<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 September 30, 1997  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 September 30, 1997
-----------------------------              --------------------------------
Common Stock, $1.00 par value                      40,786,712 shares
<PAGE>
 
                                ALFA CORPORATION

                                     INDEX
 
Part I.    Financial Information                                      Page No.
                                                                      --------
           (Condensed Consolidated Unaudited)
 
   Item 1.   Financial Statements
 
           Balance Sheets -- September 30, 1997 and
           December 31, 1996                                             3
 
           Statements of Income, Nine Months  and Three Months
           ended September 30, 1997 and 1996                             4
 
           Statements of Cash Flows, Nine Months
           ended September 30, 1997 and 1996                             5
 
 
           Notes to Financial Statements                                 6
 
   Item 2.
 
           Management's Discussion and Analysis of
           Financial Condition and Results of Operations                 8
 
Part II.   Other Information                                            16
 
   Item 6.
 
           Exhibits and Reports on Form 8-K                             16
  

                                       2
<PAGE>
                               ALFA CORPORATION
                            CONSOLIDATED CONDENSED
                                BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                        September 30,        December 31,
                                                                        ----------------------------------
                                                                             1997               1996
                                                                        ----------------------------------
                                                                         (Unaudited)
<S>                                                                     <C>                 <C>
Assets
  Investments:
     Fixed Maturities Held for Investment, at amortized cost
       (market value $2,261,726 in 1997 and $2,998,688 in 1996)         $    2,111,886      $    2,817,964
     Fixed Maturities Available for Sale, at market value
       (amortized cost $672,975,043 in 1997 and $591,859,469 in 1996)      699,740,706         610,324,605
     Equity Securities, at market (cost $57,753,842
       in 1997 and $59,763,634 in 1996)                                    113,189,251          96,007,650
     Mortgage Loans on Real Estate                                             614,837             826,480
     Investment Real Estate (net of accumulated
       depreciation of $1,477,514 in 1997 and
       $1,356,829 in 1996)                                                   1,758,525           1,855,972
     Policy Loans                                                           34,583,125          31,680,254
     Other Long-term Investments                                            97,576,790         102,297,440
     Short-term Investments                                                 32,089,585          40,206,951
----------------------------------------------------------------------------------------------------------
       Total Investments                                                   981,664,705         886,017,316
  Cash                                                                       1,226,986           4,424,123
  Accrued Investment Income                                                 10,803,347          10,032,275
  Accounts Receivable                                                        8,470,596           9,498,914
  Reinsurance Balances Receivable                                              950,150           1,689,654
  Due from Affiliates                                                        5,843,233           2,709,492
  Deferred Policy Acquisition Costs                                        105,383,698         100,094,079
  Other Assets                                                               4,376,586           4,864,302
----------------------------------------------------------------------------------------------------------
        Total Assets                                                    $1,118,719,301      $1,019,330,155
==========================================================================================================

Liabilities
  Policy Liabilities and Accruals                                         $489,436,699        $442,878,500
  Unearned Premiums                                                        101,228,448          92,945,366
  Dividends to Policyholders                                                 9,001,380           8,988,574
  Premium Deposit and Retirement Deposit Funds                               6,571,736           6,925,786
  Deferred Income Taxes                                                     34,340,110          24,686,336
  Other Liabilities                                                         33,752,202          32,974,237
  Commercial Paper                                                          63,118,262          73,580,963
  Notes Payable                                                              2,056,177           2,209,958
  Notes Payable to Affiliates                                               11,128,502          10,828,626
----------------------------------------------------------------------------------------------------------
        Total Liabilities                                                  750,633,516         696,018,346
----------------------------------------------------------------------------------------------------------
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:  40,786,712                                               41,891,512          41,891,512
  Capital in Excess of Par Value                                            21,281,323          21,281,323
  Net Unrealized Investment Gains
     (Less applicable deferred income taxes)                                50,465,102          33,926,747
  Retained Earnings                                                        259,075,518         230,839,897
  Treasury Stock: at cost (1,104,800 shares)                                (4,627,670)         (4,627,670)
----------------------------------------------------------------------------------------------------------
        Total Stockholders' Equity                                         368,085,785         323,311,809
----------------------------------------------------------------------------------------------------------
        Total Liabilities and
        Stockholders' Equity                                            $1,118,719,301      $1,019,330,155
==========================================================================================================
</TABLE>
                                                   
The accompanying notes are an integral part of these consolidated condensed 
unaudited financial statements.

