<PAGE>
 
                       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 Quarter Ended March 31, 1999 Commission File Number 0-11773


                                ALFA CORPORATION
                                ----------------
             (Exact name of registrant as specified in its charter)


Delaware                                                             063-0838024
--------------------------------------------------------------------------------
(State of Other Jurisdiction of                                   (IRS Employer 
Incorporation or Organization)                               Identification No.)

2108 East South Boulevard, Montgomery, Alabama  36116
(Mail:   P. O Box 11000, Montgomery, Alabama   36191-0001)
----------------------------------------------------------
(Address and Zip Code of Principal Executive Offices)

Registrant's Telephone Number
Including Area Code                                                (334)288-3900
                                                                   -------------

                 None
----------------------------------
Former name, former address and former fiscal year if changed since last report

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

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the close of the period covered by this report.


        Class                                         Outstanding March 31, 1999
-----------------------------                         --------------------------
Common Stock, $1.00 par value                              40,296,311 shares
<PAGE>
 
                                ALFA CORPORATION

                                      INDEX

Part I.           Financial Information                             Page No.
                  (Condensed Consolidated Unaudited)                --------

         Item 1.     Financial Statements

                  Balance Sheets - March 31, 1999 and
                  December 31, 1998                                     3     

                  Statements of Income, Three Months
                  ended March 31, 1999 and 1998                         4


                  Statements of Comprehensive Income, Three Months
                  ended March 31, 1999 and 1998                         5

                  Statements of Cash Flows, Three Months
                  ended March 31, 1999 and 1998                         6


                  Notes to Financial Statements                         7

         Item 2.

                  Management's Discussion and Analysis of
                  Financial Condition and Results of Operations        11      

         Item 3.

                  Market Risk Disclosures                              21


Part II. Other Information                                             22

         Item 6.

                  Exhibits and Reports on Form 8-K                     22

                                       2
<PAGE>
 
                               ALFA CORPORATION
                            CONSOLIDATED CONDENSED
                                BALANCE SHEETS
<TABLE> 
<CAPTION> 
                                                                   March 31,       December 31,
                                                                     1999              1998
                                                                   ---------       ------------
<S>                                                                <C>             <C>      
Assets                                                            (Unaudited)
  Investments:
     Fixed Maturities Held for Investment, at amortized cost
       (market value $1,447,774 in 1999 and $1,560,903 in 
       1998)                                                   $    1,366,061    $    1,471,113
     Fixed Maturities Available for Sale, at market value
       (amortized cost $783,461,346 in 1999 and $741,583,948
       in 1998)                                                   800,597,285       774,346,360
     Equity Securities, at market (cost $55,693,137
       in 1999 and $40,833,150 in 1998)                           114,011,689       103,055,465
     Mortgage Loans on Real Estate                                    372,978           404,432
     Investment Real Estate (net of accumulated
       depreciation of $1,131,251 in 1999 and
       $1,587,634 in 1998)                                          1,281,357         1,482,647
     Policy Loans                                                  39,829,450        38,645,185
     Other Long-term Investments                                  114,457,332       110,022,016
     Short-term Investments                                        58,454,657        54,637,029
                                                               --------------    --------------
       Total Investments                                        1,130,370,809     1,084,064,247
  Cash                                                              4,627,996         5,948,409
  Accrued Investment Income                                        12,231,844        11,394,940
  Accounts Receivable                                              10,781,795        23,378,825
  Reinsurance Balances Receivable                                   1,511,124         1,121,089
  Due from Affiliates                                               5,727,213         1,677,667
  Deferred Policy Acquisition Costs                               118,469,012       114,141,870
  Other Assets                                                      4,521,052         4,932,090
                                                               --------------    --------------
        Total Assets                                           $1,288,240,845    $1,246,659,137
                                                               ==============    ==============  
Liabilities
  Policy Liabilities and Accruals                              $  574,144,992    $  548,428,408
  Unearned Premiums                                               108,226,470       105,464,480
  Dividends to Policyholders                                        9,399,711         9,337,982
  Premium Deposit and Retirement Deposit Funds                      6,141,645         6,217,463
  Deferred Income Taxes                                            35,996,675        41,788,715
  Other Liabilities                                                63,474,830        44,677,579
  Due to Affiliates                                                                     318,113
  Commercial Paper                                                 68,173,524        57,259,518
  Notes Payable                                                       105,702           106,765
  Notes Payable to Affiliates                                       9,160,705         9,438,129
                                                               --------------    --------------
        Total Liabilities                                         874,824,254       823,037,152
                                                               --------------    --------------
Commitments and Contingencies (Note 3)
Stockholders' Equity
  Preferred Stock, $1 par value
     Shares authorized: 1,000,000
     Issued: None
  Common Stock, $1 par value
     Shares authorized:  110,000,000
     Issued:  41,891,512
     Outstanding:  1999 - 40,296,311; 1998 - 40,879,911            41,891,512        41,891,512
  Capital in Excess of Par Value                                   22,599,952        22,355,934
  Accumulated Other Comprehensive Income:                          46,213,422        57,577,202
  Retained Earnings                                               317,818,117       306,268,833
  Treasury Stock: at cost (1999-1,595,201 shares; 
    1998-1,011,601 shares)                                        (15,106,412)       (4,471,496)
                                                               --------------    --------------
        Total Stockholders' Equity                                413,416,591       423,621,985
                                                               --------------    --------------
        Total Liabilities and
        Stockholders' Equity                                   $1,288,240,845    $1,246,659,137
                                                               ==============    ============== 
</TABLE> 
 
The accompanying notes are an integral part of these consolidated condensed
unaudited financial statements.

