net Income                                       $          3,135        $         2,829
Adjustments to reconcile net income to
       net cash (used in) provided by
       operating activities:

Amortization of present value of future
      profits of acquired businesses                          995                  1,457
Amortization of deferred policy
     acquisition costs                                        461                    407

Net gain on sale of investments                                73                     76

Depreciation                                                  120                    113

Financing costs amortized                                     -0-                     56

Changes in assets and liabilities:

Increase in accrued investment income                        (394)                  (120)
Decrease (increase) in agent advances and
     other  receivables                                     7,717                 (4,631)

Policy acquisition costs deferred                          (1,537)                (1,325)
Decrease in policy liabilities and
  contractholder deposit funds                             (3,944)                (2,464)

Dcrease in other policyholders' funds                         (16)                    (4)

Decrease (increase) in other liabilities                   (7,048)                 5,807

(Decrease) increase in deferred federal income
  taxes                                                      (997)                 2,050

Decrease (increase) in other assets                           882                 (4,138)

Other, net                                                 (4,419)                 2,619
                                                 ----------------        ----------------

Net cash (used in) provided by
 operating activities                            $         (4,972)       $         2,732
</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)

<TABLE>
<CAPTION>

                                                                    Nine Months ended
                                                                       September 30,
                                                              1999                    1998
                                                                  (unaudited)
<S>                                                            <C>                    <C>
CASH FLOWS FROM OPERATING
ACTIVITIES

Net Income                                        $           8,723        $         8,356
Adjustments to reconcile net income to
       net cash (used in) provided by
       operating activities:

Amortization of present value of future
      profits of acquired businesses                          2,883                  4,402

Amortization of deferred policy
     acquisition costs                                        1,676                  1,380

Net gain on sale of investments                                (149)                   -0-

Depreciation                                                    347                    321

Financing costs amortized                                       -0-                    111

Changes in assets and liabilities:

Increase in accrued investment income                          (312)                  (253)
Decrease (increase) in agent advances
 and other receivables                                          669                (12,593)

Policy acquisition costs deferred                            (4,382)                (4,173)
Decrease in policy liabilities and
 contractholder deposit funds                               (15,055)               (19,528)

Increase (decrease) in other policyholders'
 funds                                                            9                   (659)

(Decrease) increase in other liabilities                     (2,685)                 2,440

(Decrease) increase in deferred federal
 income taxes                                                (5,056)                 1,419

Increase in other assets                                     (1,068)                (5,017)

Other, net                                                     (710)                (1,072)
                                                  -----------------        ---------------

Net cash used in operating activities             $         (15,110)       $       (24,866)

</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)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months ended
                                                                       September 30,

                                                                  1999               1998
<S>                                                          <C>                      <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Investments purchased                              $        (27,343)         $          (52)
Proceeds from sales and maturities
 of investments                                              29,596                  22,424
Net change in short-term investments                          3,220                 (23,586)
Purchases & retirements of equipment                           (170)                   (722)
Decrease in notes receivable from affiliates                  1,537                   1,537
                                                   ----------------          --------------
Net cash provided by investing activities                     6,840                    (399)



CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of treasury stock                                       -0-                    -0-
Purchase of subsidiary                                           -0-                    -0-
Issuance of common stock                                          27                     21
Repayment of debit                                               -0-                 (3,564)
                                                   -----------------          -------------
Net cash provided by (used in)
 financing activities                                             27                 (3,543)
                                                   -----------------         --------------
Net increase in cash and
 cash equivalents                                              1,895                 (1,210)
Cash and cash equivalents, beginning
 of period                                                     9,688                  9,620
                                                   -----------------         --------------
Cash and cash equivalents, end of period           $          11,583         $        8,410
                                                   =================         ==============
</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>
                                                                          Nine Months ended
                                                                             September 30,
CASH FLOWS FROM INVESTING                                            1999                   1998
ACTIVITIES
<S>                                                                   <C>                     <C>
Investments purchased                                    $          (54,825)       $        (25,402)
Proceeds from sales and maturities of investments                    83,254                  57,810
Net change in short-term investments                                (18,176)                    347
Purchases & retirements of equipment                                   (497)                   (985)
Decrease in notes receivable from affiliates                          4,611                   4,610
                                                         ------------------        ----------------
Net cash provided by investing activities                            14,367                  36,380



CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of treasury stock                                               33                      0
Purchase of subsidiary                                                  -0-                 (1,322)
Issuance of common stock                                                 87                    141
Repayment of debt                                                       -0-                (10,964)
                                                         ------------------        ---------------
Net cash provided by (used in) financing activities                     120                (12,145)
                                                         ------------------        ---------------
Net decrease in cash and cash equivalents                              (623)                  (631)
Cash and cash equivalents, beginning of year                         12,206                  9,041
                                                         ------------------        ----------------
Cash and cash equivalents, end of period                 $           11,583        $         8,410
                                                         ==================        ===============
</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  income for the nine months  ended  September  30, 1999 and
September 30, 1998 is $ (2.2) million and $ 9.9 million, respectively.