                                       3



<PAGE>
<TABLE> 
<CAPTION> 
                                              ALFA CORPORATION
                                    CONSOLIDATED CONDENSED UNAUDITED
                                           STATEMENTS OF INCOME

                                                           Nine Months Ended            Three Months Ended
                                                             September 30,                 September 30,
                                                      ---------------------------   --------------------------
                                                           1997           1996          1997       1996
                                                      ---------------------------   --------------------------
<S>                                                   <C>            <C>            <C>          <C> 
Revenues
  Premiums and Policy Charges                         $276,643,529   $250,149,744   $ 93,919,207  $ 84,460,691
  Net Investment Income                                 42,432,029     40,433,481     14,515,423    13,959,538
  Realized Investment Gains                              6,116,996      5,207,103        898,970     2,358,009
  Other Income                                           1,561,290      1,615,408        432,588       565,567
---------------------------------------------------------------------------------   --------------------------
    Total Revenues                                     326,753,844    297,405,736    109,766,188   101,343,805
---------------------------------------------------------------------------------   --------------------------

Benefits and Expenses                                                                
  Benefits & Settlement Expenses                       200,500,912    202,720,199     66,404,515    62,349,302
  Dividends to Policyholders                             2,476,365      2,426,524        788,311       771,720
  Amortization of Deferred Policy                                                                   
    Acquisition Costs                                   41,709,622     37,574,852     14,049,617    13,016,938
  Other Operating Expenses                              23,120,546     22,077,872      8,342,438     7,294,687
---------------------------------------------------------------------------------   --------------------------

    Total Expenses                                     267,807,445    264,799,447     89,584,881    83,432,647
---------------------------------------------------------------------------------   --------------------------

                                                                                     
Income Before Provision for Income Taxes                58,946,399     32,606,289     20,181,307    17,911,158

Provision for Income Taxes                              18,546,209      9,583,435      6,528,037     5,626,952
---------------------------------------------------------------------------------   --------------------------

    Net Income                                         $40,400,190    $23,022,854   $ 13,653,270  $ 12,284,206
=================================================================================   ==========================

Net Income Per Share                                         $0.99          $0.56          $0.33         $0.30

=================================================================================   ==========================

Operating Income                                       $36,424,143    $19,638,237   $ 13,068,940  $ 10,751,500

Operating Income Per Share                                   $0.89          $0.48          $0.32         $0.26

=================================================================================   ==========================

Dividends Per Share                                        $0.2975          $0.29          $0.10       $0.0975

=================================================================================   ==========================

Average Shares Outstanding                              40,786,712     40,786,511     40,786,712    40,786,712

=================================================================================   ==========================

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

                                                      4

<PAGE>
                               ALFA CORPORATION 
                       CONSOLIDATED CONDENSED UNAUDITED
                           STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                               Nine Months Ended
                                                                                  September 30,
                                                                         -------------------------------
                                                                              1997             1996
                                                                         -------------------------------
<S>                                                                      <C>                <C>
Cash Flows From Operating Activities:
  Net Income                                                             $  40,400,190     $  23,022,854