                                       3
<PAGE>
 
                               ALFA CORPORATION
                       CONSOLIDATED CONDENSED UNAUDITED
                             STATEMENTS OF INCOME
 
 
                                                          Three Months Ended
                                                                March 31,
                                                     --------------------------
                                                         1999          1998
                                                     ------------  -------------
Revenues
  Premiums - Property and Casualty Insurance         $ 87,704,624  $ 84,711,832
  Premiums and Policy Charges - Life Insurance         12,672,446    12,324,677
  Net Investment Income                                16,394,194    15,518,593
  Realized Investment Gains                             5,479,084     2,578,668
  Other Income                                            573,508       619,219
                                                     ------------  ------------

    Total Revenues                                    122,823,856   115,752,989
                                                     ------------  ------------
 
Benefits and Expenses
  Benefits & Settlement Expenses                       69,825,805    68,900,453
  Dividends to Policyholders                              924,151       901,577
  Amortization of Deferred Policy
    Acquisition Costs                                  14,832,838    14,355,607
  Other Operating Expenses                             13,646,096     8,185,752
                                                     ------------  ------------
 
    Total Expenses                                     99,228,890    92,343,389
                                                     ------------  ------------
 
Income Before Provision for Income Taxes               23,594,966    23,409,600
 
Provision for Income Taxes                              7,314,389     7,349,358
                                                     ------------  ------------
 
    Net Income                                       $ 16,280,577  $ 16,060,242
                                                     ============  ============
 
Net Income Per Share - Basic and Diluted             $       0.40  $       0.39
                                                     ============  ============
 
Operating Income                                     $ 12,719,172  $ 14,384,108
 
Operating Income Per Share - Basic and Diluted       $       0.31  $       0.35
                                                     ============  ============
 
Average Shares Outstanding - Basic                     40,734,802    40,796,961
 
Average Shares Outstanding - Diluted                   41,052,769    41,054,230
                                                     ============  ============
 
 
The accompanying notes are an integral part of these consolidated condensed
unaudited financial statements.
 

                                       4
<PAGE>
 
                               ALFA CORPORATION
                       CONSOLIDATED CONDENSED UNAUDITED
                      STATEMENTS OF COMPREHENSIVE INCOME
 
 
                                                          Three Months Ended
                                                                March 31,
                                                     --------------------------
                                                         1999          1998
                                                     ------------  -------------
 
Net Income                                           $ 16,280,577  $ 16,060,242
Other Comprehensive Income, net of tax:
 Unrealized Investment Gain (Loss) on Securities 
      Available for Sale                               (7,802,375)   10,240,843
 Less:  Realized Investment Gains                       3,561,405     1,676,134
                                                     ------------  ------------
   Total Other Comprehensive Income (Loss)            (11,363,780)    8,564,709
                                                     ------------  ------------
 
        Total Comprehensive Income                   $  4,916,797  $ 24,624,951
                                                     ============  ============
 
The accompanying notes are an integral part of these consolidated condensed
unaudited financial statements.

                                       5

<PAGE>
 
                               ALFA CORPORATION
                       CONSOLIDATED CONDENSED UNAUDITED
                           STATEMENTS OF CASH FLOWS
 
<TABLE> 
<CAPTION> 
  
                                                                Three Months Ended
                                                                     March 31,
                                                             --------------------------
                                                                 1999           1998
                                                             -----------    -----------
<S>                                                          <C>                <C> 
Cash Flows From Operating Activities:                
  Net Income                                                $ 16,280,577   $ 16,060,242
                                                     
  Adjustments to Reconcile Net Income to Net Cash    
  Provided by Operating Activities:                  
    Policy Acquisition Costs Deferred                        (17,878,373)   (16,752,518)
    Amortization of Deferred Policy Acquisition Costs         14,832,838     14,355,607
    Depreciation and Amortization                                258,994        864,956
    Provision for Deferred Taxes                               1,674,316        466,376
    Interest on Policyholders' Funds                           4,382,338      3,702,501
    Net Realized Investment Gains                             (5,479,084)    (2,578,668)
    Other                                                       (736,055)         4,037
    Changes in Operating Assets and Liabilities:     
      (Increase) in Accrued Investment Income                   (836,904)      (216,276)
      Decrease in Accounts Receivable                            320,481        842,184
      (Increase) in Reinsurance Balances Receivable             (390,035)      (228,829)
      (Increase) in Amounts Due From Affiliates               (4,049,546)    (5,754,575)
      (Decrease) in Amounts Due to Affiliates                   (318,113)           --
      Decrease in Other Assets                                   411,038        304,182
      Increase in Liability for Policy Reserves                4,535,383      3,684,050
      Increase in Liability for Unearned Premiums              2,761,990      3,220,618
      (Decrease) in Amounts Held for Others                      (14,089)      (137,019)
      Increase in Other Liabilities                           13,934,897      8,458,335
                                                            ------------   ------------ 
       Net Cash Provided by Operating Activities              29,690,653     26,295,203
                                                            ------------   ------------ 
                                                     
Cash Flows From Investing Activities:                
    Maturities and Redemptions of Fixed Maturities   
       Held for Investment                                       105,241        147,739
    Maturities and Redemptions of Fixed Maturities   
       Available for Sale                                     26,092,317     11,936,077
    Maturities and Redemptions of Other Investments           29,703,968     45,336,811
    Sales of Fixed Maturities Available for Sale                 493,750     16,049,438
    Sales of Other Investments                                22,585,569     17,690,248
    Purchase of Fixed Maturities Available for Sale          (67,510,352)   (50,155,594)
    Purchase of Other Investments                            (68,163,701)   (45,572,794)
    Net (Increase) in Short-term Investments                 (15,064,547)    (9,303,150)
    Net Decrease in Receivable/Payable on Securities          28,576,030        503,815
                                                            ------------   ------------ 
       Net Cash (Used in) Investing Activities               (43,181,725)   (13,367,410)
                                                            ------------   ------------ 
                                                     