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


<TABLE>
<CAPTION>


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

<S>                                          <C>                      <C>                 <C>

Balance at December 31, 1998         $        9,762          $        1,809      $       11,571
Current period change                       (10,167)                   (800)            (10,967)
                                     --------------          --------------      --------------
Balance at September 30, 1999        $         (405)         $        1,009      $          604
                                     ==============          ==============      ==============

</TABLE>



                                     - 11 -


<PAGE>




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 is 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 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 the Derivative Instruments and Hedging Activities- Deferral
of the Effective Date of FASB Statements 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  nine-month  period  ended  September  30, 1999,  InterContinental  Life
Corporation's  ("ILCO") net income was  $8,723,000  (basic  earnings and diluted
earnings of $0.99 per common  share) as compared to $8,356,000  (basic  earnings
and  diluted  earnings  of $0.95 per common  share) in the first nine  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 nine-month  period ended September 30, 1999, the Company's income before
federal  income taxes was  $13,780,000 on revenues of $78,262,000 as compared to
income of $13,081,000  on revenues of  $82,668,000  for the first nine 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 nine months of 1999 was $7.6
million,  as  compared  to $8.4  million  for the  first  nine  months  of 1998.
Reinsurance  premiums ceded were $1.9 million for the first nine months of 1999,
as compared to $2.5 million in the first nine months of 1998.

Earned insurance charges for the nine-month period ended September 30, 1999 were
$30.3  million,  as compared to $30.8 million for the same period in 1998.  This
source of revenues is related to the universal  life  insurance and annuity book
of business of the insurance subsidiaries of the Company.

The Company's  senior loan was fully  discharged  effective  September 30, 1998,
accordingly, there was no interest expense for the first nine months of 1999, as
compared to interest expense in the amount of $645,000 for the first nine months
of 1998.

As of September 30, 1999, the market value of the fixed maturities available for
sale  segment was $409.4  million as compared  to an  amortized  cost of $410.04
million,  or  an  unrealized  loss  of  $0.64  million.  The  decrease  reflects
unrealized  losses on such  investments  related to changes  in  interest  rates
subsequent  to the purchase of such  investments.  The net of tax effect of this
decrease  ($0.405  million at September  30,  1999) is included in  "Accumulated
other  comprehensive  income" 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.

For the three-month period ended September 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  5.89%,  as
compared to 7.08% in the 1998 period. The lapse rate with respect to traditional
(non-universal)   life  insurance   policies  also  decreased  from  the  levels
experienced in the second quarter of 1998. The rate for the  three-month  period
ended  September 30, 1999 was 8.56%,  as compared to 8.67% in the similar period
in 1998. The lapse rates experienced during these periods were within the ranges
anticipated by management.

                                     - 13 -


<PAGE>



                        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 September 30, 1999, the outstanding principal balance of the
Surplus Debentures was $1.5 million and $6.9 million, respectively. The terms of
the  latter  required  final  payment  of the  remaining  principal  balance  on
September 30, 1999.  Effective September 28, 1999, the Company and Investors- NA
amended the payment schedule to provide payment of the remaining balance in four
installments,  with  the  final  installment  being  due  July  1,  2000.  Since
Investors-NA  is  domiciled  in the  State  of  Washington,  the  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 September  30,
1999,  the  statutory  surplus  of  Investors-NA  was $70.2  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

                                     - 14 -


<PAGE>



the greater of (i) 10% of the  policyholder  surplus or (ii) the  insurer's  net
gain  from  operations  for  the  previous  year.  As  of  September  30,  1999,
Investors-NA had earned surplus of $46.0 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 $17.6 million at September 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;  accordingly,  no prior approval was
required  for the  payment of the  dividend.  Advance  notice of the payment was
provided  to the  Indiana  Department  of  Insurance,  in  accordance  with  the
provisions of the Indiana Insurance Code.

ILCO's net cash flow used in  operating  activities  was $15.1  million  for the
nine-month period ended September 30, 1999, as compared to $24.8 million for the
first nine 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  September  30, 1999,  the  Company's  investment  assets  totaled  $681.0
million,  as compared to $702.1 million as of December 31, 1998. Total assets as
of September 30, 1999 ($1.32  billion)  decreased  slightly from the level as of
December 31, 1998 ($1.35 billion).