  Adjustments to Reconcile Net Income to Net Cash
  Provided by Operating Activities:
    Policy Acquisition Costs Deferred                                      (48,327,277)      (44,766,601)
    Amortization of Deferred Policy Acquisition Costs                       41,709,622        37,574,852
    Depreciation and Amortization                                            3,294,024         3,174,811
    Provision for Deferred Taxes                                             1,559,564           966,209
    Interest on Policyholders' Funds                                        10,695,930         9,059,615
    Net Realized Investment Gains                                           (6,116,996)       (5,207,103)
    Other                                                                     (137,425)          972,872
    Changes in Operating Assets and Liabilities:
      Increase in Accrued Investment Income                                   (771,072)         (419,817)
      Decrease in Accounts Receivable                                        1,110,743         6,672,198
      Decrease in Reinsurance Balances Receivable                              739,504         3,552,622
      Increase in Amounts Due From Affiliates                               (3,133,741)       (4,266,735)
      Decrease in Amounts Due to Affiliates                                                   (6,135,599)
      Decrease (Increase) in Other Assets                                      487,716          (394,366)
      Increase in Liability for Policy Reserves                             14,851,249         6,175,917
      Increase in Liability for Unearned Premiums                            8,283,082         9,799,152
      Decrease in Amounts Held for Others                                     (341,244)         (707,290)
      Increase in Other Liabilities                                          1,164,698         8,064,970
                                                                         -------------     -------------
       Net Cash Provided by Operating Activities                            65,468,567        47,138,561
                                                                         -------------     -------------
Cash Flows From Investing Activities:
    Maturities and Redemptions of Fixed Maturities Held for Investment         448,444           767,841
    Maturities and Redemptions of Fixed Maturities Available for Sale       37,752,602        32,873,057
    Maturities and Redemptions of Other Investments                         73,282,528        64,036,163
    Sales of Fixed Maturities Available for Sale                            16,095,815        35,503,696
    Sales of Other Investments                                              36,633,749        42,763,041
    Purchase of Fixed Maturities Available for Sale                       (133,336,369)     (127,620,504)
    Purchase of Other Investments                                         (105,829,477)      (87,839,229)
    Net Decrease in Short-term Investments                                   7,906,027         3,609,605
    Net Decrease in Receivable/Payable on Securities                           542,907         2,192,700
                                                                         -------------     -------------
       Net Cash Used in Investing Activities                               (66,503,774)      (33,713,630)
                                                                         -------------     -------------
Cash Flows From Financing Activities:
    Decrease in Commercial Paper                                           (10,462,701)       (7,073,691)
    Decrease in Notes Payable                                                 (153,781)          (56,717)
    Increase in Notes Payable to Affiliates                                    299,876           222,836
    Stockholder Dividends Paid                                             (12,134,046)      (11,826,510)
    Proceeds from Exercise of Stock Options                                                        9,400
    Deposits of Policyholders' Funds                                        45,260,846        30,379,780
    Withdrawal of Policyholders' Funds                                     (24,972,124)      (20,541,141)
                                                                         -------------     -------------
       Net Cash Used in Financing Activities                                (2,161,930)       (8,886,043)
                                                                         -------------     -------------
Net Increase (Decrease) in Cash                                             (3,197,137)        4,538,888
Cash - Beginning of Period                                                   4,424,123         1,326,285
                                                                         -------------     -------------
Cash - End of Period                                                     $   1,226,986     $   5,865,173
                                                                         =============     =============
Supplemental Disclosures of Cash Flow Information
Cash Paid as of September 30 for:
    Interest                                                             $   3,486,249     $   4,150,046
    Income Taxes                                                         $  17,490,566     $   4,182,000
</TABLE>

The accompanying notes are an integral part of these consolidated condensed 
unaudited financial statements.
            
                                       5

<PAGE>
 
                                ALFA CORPORATION
         NOTES TO CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997

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, 1996.  The results of
operations for the three month and nine month periods ended September 30, 1997
and 1996 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
September 30, 1997 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 will allow 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.

                                       6
<PAGE>
 
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.

     Various legal proceedings arising in the normal course of business with
policyholders and agents were in process at September 30, 1997.   These legal
proceedings involve alleged breaches of contract, torts, including bad faith and
fraud claims based on alleged wrongful or fraudulent acts of agents and
miscellaneous other causes of action.  Many of these lawsuits involve claims for
punitive damages.  The likelihood or extent of a punitive damage award in any
one of these given cases is not possible to predict.  Although the Alfa
Insurance Group including Alfa Corporation and its subsidiaries have  such legal
proceedings filed against it in which punitive damages are sought, to date, no
such lawsuit has resulted in the award of any significant amount of damages
against the Company.  Based upon information presently available, applicable law
and the defenses available to Alfa Corporation and its subsidiaries, management
does not consider the contingent liabilities which might arise from pending
litigation to be material in relation to the financial position, result of
operations, or cash flows of the Company.  Management's opinion is based upon
the company's experience in dealing with such claims and the historical results
of such claims against the Company.  However, it should be noted that in
Alabama, where the company has substantial business, the frequency of large
punitive damage awards, bearing little or no relation to the actual damages
awarded by juries, continues to exist, creating the potential for unpredictable
material adverse judgements in any given suit.