Cash Flows From Financing Activities:                
    Increase (Decrease) in Commercial Paper                   10,914,006    (26,071,799)
    (Decrease) in Notes Payable                                   (1,063)    (1,870,296)
    (Decrease) in Notes Payable to Affiliates                   (277,424)      (118,860)
    Stockholder Dividends Paid                                (4,602,255)    (4,079,832)
    Purchase of Treasury Stock                               (10,746,066)           --
    Proceeds from Exercise of Stock Options                      267,900        239,700
    Deposits of Policyholders' Funds                          26,909,937     25,690,284
    Withdrawal of Policyholders' Funds                       (10,294,376)    (9,401,838)
                                                            ------------   ------------ 
       Net Cash Provided by (Used in) Financing      
         Activities                                           12,170,659    (15,612,641)
                                                            ------------   ------------ 
Net (Decrease) in Cash                                        (1,320,413)    (2,684,848)
Cash - Beginning of Period                                     5,948,409      5,820,597
                                                            ------------   ------------ 
Cash - End of Period                                        $  4,627,996   $  3,135,749
                                                            ============   ============
Supplemental Disclosures of Cash Flow Information
Cash Paid as of March 31 for:
    Interest                                                $    728,113   $  1,283,292
    Income Taxes                                            $          0   $          0
</TABLE> 
 
The accompanying notes are an integral part of these consolidated condensed
unaudited financial statements
 
                                       6
<PAGE>
 
                                ALFA CORPORATION
         NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
                                 March 31, 1999

1.  Significant Accounting Policies
    -------------------------------

    In the opinion of the Company, the accompanying consolidated condensed
unaudited financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly its financial position,
results of operations and cash flows. The accompanying financial statements have
been prepared on the basis of generally accepted accounting principles. A
summary of the more significant accounting policies related to the Company's
business is set forth in the notes to its audited consolidated financial
statements for the fiscal year ended December 31, 1998. The results of
operations for the three month period ended March 31, 1999 are not necessarily
indicative of the results to be expected for the full year. For purposes of this
report, the Company has defined operating income as income excluding net
realized investment gains. Certain reclassifications have been made to conform
previous classifications to March 31, 1999 classifications and descriptions.

2.  Pooling Agreement
    -----------------

    Effective August 1, 1987, the Company entered into a property and casualty
insurance Pooling Agreement (the "Pooling Agreement") with Alfa Mutual Insurance
Company (Mutual), and other members of the Mutual Group. The Mutual Group is a
direct writer primarily of personal lines of property and casualty insurance in
Alabama. The Company's subsidiaries similarly are direct writers in Georgia and
Mississippi. Both the Mutual Group and the Company write preferred risk
automobile, homeowner, farmowner and mobile home insurance, fire and allied
lines, standard risk automobile and homeowner insurance, and a limited amount of
commercial insurance, including church, and businessowner insurance. Under the
terms of the Pooling Agreement, the Company cedes to Mutual all of its property
and casualty business. All of the Mutual Group's direct property and casualty
business (together with the property and casualty business ceded by the Company)
is included in the pool. Until September 30, 1994, Mutual retroceded 50% of the
pooled premiums, losses, loss adjustment expenses and other underwriting
expenses to the Company while retaining 50% of these amounts itself. On October
1, 1994, the Company increased its participation in the Pooling Agreement.
Mutual currently retrocedes 65% of the pool to the Company and retains 35%
within the Mutual Group. On October 1, 1996, the Pooling Agreement was amended
in conjunction with the restructuring of the Alfa Insurance Group's catastrophe
protection program. Effective November 1, 1996, the allocation of catastrophe
costs among the members of the pool was changed to better reflect the economics
of catastrophe finance. The amendment limits Alfa Corporation's participation in
any single catastrophic event or series of disasters to its pool share (65%) of
$10 million unless the loss exceeds $249 million on a 100% basis in which case
the Company's share in the loss would be based upon its amount of surplus
relative to the other members of the group. Currently, the Company's share of
losses exceeding $249 million would be 13%. The change allows the catastrophe
reinsurance buying decision to be made on a group basis which will benefit each
member of the group. The Company's participation in the Pooling Agreement may be
changed or terminated without the consent or approval of the Company's
shareholders, and the Pooling Agreement may be terminated by any party thereto
upon 90 days notice.

                                       7
<PAGE>
 
(Note 2. Continued)

     The following table sets forth the premiums and losses ceded to and assumed
from the pool for the three month periods ended March 31, 1999 and 1998:

                              Three Months Ended March 31,
                              ----------------------------
                                 1999             1998
                              ----------------------------
                                    (in thousands)

Premiums ceded to pool        $14,424            $13,851
Premiums assumed from pool    $88,011            $85,003
Losses ceded to pool          $10,211            $ 9,941
Losses assumed from pool      $54,620            $53,431

     The Alfa Group incurred no pooled catastrophe losses in the first three
months of 1999 or 1998.

3.  Contingent Liabilities
    ----------------------

    The property and casualty subsidiaries have entered into the reinsurance
pooling agreement with Alfa Mutual Insurance Company and its affiliates as
discussed in Note 2. Should any member of the affiliated group be unable to meet
its obligation on a claim for a policy written by the Company's property and
casualty subsidiaries, the obligation to pay the claim would remain with the
Company's subsidiaries.

     The liability for estimated unpaid property and casualty losses and loss
adjustment expenses is based upon an evaluation of reported losses and on
estimates of incurred but not reported losses. Adjustments to the liability
based upon subsequent developments are included in current operations.

    Year 2000 is a critical data management issue which could have substantial
consequences for companies worldwide because of the use of only two digits in
the date field that may cause many computer applications to fail completely or
create erroneous results by the year 2000 unless corrective measures are taken.
Over the past five years, the Company has devoted a significant amount of time
and resources to the issue of year 2000 as it relates to the Company's operating
systems and information technology applications as well as its non- operations
applications. The Company has identified its mission critical systems and many
other year 2000 issues. At March 31, 1999, the Company believes it has
substantially completed the identification and programming remediation steps
required to make its mission critical systems and other systems year 2000
compliant. In addition, the Company estimates it is approximately 95% complete
with actual application and scenario remediation and believes it will be 100%
complete with all year 2000 remediation efforts during the second quarter of
1999. To date the Company has incurred total costs of $2.2 million related to
year 2000 efforts, of which $500,000 was incurred during the first quarter of
1999. To the extent the year 2000 issues are not corrected timely and
successfully, the Company's ability to process its business and pay its claims
timely could be impacted. Such an event could have material adverse consequences
on future financial conditions and results of operations. The Company has begun
the process of developing a contingency plan should an adverse year 2000 issue
occur. As part of the contingency plan, the Company expects to address its
ability to conduct business in environments experiencing both limited and
extensive adverse conditions resulting from the year 2000 issue. It expects to
have such a plan in place by the end of the third quarter of 1999.