The level of short-term investments at September 30, 1999 was $190.0 million, as
compared to $171.8 million at December 31, 1998.

Invested real estate and other invested  assets  increased from $10.0 million at
December 31, 1998 to $13.8  million as of September  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 the first phase.

The fixed maturities  available for sale portion of invested assets at September
30,  1999  was  $409.4  million.  The  amortized  cost of the  fixed  maturities
available  for sale  segment  as of  September  30,  1999 was  $410.04  million,
representing a net  unrealized  loss of $0.405  million.  This  unrealized  loss
principally  reflects  changes in  interest  rates from the date the  respective
investments  were  purchased.  To reduce the exposure to interest  rate changes,
portfolio  investments  are selected so that  diversity,  maturity and liquidity
factors approximate the duration of associated policyholder liabilities.

The  assets  held  by  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."

                                     - 15 -


<PAGE>


The portfolio includes investments in mortgage-backed  securities which includes
collateralized   mortgage   obligations   ("CMOs")   of   $182.1   million   and
mortgage-backed  pass-through securities of $30.7 million at September 30, 1999.
Mortgage-backed  pass-through  securities,  sequential  CMOs and support  bonds,
which  comprised  approximately  52.0%  of  the  book  value  of  the  Company's
mortgage-backed  securities at September  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  48.0% and sequential
and support  classes  represented  approximately  37.6% of the book value of the
Company's  mortgage-backed  securities at September  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  three  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 September  30, 1999 and December 31,  1998,  included a  non-material  amount
(0.1% 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. Of these
non-investment  grade  investments,  all  received an NAIC rating of "5" (lowest
quality).

The consolidated  balance sheets of the Company as of September 30, 1999 include
$43.0 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
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

                                     - 16 -

<PAGE>


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  utilizes its own  personnel  and  personnel of its
affiliated  company,  FIC  Computer  Services,   Inc.,  acquired  Y2K  compliant
operating  software,  and  engaged  the  assistance  of outside  consultants  to
facilitate the systems conversions and modifications.  The Company has completed
this system conversion,  except as it relates to the conversion of approximately
6,130 policies and additional testing of previously completed  conversions.  The
Company has increased the budget for the  implementation  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
September  30,  1999,   the  Company  has  incurred  an  after-tax   expense  of
approximately $33,800 in connection with the completion of the Plan.

                                     - 17 -


<PAGE>


Between  January 1, 1997 and  September  30,  1999,  the  Company  has  expended
approximately 78 % 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.  FIC Computer  Services  plans to
continue testing the completed  conversions and modifications  through December,
1999.

As of September 30, 1999,  FIC Computer  Services,  Inc.  estimated  that it had
completed the necessary  conversions  and  modifications  on the  administrative
systems  which  process  approximately  97% 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  16,900  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. As of June 30, 1999, the Lifecomm-A system  administered
approximately 57,140 active policies for Investors-NA. As of September 30, 1999,
the  conversion  of  all  but  approximately  6,130  active  policies  had  been
completed. The majority of those conversions were completed in November, and the
Company  expects  the  conversion  of the  remaining  Lifecomm-A  policies to be
completed  before the end of  November,  1999.  The  modification  of one of the
Company's  smaller systems which administers  approximately  2,100 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. Initial testing on such third-party software was completed in
October,  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 was completed in mid-November, 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

                                     - 18 -

<PAGE>


of such third  party  providers,  the  Company  has  developed  and  forwarded a
detailed questionnaire to such providers. The Company has received responses and
assurances of Y2K readiness from all of its mission critical external suppliers,
as  well  as  many  of its  non-mission  critical  suppliers.  The  receipt  and
evaluation of responses is on-going,  and the Company will  consider  whether to
continue  relationships  with  external  suppliers  who fail to  respond  to the
questionaire.

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." As 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.

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

                                     - 19 -


<PAGE>


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 $23.7  million at
September 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 $642.5 million
at September 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 $215.2 million at September
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 $12.3
million at September 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

                  None

ITEM 5.  OTHER INFORMATION

                  On June 29, 1999,  ILCO  announced that its Board of Directors
                  has approved a stock repurchase plan. Under the plan, ILCO may
                  repurchase up to 5% of its issued and outstanding common stock
                  in the open  market or in  "block"  transactions,  within  the
                  meaning of Rule 10b-18  under the  Securities  Exchange Act of
                  1934, as amended. A more detailed  description of the plan was
                  included in a Form 8-K dated June 29,  1999 filed by ILCO.  As
                  of November 8, 1999, the Company has not  repurchased any ILCO
                  common stock pursuant to the plan.

                                     - 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: November 15, 1999

                                     - 23 -


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