                                       7
<PAGE>
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

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

     The following table sets forth consolidated summarized income statement
information for the nine months and three months ended September 30, 1997 and
1996:
<TABLE>
<CAPTION>

                                       NINE MONTHS ENDED SEPTEMBER 30,      THREE MONTHS ENDED SEPTEMBER 30,
                                    -------------------------------------   --------------------------------
 
                                        1997          1996       % CHANGE     1997       1996      % CHANGE
                                    ------------  ------------  ----------  ---------  ---------  ----------
                                                (in thousands, except share and per share data)
<S>                                 <C>           <C>           <C>         <C>        <C>        <C>
 
Premiums and Policy Charges         $   276,644   $   250,150         11%   $ 93,919    $ 84,461         11%
                                    ===========   ===========         ==    ========    ========        ===
 
Net Investment income               $    42,432   $    40,433          5%   $ 14,515    $ 13,960          4%
                                    ===========   ===========         ==    ========    ========        ===
 
Total Revenues                      $   326,754   $   297,406         10%   $109,766    $101,344          8%
                                    ===========   ===========         ==    ========    ========        ===
 
NET INCOME
   Insurance operations             $    36,654   $    19,558         87%   $ 13,253    $ 11,176         19%
   Noninsurance operations                2,024         2,229         (9%)       576         843        (32%)
   Net realized investment gains          3,976         3,385         17%        584       1,533        (62%)
   Corporate expenses                    (2,254)       (2,149)         5%       (760)     (1,268)       (40%)
                                    -----------   -----------         --    --------    --------        ---
         Net income                 $    40,400   $    23,023         75%   $ 13,653    $ 12,284         11%
                                    ===========   ===========         ==    ========    ========        ===
 
         Net income per share             $0.99         $0.56         75%      $0.33       $0.30         11%
                                    ===========   ===========         ==    ========    ========        ===
 
Weighted average
  shares outstanding                 40,786,712    40,786,511             40,786,712  40,786,712
                                    ===========   ===========             ==========  ==========
 
</TABLE>

     Total premiums and policy charges increased 11% in the first nine months of
1997 and 11% in the  third quarter due primarily to growth in property casualty
business.  Net investment income increased 5% over the first nine months of 1996
and 4% in the third quarter while invested assets have grown 11% since December
31, 1996 resulting from positive cash flows.

     The increase in the Company's net income in the first nine months and in
the third quarter of 1997 is due primarily to improved operating results in the
property and casualty business.  The favorable year to date comparison is also
due to a net loss in the first quarter of 1996 as a result of catastrophic storm
activity.  Life insurance operations also had improved results for the first
nine months of 1997.  Realized investment gains declined in the second and third
quarters, but have increased 17% year to date.  Such gains, primarily from sales
of equity securities in the first quarter, are the result of market conditions
and can fluctuate from period to period.

                                       8
<PAGE>
 
PROPERTY AND CASUALTY INSURANCE OPERATIONS
------------------------------------------

     The following table sets forth the components of property and casualty
insurance earned premiums, net underwriting income, underwriting margin and
operating income for the nine months and three months ended September 30, 1997
and 1996:
<TABLE>
<CAPTION>
 
                                      NINE MONTHS ENDED SEPTEMBER 30,       THREE MONTHS ENDED SEPTEMBER 30,
                                ------------------------------------------  --------------------------------
                                    1997              1996       % CHANGE     1997       1996      % CHANGE
                                -------------    -------------  ----------  ---------  ---------   --------- 
<S>                               <C>               <C>         <C>         <C>        <C>         <C>
                                                              (in thousands)
 