                                       8
<PAGE>
 
     Certain legal proceedings involving policyholders and agents are in process
at March 31, 1999.  Costs for these and similar legal proceedings including 
accruals for outstanding cases were $1.8 million in the first quarter 1999 and 
$567,000 in the similar period in 1998.  Such costs totaled $5.2 million in 
1998, $3.6 million in 1997 and $2.7 million in 1996.  These proceedings involve 
alleged breaches of contract, torts, including bad faith and fraud claims and 
miscellaneous other causes of action.  These lawsuits involve claims for 
punitive damages.  The likelihood or extent of a punitive damage award in any 
one of these cases is not possible to predict.

     Approximately 86 legal proceedings against Alfa Life Insurance Corporation 
involving policyholders and agents are in process at March 31, 1999.  Of the 86 
proceedings, 12 were filed in the first quarter of 1999, 50 were filed in 1998, 
9 were filed in 1997, 11 were filed in 1996, and 4 were filed in 1995.  Of the 
50 legal proceedings filed in 1998, two plaintiff's law firms accounted for 47 
of the filings.  These same two firms accounted for 8 of the 12 filings in the 
first quarter of 1999.  Currently, three of the proceedings against Alfa Life 
Insurance Corporation have gone to trial.  In two of the proceedings, the jury 
awarded the plaintiffs compensatory and punitive damages against Alfa Life 
Insurance Corporation.  The first jury verdict has been appealed and the second 
verdict will be appealed to the Alabama Supreme Court.  In the third proceeding,
the jury returned a verdict for Alfa Life Insurance Corporation.  To date, no 
material losses from this type litigation have occurred.  However, it should be 
noted that in Alabama, where the company has substantial business, the frequency
and severity of large punitive damage awards by juries, bearing little or no 
relation to actual damages, continues to exist, creating the potential for 
unpredictable material adverse judgments in any given suit.

     In the first quarter of 1999, Alfa Life Insurance Corporation paid $500,000
in settlement of one particular lawsuit.  In addition, Alfa Life Insurance 
Corporation has reserved $2,000,000 to adjust the values on a certain group of 
policies ($350,000 of this amount was reserved prior to the first quarter of 
1999).

     Two purported class action lawsuits have been filed against Alfa Life 
Insurance Corporation, but they have not been certified at present.  One of 
those lawsuits was filed during the first quarter of 1999.

     Prior to the first quarter 1999, two purported class action lawsuits had 
also been filed against Alfa Financial Corporation, but they have not been 
certified at present.

     Also prior to the first quarter 1999, seven purported class action lawsuits
had been filed against the property and casualty mutual companies involving a 
number of issues and allegations, but none have been certified.  These lawsuits 
could affect Alfa Corporation because of a pooling agreement between the 
companies.

     Because no class has been certified in any of the class action cases 
mentioned above, no amounts have been reserved for them other than the 
anticipated expenses for attorney's fees and costs.  Future developments in 
these class actions and/or class certification could create the need for 
significant reserves and expenses in future statements.

                                       9
<PAGE>

4.  Accounting for Costs of Internal Use Software
    ---------------------------------------------

    In March 1998, SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use was issued. This SOP provides guidance
for determining whether costs of software developed or obtained for internal use
should be capitalized or expensed as incurred. In the past, the Company has
expensed all such costs when incurred. The company is currently involved in
certain technology projects that involve costs which should be capitalized under
SOP 98-1. In the first quarter of 1999, such costs totaled $331,145 or $0.01 per
share which has been capitalized.

5.  Financial Accounting Developments
    ---------------------------------

     The Financial Accounting Standards Board (FASB) issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities in June 1998. This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in investment
securities and other contracts, and for hedging activities. It requires than an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The accounting for changes in
the fair value of a derivative will be included in either earnings or other
comprehensive income depending on the intended use of the derivative instrument.
The Company is currently evaluating this standard, which is effective January 1,
2000.

                                       10
<PAGE>
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS
---------------------

     The following table sets forth consolidated summarized income statement
information for the three months ended March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                           Three  Months  Ended
                                                                March 31,
                                                -----------------------------------------
                                                       1999             1998     % Change
                                                -----------------------------------------
                                                     (in thousands except share and
                                                            per share data)
Revenues
<S>                                             <C>              <C>            <C>
Property and casualty insurance premiums        $    87,705      $    84,712           4 %
Life insurance premiums and policy charges           12,672           12,325           3 %
                                                -----------------------------------------
 Total premiums and policy charges              $   100,377      $    97,037           3 %
                                                =========================================

Net investment income                           $    16,394      $    15,519           6 %
                                                =========================================

Total revenues                                  $   122,824      $   115,753           6 %
                                                =========================================


Net Income
  Property and casualty insurance               $     9,516      $    11,192         (15)%
  Life insurance                                      2,418            3,521         (31)%
                                                -----------------------------------------
   Total insurance operations                        11,934           14,713         (19)%
Noninsurance operations                                 822              670          23 %
Net realized investment gains                         3,561            1,676         112 %
Corporate expenses                                      (36)            (999)         96 %
                                                -----------------------------------------
        Net income                              $    16,281      $    16,060           1%
                                                =========================================
        Net income per share - Basic            $      0.40      $      0.39           1%
                                                =========================================
        Net income per share - Diluted          $      0.40      $      0.39           1%
                                                =========================================

Weighted average shares outstanding - Basic      40,734,802       40,796,961          (0%)
                                                =========================================
Weighted average shares outstanding - Diluted    41,052,769       41,054,230          (0%)
                                                =========================================
</TABLE>

     Total premiums and policy charges increased 3% in the first three months of
1999. Growth in new sales and continued good persistency has been partially
offset by the impact of rate changes, particularly a 2.2% decrease in automobile
rates in December 1998. Net investment income increased 6% over the first three
months of 1999 while invested assets have grown 4.3% in the three months since
December 31, 1998 resulting from positive cash flows.

