<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 June 30, 2001  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 June 30, 2001
-----------------------------                   -------------------------
Common Stock, $1.00 par value                        39,208,628 shares
<PAGE>

                                ALFA CORPORATION

                                     INDEX

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

     Item 1. Financial Statements

          Balance Sheets - June 30, 2001 and
          December 31, 2000                                                   3

          Statements of Income, Six Months and Three Months
          ended June 30, 2001 and 2000                                        4

          Statements of Comprehensive Income, Six Months and Three Months
          ended June 30, 2001 and 2000                                        5

          Statements of Cash Flows, Six Months
          ended June 30, 2001 and 2000                                        6


          Notes to Financial Statements                                       7

          Independent Auditors' Report                                       12

     Item 2.

          Management's Discussion and Analysis of
          Financial Condition and Results of Operations                      13

     Item 3.

          Market Risk Disclosures                                            22

Part II.  Other Information

     Item 1.

          Legal Proceedings                                                  23

     Item 6.

          Exhibits and Reports on Form 8-K                                   23



                                       2
<PAGE>

                               ALFA CORPORATION
                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                      June 30,      December 31,
                                                                                        2001            2000
                                                                                 -------------------------------
                                                                                    (Unaudited)
<S>                                                                               <C>              <C>
Assets
  Investments:
     Fixed Maturities Held for Investment, at amortized cost
       (fair value $691,959 in 2001 and $792,959 in 2000)                              $652,206        $754,450
     Fixed Maturities Available for Sale, at fair value
       (amortized cost $965,210,724 in 2001 and $937,730,993 in 2000)               980,130,841     946,179,812
     Equity Securities, at fair value (cost $57,285,628
       in 2001 and $53,687,943 in 2000)                                             109,882,163     114,594,848
     Mortgage Loans on Real Estate                                                      159,300         214,394
     Investment Real Estate (net of accumulated
       depreciation of $1,387,999 in 2001 and
       $1,299,407 in 2000)                                                            2,019,050       2,045,171
     Policy Loans                                                                    48,345,675      46,335,399
     Collateral Loans                                                                75,100,595      70,022,985
     Other Long-term Investments                                                    143,176,956     118,945,159
     Short-term Investments                                                          63,853,328      55,933,710
---------------------------------------------------------------------------------------------------------------
       Total Investments                                                          1,423,320,114   1,355,025,928
  Cash                                                                                6,313,926       4,475,672
  Accrued Investment Income                                                          15,550,524      14,020,985
  Accounts Receivable                                                                14,761,075      13,885,864
  Reinsurance Balances Receivable                                                     3,264,264       2,935,521
  Due from Affiliates                                                                 7,105,156       5,753,191
  Deferred Policy Acquisition Costs                                                 149,443,616     144,572,014
  Other Assets                                                                        5,060,388       5,633,934
---------------------------------------------------------------------------------------------------------------
        Total Assets                                                             $1,624,819,063  $1,546,303,109
===============================================================================================================
Liabilities
  Policy Liabilities and Accruals - Property and Casualty Insurance                $143,418,465    $145,077,064
  Policy Liabilities and Accruals - Life Insurance                                  538,232,727     507,455,793
  Unearned Premiums                                                                 136,680,338     121,688,810
  Dividends to Policyholders                                                         10,105,571      10,033,028
  Premium Deposit and Retirement Deposit Funds                                        5,149,559       5,364,453
  Deferred Income Taxes                                                              42,238,030      42,513,055
  Other Liabilities                                                                  72,780,468      82,021,332
  Due to Affiliates                                                                  16,057,073      15,408,988
  Commercial Paper                                                                  136,828,538     117,642,561
  Notes Payable                                                                           -             103,806
  Notes Payable to Affiliates                                                        30,358,972      25,432,979
---------------------------------------------------------------------------------------------------------------
        Total Liabilities                                                         1,131,849,741   1,072,741,869
---------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
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:  2001 - 39,208,628; 2000 - 39,148,527                              41,891,512      41,891,512
  Capital in Excess of Par Value                                                     25,529,903      24,076,380
  Accumulated Other Comprehensive Income                                             43,140,978      45,444,149
  Retained Earnings                                                                 419,860,173     398,705,679
  Treasury Stock: at cost (2001-2,682,884 shares; 2000-2,742,985 shares)            (37,453,244)    (36,556,480)
---------------------------------------------------------------------------------------------------------------
        Total Stockholders' Equity                                                  492,969,322     473,561,240
---------------------------------------------------------------------------------------------------------------
        Total Liabilities and
        Stockholders' Equity                                                     $1,624,819,063  $1,546,303,109
===============================================================================================================
</TABLE>

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

                                       3

<PAGE>

                               ALFA CORPORATION
                       CONSOLIDATED STATEMENTS OF INCOME
                                  (UNAUDITED)
<TABLE>
<CAPTION>