Earned Premiums
 Personal lines                    $235,277         $216,629        8.6%    $79,576    $73,574        8.2%
 Commercial lines                     8,758            8,367        4.7%      2,960      2,817        5.1%
 Pools, associations and                       
  fees                                3,006            2,911        3.3%        993        976        1.8%
 Reinsurance ceded                     (872)          (6,430)     (86.4%)      (279)    (2,334)     (88.0%)
                                   --------         --------      -----     -------    -------      -----
                                               
  Total                            $246,169         $221,477       11.1%    $83,250    $75,032       11.0%
                                   ========         ========      =====     =======    =======      =====
 
Net underwriting income
 (loss)                            $ 18,816         $ (6,130)     407.0%    $ 7,021    $ 3,130      124.3%
                                   ========         ========      =====     =======    =======      =====
 
Underwriting margin                     7.6%           (2.8%)                   8.4%       4.2%
                                   ========            =====                =======      =====
 
Operating Income                   $ 25,399         $  8,520        198%    $ 9,053    $ 6,823         33%
                                   ========         ========      =====     =======    =======      =====
 
</TABLE>

     Earned premiums increased 11% in both the third quarter and first nine
months of 1997 due to an increase in new business and a low lapse ratio of 3.9%.
Rate increases also positively impacted the growth rate.  Another significant
factor positively affecting the growth rate was the reduction in the cost of
reinsurance.  As a result of the Company's new catastrophe protection program,
the exposure to losses from significant weather events has been lessened for
Alfa Corporation, reducing the need for and amount of reinsurance protection,
and allowing the reinsurance buying decision to be made on a group basis for the
entire pool.  This reduction also had a similar positive impact on operating
earnings for the periods shown.  A similar positive impact is expected in the
fourth quarter of 1997.

     The operating results in both the first nine months and third quarter of
1997 were profitable.  The underwriting margins of 7.6% and 8.4%, respectively
are the result of improved loss ratios of 65.9% for the first nine months of
1997 and 65.3% in the third quarter compared to loss ratios of 75.6% and 68.0%
in the first nine months and third quarter of 1996.  In addition to improved non
storm loss ratios, in the first quarter of 1996 catastrophic storm activity
produced significant claims resulting in a higher loss ratio and a net
underwriting loss and net operating loss,  only the second such quarterly loss
in the Company's history.

     Claims from snow and ice in February 1996 and tornados in March 1996
combined to produce losses estimated at September 30, 1996 to be $27 million for
the entire Alfa Group pool. After taxes, the impact on the first nine months
results in 1996 on Alfa Corporation was approximately $11.4 million, or $0.28
per share.

                                       9
<PAGE>
 
     The expense ratios were 26.5% and 26.3% in the first nine months and third
quarter of 1997, respectively, compared to 27.2% and 27.8% for the similar
periods in 1996.  The Company's expense focus has had a positive impact on
results, however, higher expenses were incurred in the second and third quarters
of 1997 due to technology expenditures that are ongoing.

      Investment income in the property casualty subsidiaries increased 5.0% in
the first nine months of 1997 and 6.0% in the third quarter.  Continued positive
cash flow has increased invested assets which has increased investment income.

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

     The following table sets forth life insurance premiums and policy charges,
by type of policy, and life insurance operating income for the nine months and
three months ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
 
                                            NINE MONTHS ENDED SEPTEMBER 30,     THREE MONTHS ENDED SEPTEMBER 30,
                                          ---------------------------------    ---------------------------------
                                             1997        1996     % CHANGE       1997        1996    % CHANGE  
                                          --------     -------  ----------     -------     ------    --------    
                                                                       (in thousands)
<S>                                        <C>          <C>      <C>            <C>         <C>       <C>        
Premiums and Policy Charges                                                                                      
 Universal life policy charges              $10,327     $ 7,447        39%      $ 3,291     $2,589       27%     
 Interest sensitive life policy charges       6,961       6,467         8%        2,314      2,229        4%     
 Traditional life insurance premiums         13,186      14,759       (11%)       5,064      4,611       10%     
                                            -------     -------       ---       -------     ------       --      
                                                                                                                 