                                      11
<PAGE>
 
     The Company's net income increased 1% in the first three months of 1999 due
to a significant increase in realized investment gains. Offsetting these gains
were declines in operating income of 15% in the property casualty subsidiaries
and 31% in life operations due to higher legal, technology and administrative
costs in the period. Noninsurance operating income increased 23 % in the first
three months of 1999, due primarily to an increase in income in the consumer
finance subsidiary and in the construction subsidiary.


PROPERTY AND CASUALTY INSURANCE OPERATIONS
------------------------------------------

     The following table sets forth the components of property and casualty
insurance earned premiums, net underwriting income, GAAP basis loss, expense and
combined ratios, underwriting margin, net investment income and operating income
for the three months ended March 31, 1999 and 1998:

                                                   Three  Months  Ended
                                                         March 31,
                                            ----------------------------------
                                                1999         1998     % Change
                                            ----------------------------------
                                                       (in thousands)
Earned Premiums
  Personal lines                             $83,894        $80,964       3.6 %
  Commercial lines                             3,126          3,018       3.6 %
  Pools, associations and fees                   991          1,021      (3.0)%
  Reinsurance ceded                             (306)          (291)      5.2 %
                                             --------------------------------
      Total                                  $87,705        $84,712       3.5 %
                                             ================================
Net underwriting income                      $ 6,529        $ 9,491     (31.2)%
                                             ================================
Loss ratio                                      61.8%          63.0%
LAE ratio                                        5.5%           4.7%
Expense ratio                                   25.2%          21.1%
                                             --------------------------------
GAAP basis combined ratio                       92.6%          88.8%
                                             ================================

Underwriting margin                              7.4%          11.2%
                                             ================================

Net investment income                        $ 6,509        $ 6,329       2.8 %
                                             ================================

Pre-tax operating income                     $12,969        $15,870     (18.3)%
                                             ================================

Operating income, net of tax                 $ 9,516        $11,192     (15.0)%
                                             ================================

     Earned premiums increased 3.5% in the first three months of 1999. Growth
from new business was modest and premium growth is being impacted in 1999 by a
2.2% December 1998 rate decrease in automobile insurance, the company's primary
line of business.

                                      12
<PAGE>
 
     Operating results continued to be profitable with a 7.4% underwriting
margin, favorably impacted by improved loss ratios, primarily automobile loss
ratios, which improved throughout 1998 and were 61% in the first quarter of
1999. However, overall operating results declined 15.0% in the three month
period of 1999 compared to the highly profitable first quarter of 1998, due to
increased operating expenses. Continued technology expenses of approximately
$1.1 million reflect the Company's stated commitment to upgrade its systems for
future growth and improved efficiencies. Additionally, legal expenses in the
quarter and administrative expenses related to the retirement of two executives
also impacted expense ratios, which increased from 21.1% to 25.2% in the
comparative three month periods. The Company incurred no catastrophe losses in
either period due to favorable weather.

     Net investment income increased 2.8% in the first three months of 1999 in
the property casualty subsidiaries due to continued positive cash flow from
profitable underwriting results which increased invested assets 8.2% since March
31, 1998.

LIFE INSURANCE OPERATIONS
-------------------------

     The following table sets forth life insurance premiums and policy charges,
by type of policy, net investment income, benefits and expenses and life
insurance operating income for the three months ended March 31, 1999 and 1998:
                 
                                                   Three  Months  Ended
                                                         March 31,
                                            --------------------------------  
                                                1999         1998   % Change
                                            --------------------------------
                                                     (in thousands)
Premiums and policy charges
  Universal life policy charges              $ 3,224      $ 3,006         7 %
  Universal life policy charges - COLI         1,156        1,105         5 %
  Interest sensitive life policy charges       2,487        2,423         3 %
  Traditional life insurance premiums          5,596        5,542         1 %
  Group life insurance premiums                  209          249       (16)%
                                             ------------------------------
       Total                                 $12,672      $12,325         3 %
                                             ==============================
Net investment income                        $ 9,096      $ 8,561         6 %
                                             ==============================
Benefits and expenses                        $16,758      $14,357        17 %
                                             ==============================
Pretax operating income                      $ 3,323      $ 4,863       (32)%
                                             ==============================
Operating income, net of tax                 $ 2,418      $ 3,521       (31)%
                                             ==============================

     The Company's life insurance premiums and policy charges increased 3% in
the first three months of 1999 due to new business and good persistency. First
year collected premiums have increased over 20% in the first quarter of 1999 due
to increased new sales of term products and from increased sales of universal
life policies which also have been positively impacted by a term conversion
program in 1998. Total new annualized premium increased 14.5% in the first
quarter of 1999 and 10.3% in all of 1998.

                                      13
<PAGE>
 
     Life insurance operating income decreased approximately 31% in the first 
three months of 1999.  The primary factor that caused the decline in first 
quarter earnings was a $2.2 million impact of legal expenses and policy reserve
increases related to certain whole life policies sold more than 10 years ago. 
After thoroughly assessing those policies, the Company made a decision to adjust
the values of those policies and the reserves related to those policies.  The 
impact is included in the 17% increase in benefits and expenses.  Partially
offsetting this increase was a decline in death claims of approximately $645,000
or 14.8%.  The mortality ratio of actual to expected death claims improved from
110% in the first three months of 1998 to 85% in the first quarter of 1999.  In
spite of the decline in earnings, positive cash flows resulted in a 7.8%
increase in invested assets which increased investment income approximately 6%.