                                                                      Six Months Ended              Three Months Ended
                                                                           June 30,                      June 30,
                                                                ----------------------------     -------------------------
                                                                    2001            2000             2001          2000
                                                                ----------------------------     -------------------------
<S>                                                             <C>             <C>              <C>           <C>
Revenues
  Premiums - Property and Casualty Insurance                    $195,227,850    $185,395,246     $98,322,672   $93,798,575
  Premiums and Policy Charges - Life Insurance                    28,652,937      26,816,538      13,653,961    12,926,313
  Net Investment Income                                           39,576,356      34,690,547      20,413,633    17,558,717
  Realized Investment Gains                                        1,151,136       5,618,755         104,851     4,752,791
  Other Income                                                     1,448,140       1,549,446         629,396       747,330
--------------------------------------------------------------------------------------------------------------------------
    Total Revenues                                               266,056,419     254,070,532     133,124,513   129,783,726
--------------------------------------------------------------------------------------------------------------------------

Benefits and Expenses
  Benefits & Settlement Expenses                                 154,843,981     145,954,192      75,016,990    71,829,975
  Dividends to Policyholders                                       1,904,250       1,849,121         903,510       876,887
  Amortization of Deferred Policy
    Acquisition Costs                                             36,713,343      32,002,272      18,471,126    16,749,561
  Other Operating Expenses                                        27,761,170      21,694,494      14,126,539    10,819,553
--------------------------------------------------------------------------------------------------------------------------

    Total Expenses                                               221,222,744     201,500,079     108,518,165   100,275,976
--------------------------------------------------------------------------------------------------------------------------

Income Before Provision for Income Taxes                          44,833,675      52,570,453      24,606,348    29,507,750

Provision for Income Taxes                                        12,827,158      15,385,024       7,192,288     8,672,496
--------------------------------------------------------------------------------------------------------------------------

Net Income Before Cumulative Effect of Change
     in Accounting Principle, Net of Tax Benefit                  32,006,517      37,185,429      17,414,060    20,835,254

Cumulative Effect of Change in Accounting Principle,
    Net of Income Tax Benefit of $139,344                           (258,781)              0               0             0
--------------------------------------------------------------------------------------------------------------------------

    Net Income                                                   $31,747,736     $37,185,429     $17,414,060   $20,835,254

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

Operating Income                                                 $31,258,279     $33,533,238     $17,345,907   $17,745,940

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

Earnings Per Share:
Operating Income
    - Basic                                                            $0.80           $0.85           $0.44         $0.45
    - Diluted                                                          $0.79           $0.85           $0.44         $0.45

Net Income Before Cumulative Effect of Change
     in Accounting Principle, Net of Tax Benefit
    - Basic                                                            $0.82           $0.95           $0.44         $0.53
    - Diluted                                                          $0.81           $0.94           $0.44         $0.53

Cumulative Effect of Change in Accounting Principle,
     Net of Tax Benefit
    - Basic                                                           ($0.01)          $0.00           $0.00         $0.00
    - Diluted                                                         ($0.01)          $0.00           $0.00         $0.00

Net Income
    - Basic                                                            $0.81           $0.95           $0.44         $0.53
    - Diluted                                                          $0.80           $0.94           $0.44         $0.53

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

Average Shares Outstanding
    - Basic                                                       39,160,202      39,267,605      39,166,321    39,097,428
    - Diluted                                                     39,451,134      39,483,252      39,480,690    39,329,185

==========================================================================================================================
</TABLE>


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

                                       4

<PAGE>

                               ALFA CORPORATION
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (UNAUDITED)
<TABLE>
<CAPTION>



                                                                 Six Months Ended             Three Months Ended
                                                                     June 30,                      June 30,
                                                           ---------------------------    --------------------------
                                                               2001            2000             2001          2000
                                                           ---------------------------    --------------------------
<S>                                                        <C>             <C>            <C>            <C>
Net Income                                                 $31,747,736     $37,185,429     $17,414,060   $20,835,254
Other Comprehensive (Loss) Income, net of tax:
   Unrealized Investment (Losses) Gains on Securities
     Available for Sale                                     (1,554,933)      4,181,754      (4,510,864)   (1,945,906)
   Less:  Reclassification Adjustment for Realized
     Investment Gains                                          748,238       3,652,191          68,153     3,089,314
                                                           -----------     -----------     -----------   -----------

     Total Other Comprehensive (Loss) Income                (2,303,171)        529,563      (4,579,017)   (5,035,220)
                                                           -----------     -----------     -----------   -----------

       Total Comprehensive Income                          $29,444,565     $37,714,992     $12,835,043   $15,800,034
                                                           ===========     ===========     ===========   ===========
</TABLE>



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

                                       5
<PAGE>

                               ALFA CORPORATION
                    CONSOLIDATED  STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>