  Total                                     $30,474     $28,673         6%      $10,669     $9,429       13%     
                                            =======     =======       ===       =======     ======       ==      
                                                                                                                 
Operating Income                            $11,191     $11,017         2%      $ 4,187     $4,348       (4%)    
                                            =======     =======       ===       =======     ======       ==       
</TABLE>

     The Company's life insurance premiums and policy charges increased 6% in
the first nine months of 1997 and 13% in the third quarter.  The replacement of
group term business in 1997 with universal whole life is impacting the growth
rates.  Such business, which was comprised of life insurance provided to the
Alfa Group's employees, totaled approximately $1.6 million in 1996.  The Alfa
Group now uses corporate owned life insurance utilizing the Company's universal
life policy.  The policy charges that result will partially offset the reduction
in group premium revenue, which is the primary reason for the 39% and 27%
increases in such revenues for the first nine months and third quarter shown in
the above table.  Although these changes will affect premium revenue growth
rates, it is not expected to have  a material impact on earnings in 1997.  Both
the Company and the Alfa Group believe the new program will be mutually
beneficial to results in the future.

     Excluding the impact on premiums from such business, the premium growth
rates are 8.8% for the first nine months of 1997 and 6.0% in the third quarter.
New business premium increased 6.4% for the period, primarily from sales of
universal life policies.  The persistency rate remained high at 92.2%.

      Life insurance operating income increased approximately 2% in the first
nine months of 1997 but declined 4% in the third quarter.  Mortality was only
86% and 76% of expected in the respective periods, but was much higher than the
similar periods in 1996 which had mortality rates of 75% and 68% of expected.
Net investment income increased 7.3% in the first nine months of 1997 and 6.2%
in the third quarter  compared to the same period in 1996 due to positive cash
flows which increased invested assets .

                                       10
<PAGE>
 
NONINSURANCE OPERATIONS
-----------------------

     Noninsurance earnings decreased 9% in the first nine months of 1997 and
declined 32% in the third quarter. The third quarter decline is due primarily to
a 7.8% decrease in operating earnings in the consumer finance subsidiary.  The
loan portfolio has declined 11% since September 30, 1996 to $53.2 million at
September 30, 1997 and the interest margin declined 35 basis points due to
higher cost of funds rates.  The construction subsidiary has had a modest
increase in earnings while the real estate sales subsidiary's earnings have
declined due to lower residential sales activity.

CORPORATE
---------

     Interest expense on corporate debt is the primary corporate expense
incurred.  Interest expense in the first nine months of 1997 was approximately
$1,354,000 compared to approximately $1,351,000 for the similar period in 1996.
However, corporate expense is higher comparatively in 1997 due to the income tax
benefit in the first quarter of 1996 related to that period's operating loss.
The remainder of the corporate expense represents general operating expenses
which may fluctuate from time to time.

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 nine months ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
                                                                                       NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                                     ---------------------
                                                                                       1997          1996   
                                                                                     --------     --------  
<S>                                                                               <C>               <C>     
Increase (decrease) in cash flow from operations since Sept. 30, 1996 and 1995          38.9%      (4.7%)  
Increase (decrease) in invested assets since January 1, 1997 and 1996                   10.8%       2.0% 
Investment yield rate (annualized)                                                       6.9%       7.2% 
Increase in net investment income since September 30, 1996 and 1995                      4.9%       6.6%    
 
</TABLE>

    Positive cash flow from operations increased 38.9% in the first nine months
of 1997 due primarily to improved cash flow in the Company's property casualty
subsidiaries.  Positive cash flow has increased invested assets 10.8% since
December 31, 1996 and 14.4%  since September 30, 1996.   The higher level of
invested assets has increased net investment income by 4.9%.   The growth rate
in net investment income was lower than the growth in invested assets due to the
prior year impact of a special one time dividend and a partnership distribution,
both received in the first quarter of 1996.  Positive cash flow from operations
declined 4.7% in the first nine months of 1996 due to significant storm losses
that negatively affected income and cash flow.  The Company had net realized
investment gains of approximately $6.1 million in the first nine months of 1997
and $5.2 in the similar period in 1996.  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.