NONINSURANCE OPERATIONS
-----------------------

     Noninsurance earnings increased 23% in the first three months of 1999 due
to an increase of 13% or approximately $82,000 in net income in the consumer
finance subsidiary, and a 310% increase or approximately $72,000 in net income
in the construction subsidiary due to an increase in both commercial and
residential sales activity. The loan portfolio remained relatively unchanged at
$55.9 million and the overall portfolio yield rate decreased 16 basis points.
However, loan and leasing income increased 8.7% as a result of decreased 
borrowings and lower interest rates. The real estate sales subsidiary's earnings
were relatively flat.

CORPORATE
---------

     Interest expense on corporate debt is the primary corporate expense
incurred. Interest expense in the first three months of 1999 was approximately
$443,000 compared to approximately $464,000 for the similar period in 1998. The
decrease in interest expense is due to the decrease in the average balance
outstanding and the decrease in interest rates. The remainder of the corporate
expense represents general operating expenses which may fluctuate from time to
time. The decrease in other corporate expenses in the first three months is due
to the allocation of $1,500,000 of certain legal expenses and revenues to its
subsidiaries.

                                      14
<PAGE>
 
INVESTMENTS
-----------

     The Company has historically produced positive cash flow from operations
which has resulted in increasing amounts of funds available for investment and,
consequently, higher investment income. Investment income is also affected by
yield rates. Information about cash flows, invested assets and yield rates is
presented below for the three months ended March 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                               March 31,
                                                                          ------------------
                                                                          1999          1998
                                                                          ------------------

<S>                                                                       <C>           <C>  
Increase in cash flow from operations since March 31, 1998 and 1997       12.9%         39.9%
Increase in invested assets since January 1, 1999 and 1998                 4.3%          2.7%
Investment yield rate (annualized)                                         7.0%          7.0%
Increase in net investment income since March 31, 1998 and 1997            5.6%         11.0%
</TABLE>

        The 12.9% increase in positive cash flow from operations is due
primarily to continued profitable operating results in the Company's property
and casualty subsidiaries, which had $6.5 million in underwriting income in the
first quarter of 1999. The premium from the COLI plan in the life insurance
subsidiary is collected in February and has provided positive cash flow in the
first quarter of both periods. As a result of the overall positive cash flows,
invested assets grew 4.3% since January 1, 1999 and 7.8% since March 31, 1998
(based on amortized cost, which excludes the impact of SFAS 115), and net
investment income increased 5.6%. The overall yield rate, calculated using
amortized cost, has remained flat. The Company had net realized investment gains
of approximately $5.5 million in the first three months of 1999 and $2.6 million
in the similar period in 1998. These net gains are primarily from sales of
equity securities. Such realized gains are the result of market conditions and
therefore can fluctuate from period to period.

     The composition of the Company's investment portfolio is as follows at
March 31, 1999 and December 31, 1998:

                                         March 31,        December 31,
                                         -----------------------------  
                                          1999                1998
                                         -----------------------------
           Fixed maturities
             Taxable
               Mortgage backed (CMO's)    28.0%               27.9%
               Corporate bonds            28.6                30.2
                                         ----------------------------
                 Total taxable            56.6                58.1
             Tax exempts                  14.3                13.5
                                         ----------------------------
               Total fixed maturities     70.9                71.6
                                         ----------------------------
           Equity securities              10.1                 9.5
           Mortgage loans                   -                   -           
           Real estate                     0.1                 0.1
           Policy loans                    3.5                 3.6
           Other long term investments    10.2                10.2
           Short term investments          5.2                 5.0
                                         ----------------------------
                                         100.0%              100.0%
                                         ============================

                                       15
<PAGE>
 
    The majority of the Company's investment portfolio consists of fixed
maturities which are diverse as to both industry and geographic concentration.
Since year-end, the overall mix of investments has remained relatively stable
with changes due to market value fluctuations in equities and fixed maturities.

     The rating of the Company's portfolio of fixed maturities using the
Standard & Poor's rating categories is as follows at March 31, 1999 and December
31, 1998:

                                                   March 31,        December 31,
                                                     1999              1998
                                                   ----------------------------
       RATING
       ------
       AAA to A-                                    89.9%              89.2%
       BBB+ to BBB-                                  8.9                9.8
       BB+ and Below (Below investment grade)        1.2                1.0
                                                   ----------------------------
                                                   100.0%             100.0%
                                                   ----------------------------

     One hundred percent of the fixed maturity portfolio was rated by an outside
rating service. No securities were rated by Company management. The Company
considers bonds with a quality rating of BB+ and below to be below investment
grade or high yield bonds (also called junk bonds).

     At March 31, 1999, approximately 39.5% of fixed maturities were
mortgage-backed securities. Such securities are comprised of Collateralized
Mortgage Obligations (CMO's) and pass through securities. Based on reviews of
the Company's portfolio of mortgage-backed securities, the impact of prepayment
risk on the Company's financial position is not believed to be significant. At
March 31, 1999 the Company's total portfolio of fixed maturities had gross
unrealized gains of $29,773,130 and gross unrealized losses of $12,555,478.
Securities are priced by nationally recognized pricing services or by
broker/dealer securities firms. No securities were priced by the Company.

     During the first three months of 1999, the Company sold approximately
$494,000 in fixed maturities available for sale. These sales resulted in gross
realized losses of $128,828. During the first three months of 1998 the Company
sold approximately $16.0 million in fixed maturities available for sale. These
sales resulted in gross realized losses of $11,428.

     The Company monitors its level of investments in high yield fixed
maturities and equity investments held in issuers of high yield debt securities.
Management believes the level of such investments is not significant to the
Company's financial condition. At March 31, 1999, the Company had unrealized
gains of approximately $874,000 in such investments.

    In the first three months of 1999, the Company wrote down two equity
securities totaling $179,922, whose declines in value were deemed to be other
than temporary. At March 31, 1999 there were no nonperforming bonds in the
portfolio.

     The Company's investment in other long term investments consists primarily
of loans originated by the consumer finance subsidiary. These loans are
collateralized by automobiles and other property. At March 31, 1999 the
delinquency ratio on the portfolio was 1.55%, down from 2.04% at December 31,
1998. No loans

                                      16
<PAGE>
 
were charged off in the first quarter of 1999. At March 31, 1999, the Company
maintained an allowance for loan losses of $584,178 or approximately 1.2% of the
outstanding loan balance. Long term investments also include assets leased under
operating leases, partnership investments and certain other investments.