                                       11
<PAGE>
 
     The composition of the Company's investment portfolio is as follows at
September 30, 1997 and  December 31, 1996:
<TABLE>
<CAPTION>
 
                                      SEPTEMBER 30,   DECEMBER 31,
                                     --------------  -------------
                                          1997           1996
                                     --------------  -------------
<S>                                  <C>             <C>
 
      Fixed maturities
        Taxable
          Mortgage backed (CMO's)             29.7%          30.2%
          Corporate bonds                     30.2%          29.1%
                                             -----          -----
            Total taxable                     59.9%          59.3%
        Tax exempts                           11.6%           9.9%
                                             -----          -----
          Total fixed maturities              71.5%          69.2%
                                             -----          -----
      Equity securities                       11.5%          10.8%
      Mortgage loans                            .1%            .1%
      Real estate                               .2%            .2%
      Policy loans                             3.5%           3.6%
      Other long term investments              9.9%          11.6%
      Short term investments                   3.3%           4.5%
                                             -----          -----
                                             100.0%         100.0%
                                             =====          =====
</TABLE>


     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, new cash flows have been invested in taxable and tax-exempt
corporate bonds. The remaining portfolio mix has been relatively stable with
slight changes due to market value changes in equities and from maturing
mortgage backed securities.  The consumer loan portfolio has declined  which has
reduced other long term investments.

     The rating of the Company's portfolio of fixed maturities using the
Standard & Poor's rating categories is as follows at September 30, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
 
 
                                                SEPTEMBER 30,   DECEMBER 31,
                                                --------------  -------------
                                                     1997           1996
                                                --------------  -------------
<S>                                             <C>             <C>
      RATING
      ------
      AAA to A-                                      87.8%          87.7%
      BBB+ to BBB-                                   11.6%          11.6%
      BB+ and Below (Below investment grade)          0.6%           0.7%
                                                    ------         -----
                                                    100.0%         100.0%
                                                    =====          =====
</TABLE>


     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).

                                       12
<PAGE>
 
     The following is information concerning the Company's portfolio of high
yield fixed maturity investments at September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
 
                                    SEPTEMBER  30,            DECEMBER 31,
                                ---------------------  -------------------------
                                               % OF                     % OF
                                            STATUTORY                STATUTORY
                                   1997      SURPLUS      1996        SURPLUS
                                -----------  --------  ----------  -------------
<S>                             <C>          <C>       <C>         <C>
 
High-yield fixed maturities:
  Amortized value                $3,363,603   1.2%    $3,490,866       1.4%
  Carrying value (market)        $3,806,468   1.3%    $3,656,750       1.5%
  Unrealized gain                $  442,865   0.2%    $  165,884       0.1%
</TABLE>

     During the first nine months of 1997 the Company did not dispose of any
high yield debt securities. However, the Company wrote down three equity
securities totaling $353,641  whose declines in value were deemed to be other
than temporary.  At September 30, 1997 and December 31, 1996, there were no
nonperforming bonds in the portfolio.

     Included in the Company's portfolio of equity securities are common stocks
of issuers of high yield debt instruments.  Information concerning this category
of equity securities is as follows:
<TABLE>
<CAPTION>
 
                                      SEPTEMBER 30,            DECEMBER 31,
                             ----------------------------  --------------------
                                                % OF                    % OF
                                              STATUTORY               STATUTORY
                                 1997          SURPLUS        1996     SURPLUS
                             -------------  -------------  ---------- ---------
<S>                          <C>            <C>            <C>         <C>
Equity investments held
in issuers of high-yield
debt securities:
  Carrying value (market)      $14,265,332       5.0%      $8,243,223     3.3%
  Cost                         $ 8,593,597       3.0%      $7,587,555     3.1%
  Unrealized gain              $ 5,671,735       2.0%      $  655,668     0.3%
</TABLE>

     During the first nine months of 1997, the Company sold approximately $16.1
million in fixed maturities available for sale.  These sales resulted in gross
realized gains of $674,007 and gross realized losses of $11,736. At September
30, 1997, approximately 41.5% of fixed maturities were mortgage-backed
securities.  Such securities are comprised of  CMO's and pass through
securities.  Based on reviews of the Company's portfolio of mortgage-backed
securities and due to favorable liquidity, capital strength and inherent
flexibility in its interest sensitive type product liabilities the impact of
prepayment risk on the Company's financial position is not believed to be
significant.  At September 30, 1997 the Company's total portfolio of fixed
maturities  had gross unrealized gains of $29,235,906 and gross unrealized
losses of $2,320,403.  Securities are priced by nationally recognized pricing
services or by broker/dealer securities firms. No securities were priced by the
Company.

     The Company's investment in other long term investments consists primarily
of consumer finance

                                       13
<PAGE>
 
receivables collateralized by automobiles and other property and of assets
leased under operating leases.  At September 30, 1997 the delinquency ratio on
the portfolio was 2.25%.  Loans charged off in the first nine months of 1997
totaled $399,617 or 0.7% of the outstanding loan balance.  At September 30,
1997, the Company maintained an allowance for loan losses of $583,913 or
approximately 1.1% of the outstanding loan balance.  The Company's investments
in high yield debt securities, mortgage loans and real estate have not had and
are not expected to have a material effect on liquidity, capital resources or
financial condition.

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

     The increase in income tax expense in the first nine months of 1997 is the
result of the increase in income before provision for income taxes, which
increased over $26 million due to improved operating results and due to the
impact of storms in the prior year's first quarter.  The effective tax rate for
the first nine months of 1997 was 31.5% compared to 29.8% for the full year 1996
and 31.4% for the third quarter of 1996.

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 Incentive 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 and 75,000 options on February 18, 1997.  The options ratably become
exercisable annually over three years, and may not be exercised after ten years
after the date of award.  At September 30, 1997, there had been 800 options
exercised, 891,188 options were exercisable and 51,400 had been cancelled
leaving 953,000 options available for grant under the plan.

                                       14
<PAGE>
 
      Total short term debt decreased $10.3 million in the first nine months of
1997 to $76.3 million.   At September 30, 1997 the Company had approximately
$63.1 million in commercial paper at rates ranging from 5.58%  to 5.60% with
maturities ranging from October 6, 1997 to October 20, 1997.  The Company
intends to continue to use the commercial paper program to fund its short term
needs however, backup lines of credit are in place up to $90 million.  In
addition, the Company had $11.1 million in short-term debt outstanding to
affiliates with interest equal to commercial paper  rates payable monthly and
$2.1 million outstanding in other short-term debt at a rate of 3.6%.

     Cash surrenders paid to policyholders on a statutory basis totaled $7.9
million in the first nine months of 1997 and $8.0 million for the first nine
months of 1996.  This level of surrenders is within the Company's pricing
expectations and historical persistency rates and policy termination rates
indicate a normal pattern of surrender activity.  The structure of the surrender
charges is such that lapses are discouraged.  The majority of the policies in
force have surrender charges equal to the total policy cash value in the early
years 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 September 30, 1997 the total amount
of cash that would be required to fund all amounts subject to surrender was
approximately $278.3 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.  Although the Company
believes its reinsurance coverages are adequate, unusually severe storms, other
natural disasters and other events could have an adverse impact on the Company's
financial condition and operating results.

     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.

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 1996.  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, and in the 
1996 Annual Report. 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.

                                       15
<PAGE>
 
                          PART II.  OTHER INFORMATION

Item 6.
-------

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

     None.

                                       16
<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      11/14/97                  By:      /S/  Goodwin L. Myrick
    ------------------------------      --------------------------------------
                                        Goodwin L. Myrick
                                        President



Date      11/14/97                  By:      /S/  Donald Price
    ------------------------------      --------------------------------------
                                        Donald Price
                                        Senior Vice President, Finance
                                        (Chief Financial Officer)



Date      11/14/97                  By:      /S/   John Holley
    ------------------------------      --------------------------------------
                                        John Holley
                                        Vice President and Controller
                                        (Chief Accounting Officer)

                                       17