INCOME TAXES
------------

     The slight decrease in income tax expense in the first three months of 1999
is the result of the decrease in operating income before provision for income
taxes, which declined $2.7 million due primarily to the impact of increased
operating expenses. The effective tax rate in the first three months of 1999 was
31.0% compared to 31.9% for the full year 1998 and 31.4% for the first three
months of 1998.

IMPACT OF INFLATION
-------------------

    Inflation increases consumers' needs for both life and property and
casualty insurance coverage. Inflation increases claims incurred by property and
casualty insurers as property repairs, replacements and medical expenses
increase. Such cost increases reduce profit margins to the extent that rate
increases are not maintained on an adequate and timely basis. Since inflation
has remained relatively low in recent years, financial results have not been
significantly impacted by inflation.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

    Alfa Corporation receives funds from its subsidiaries consisting of 
dividends, payments for funding federal income taxes, and reimbursement of 
expenses incurred at the corporate level for the subsidiaries. These funds are
used for paying dividends to stockholders, corporate interest and expenses, 
federal income taxes, and for funding additional investments in its 
subsidiaries' operations.

     Alfa Corporation's subsidiaries require cash in order to fund policy
acquisition costs, claims, other policy benefits, interest expense, general
operating expenses, and dividends to Alfa Corporation. The major sources of the
Company's liquidity are operations and cash provided by maturing or liquidated
investments. A significant portion of the Company's investment portfolio
consists of readily marketable securities which can be sold for cash. Based on a
review of the Company's matching of asset and liability maturities and on the
interest sensitivity of the majority of policies in force, management believes
the ultimate exposure to loss from interest rate fluctuations is not
significant.

     On October 25, 1993, the Company established a Stock Option Plan, pursuant
to which a maximum aggregate of 2,000,000 shares of common stock have been
reserved for grant to key personnel. The plan expires on October 24, 2003. The
Company granted 783,400 such options on October 25, 1993, 80,000 options on
March 28, 1994, 80,000 options on March 27, 1995, 80,000 options on April 18,
1996, 75,000 options on February 18, 1997 and 452,500 options on March 23, 1998.
The options ratably become exercisable annually over three years, and may not be
exercised after ten years after the date of award. At March 31, 1999, there had
been 138,799 options exercised, 997,739 options were exercisable and 72,268 had
been canceled leaving 521,368 options available for grant under the plan.

     In October 1989, the Company's Board of Directors approved a stock
repurchase program authorizing the repurchase of up to 2,000,000 shares of its
outstanding common stock in the open market or in negotiated transactions in
such quantities and at such times and prices as management may decide. In March
1999, the

                                      17
<PAGE>
 
Board increased the number of shares authorized for repurchase by 2,000,000.
During the first three months of 1999 the Company repurchased 606,400 shares at
a cost of $10,746,066. At March 31, 1999 the total repurchased was 1,726,000
shares at a cost of $15,796,307. The Company has reissued 138,799 treasury
shares as a result of option exercises.

     Total borrowings increased $10.6 million in the first three months of 1999
to $77.4 million. At March 31, 1999 the Company had approximately $68.2 million
in commercial paper at rates ranging from 4.92% to 4.93% with maturities ranging
from April 6, 1999 to April 23, 1999. The Company intends to continue to use the
commercial paper program to fund the consumer loan portfolio and other corporate
short term needs. Backup lines of credit are in place up to $100 million. The
Company has an A-1+, P-1 commercial paper rating from Standard & Poor's and
Moody's Investors Service. The commercial paper is guaranteed by an affiliate,
Alfa Mutual Insurance Company. In addition, the Company had $9.2 million in
short-term debt outstanding to affiliates at March 31,1999 with interest equal
to commercial paper rates payable monthly and $105,702 outstanding in other
short-term debt at a rate of 7.0%.

     Cash surrenders paid to policyholders on a statutory basis totaled $3.3
million in the first three months of 1999 and $2.9 million for the first three
months of 1998. This level of surrenders is within the Company's pricing
expectations. Historical persistency rates indicate a normal pattern of
surrender activity. The structure of the surrender charges is such that
persistency is encouraged. The majority of the policies in force have surrender
charges which grade downward over a 12 to 15 year period. In addition, the
majority of the in-force business is interest sensitive type policies which
generally have lower rates of surrender. At March 31, 1999 the total amount of
cash that would be required to fund all amounts subject to surrender was
approximately $307.0 million.

     The Company's business is concentrated geographically in Alabama, Georgia
and Mississippi. Accordingly, unusually severe storms or other disasters in
these contiguous states might have a more significant effect on the Company than
on a more geographically diversified insurance company. Unusually severe storms,
other natural disasters and other events could have an adverse impact on the
Company's financial condition and operating results. However, the Company's
current catastrophe protection program, which began November 1, 1996, reduced
the earnings volatility caused by such catastrophe exposures.

    Increasing public interest in the availability and affordability of
insurance has prompted legislative, regulatory and judicial activity in several
states. This includes efforts to contain insurance prices, restrict underwriting
practices and risk classifications, mandate rate reductions and refunds,
eliminate or reduce exemptions from antitrust laws and generally expand
regulation. Because of Alabama's low automobile rates as compared to rates in
most other states, the Company does not expect the type of punitive legislation
and initiatives found in some states to be a factor in its primary market in the
immediate future.

                                      18
<PAGE>
 
YEAR 2000
---------

     The Company initially started the identification of year 2000 issues in
1993 and 1994 and began its internal programming modifications in 1995. These
phases along with the testing have continued during the last three years. The
Company believes it has substantially completed the identification and
programming steps and at March 31, 1999 is approximately 95% complete with
actual application and scenario testing, whereby dates are manipulated and
results are compared for accuracy. Such testing and completion of internal
programming is currently scheduled to be completed in the third quarter of
1999. A summary of mission critical systems follows this section. In addition,
the Company has addressed the issues related to year 2000 in regards to
material relationships with third parties, vendors, suppliers, etc. and has
identified such providers, surveying their efforts and requesting written
assurances that year 2000 issues have been addressed. Of the vendor operating
system software identified during this process, approximately 90% of the
programs have been labeled as "year 2000 compliant" by the vendors. In the event
that such software fails despite written assurances and internal testing, the
Company expects to work closely with the vendors to find a remedy in a timely
fashion. Also, the Company is continuing to review all significant
non-information technology systems for year 2000 compliance. The most
significant such system, the telephone system, has already been determined to be
year 2000 compliant. These efforts as well as the final phase, follow-up on any
unresolved year 2000 issues, are expected to be completed during the first half
of 1999.

     The Company has not utilized any year 2000 solution providers in addressing
compliance of its mainframe systems. To date, the issues have been addressed
with internal resources. However, the Company has contracted with external
consultants to assist in the review and updating of its personal computer
systems and associated hardware and software. Due to the longevity of the
process, the number of employees and resources devoted to the efforts and the
time spent, it is not practicable to determine precisely the total costs
attributable to the year 2000 issue. These costs have been expensed as incurred
throughout the process. However, the Company estimates that to date,
approximately $2.2 million has been spent on year 2000 efforts, with
approximately $500,000 expensed in the first three months of 1999. Future costs,
including almost $300,000 for the external consultant costs of the personal
computer systems reviews and $400,000 for payment processing software, are
currently anticipated to total $1.0 million, for a total estimated cost of year
2000 efforts of $3.1 million. The Company has absorbed the costs into its
operations with no significant adverse impact on its financial condition or
results of operations. The resources utilized have caused some normal
operational enhancements and systems development to be deferred or delayed.
However, any systems maintenance or statutory required updates have not been
affected.

     To the extent the year 2000 issues are not corrected timely and
successfully, the Company's ability to process its business and pay its claims
timely could be impacted. Such an event could have material adverse consequences
on future financial condition and results of operations. The Company has begun
the process of developing a contingency plan should an adverse year 2000 issue
occur. As part of the contingency plan, the Company expects to address its
ability to conduct business in environments experiencing both limited and
extensive adverse conditions resulting from the year 2000 issue. It expects to
have such a plan in place by the end of the third quarter of 1999.

                                      19
<PAGE>
 
                       SUMMARY OF MISSION CRITICAL SYSTEMS

                                             Remediation/   System       Goal
Mission Critical Systems      Research       Programming    Testing      Date
--------------------------------------------------------------------------------
Accounting                    Completed      Completed      Completed    N/A
--------------------------------------------------------------------------------
Agent Compensation            Completed      Completed      Completed    N/A    
--------------------------------------------------------------------------------
Claims                        Completed      Completed      Completed    N/A
--------------------------------------------------------------------------------
Investment Management         Completed      Completed      Completed    N/A
--------------------------------------------------------------------------------
Life Policy Administration    Completed      Completed      Completed    N/A    
--------------------------------------------------------------------------------
Loan Processing               Completed      Completed      Started      7/31/99
--------------------------------------------------------------------------------
Payment Processing            Completed      Completed      Completed    N/A    
--------------------------------------------------------------------------------
Payroll Processing            Completed      Completed      Completed    N/A
--------------------------------------------------------------------------------
Personal Computers - Field    Completed      Completed      Completed    N/A    
--------------------------------------------------------------------------------
Personal Computer - Based
Field Programs                Completed      Completed      Started      6/30/99
--------------------------------------------------------------------------------
Personal Computers -
Home Office                   Completed      Started        Started      6/25/99
--------------------------------------------------------------------------------
Postal Software               Completed      Completed      Completed    N/A
--------------------------------------------------------------------------------
Property/Casualty
Policy Administration         Completed      Completed      Completed    N/A
--------------------------------------------------------------------------------

                                      20
<PAGE>
 
FINANCIAL ACCOUNTING DEVELOPMENTS

     The Financial Accounting Standards Board (FASB) issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities in June 1998. This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in investment
securities and other contracts, and for hedging activities. It requires than an
entity recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The accounting for changes in
the fair value of a derivative will be included in either earnings or other
comprehensive income depending on the intended use of the derivative instrument.
The Company is currently evaluating this standard, which is effective January 1,
2000.

INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

     Any statement contained in this report which is not a historical fact, or
which might otherwise be considered an opinion or projection concerning the
Company or its business, whether express or implied, is meant as and should be
considered a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are based
on assumptions and opinions concerning a variety of known and unknown risks,
including but not necessarily limited to changes in market conditions, natural
disasters and other catastrophic events, increased competition, changes in
availability and cost of reinsurance, changes in governmental regulations, and
general economic conditions, as well as other risks more completely described in
the Company's filings with the Securities and Exchange Commission. If any of
these assumptions or opinions prove incorrect, any forward-looking statements
made on the basis of such assumptions or opinions may also prove materially
incorrect in one or more respects.

ITEM 3.  MARKET RISK DISCLOSURES

     The Company's Annual Report filed on Form 10-K with the Securities and 
Exchange Commission includes quantitative and qualitative market risk disclosure
information.  Since December 31, 1998, there have been no significant changes in
these disclosures.

                                      21
<PAGE>
 
                           PART II. OTHER INFORMATION



Item 6.
-------

     EXHIBITS AND REPORTS ON FORM 8-K
     --------------------------------  

    None.

                                      22
<PAGE>
 
                                  SIGNATURES



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


                                                  ALFA CORPORATION



Date   5/17/99             By: /s/ Jerry A. Newby
    ----------------           -------------------------------------
                                      Jerry A. Newby
                                      President



Date   5/17/99             By: /s/  Donald Price
    ----------------           -------------------------------------   
                                      Donald Price
                                      Senior Vice President, Finance
                                      (Chief Financial Officer)



Date   5/17/99             By: /s/  John Holley
    ----------------           -------------------------------------
                                      John Holley
                                      Vice President, Finance
                                      (Chief Accounting Officer)


                                      23