                                                                                     Six Months Ended June 30,
                                                                                         2001           2000
                                                                                     --------------------------
<S>                                                                                  <C>            <C>
Cash Flows From Operating Activities:
  Net Income                                                                         $31,747,736    $37,185,429

  Adjustments to Reconcile Net Income to Net Cash
  Provided by Operating Activities:
    Policy Acquisition Costs Deferred                                                (43,375,345)   (40,411,716)
    Amortization of Deferred Policy Acquisition Costs                                 36,713,343     32,002,272
    Depreciation and Amortization                                                        201,602        375,954
    Provision for Deferred Taxes                                                       1,873,379      1,125,522
    Interest Credited on Policyholders' Funds                                         11,110,206      9,870,666
    Net Realized Investment Gains                                                     (1,151,136)    (5,618,755)
    Other                                                                             (1,087,602)    (1,730,236)
    Changes in Operating Assets and Liabilities:
      (Increase) in Accrued Investment Income                                         (1,529,539)    (1,469,248)
      (Increase) Decrease in Accounts Receivable                                      (3,106,831)     1,603,809
      (Increase) in Reinsurance Balances Receivable                                     (328,743)    (1,085,962)
      (Increase) in Amounts Due From Affiliates                                       (1,351,965)    (7,503,849)
      Increase in Amounts Due to Affiliates                                              648,085        480,441
      Decrease in Other Assets                                                           573,546        582,918
      Increase in Liability for Policy Reserves                                        2,222,933      5,969,280
      Increase in Liability for Unearned Premiums                                     14,991,528     11,296,727
      (Decrease) in Amounts Held for Others                                             (142,351)       (40,481)
      Increase in Other Liabilities                                                   10,360,593     21,177,966
                                                                                    ------------   ------------
       Net Cash Provided by Operating Activities                                      58,369,439     63,810,737
                                                                                    ------------   ------------
Cash Flows From Investing Activities:
    Maturities and Redemptions of Fixed Maturities Held for Investment                   102,220        169,882
    Maturities and Redemptions of Fixed Maturities Available for Sale                 38,358,056     29,509,292
    Maturities and Redemptions of Other Investments                                  153,854,323    109,727,298
    Sales of Fixed Maturities Available for Sale                                      21,046,368     29,014,745
    Sales of Other Investments                                                        36,577,604     26,016,544
    Purchase of Fixed Maturities Available for Sale                                  (87,665,016)  (134,878,670)
    Purchase of Other Investments                                                   (226,617,720)  (187,238,378)
    Net (Increase) Decrease in Short-term Investments                                 (7,919,618)    19,131,679
    Net (Increase) in Receivable/Payable on Securities                               (14,289,892)    (2,236,399)
                                                                                    ------------   ------------
       Net Cash (Used in) Investing Activities                                       (86,553,675)  (110,784,007)
                                                                                    ------------   ------------

Cash Flows From Financing Activities:
    Increase in Commercial Paper                                                      19,185,977     43,529,551
    (Decrease) in Notes Payable                                                         (103,806)          (597)
    Increase in Notes Payable to Affiliates                                            4,925,993      4,121,076
    Stockholder Dividends Paid                                                       (10,795,977)    (9,865,160)
    Purchase of Treasury Stock                                                        (1,527,821)    (8,360,394)
    Proceeds from Exercise of Stock Options                                            1,730,269        296,100
    Deposits of Policyholders' Funds                                                  40,542,399     39,527,051
    Withdrawal of Policyholders' Funds                                               (23,934,544)   (22,232,586)
                                                                                    ------------   ------------
       Net Cash Provided by Financing Activities                                      30,022,490     47,015,041
                                                                                    ------------   ------------
Net Increase in Cash                                                                   1,838,254         41,771
Cash - Beginning of Period                                                             4,475,672      6,649,914
                                                                                    ------------   ------------
Cash - End of Period                                                                 $ 6,313,926    $ 6,691,685
                                                                                    ============   ============

Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year  for:
    Interest                                                                          $4,364,304     $4,370,567
    Income Taxes                                                                     $10,681,000    $13,756,000
</TABLE>

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

                                       6
<PAGE>

                                ALFA CORPORATION
              NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
                                 June 30, 2001

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

     In the opinion of the Company, the accompanying consolidated 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 accounting principles generally accepted in the United
States of America.  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, 2000.
The results of operations for the six month and three month periods ended June
30, 2001 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, net of related tax
effects.  Certain reclassifications have been made to conform previous
classifications to June 30, 2001 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 (See Note 3).  On
January 1, 2001, Alfa Specialty Insurance Corporation (Specialty), a subsidiary
of Mutual, also became a participant in the Pooling Agreement.  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.  Specialty is a direct writer primarily of nonstandard risk
automobile insurance.  Under the terms of the Pooling Agreement, the Company
cedes to Mutual all of its property and casualty business.  Substantially 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.
Mutual currently retrocedes 65% of the pool to the Company and retains 35%
within the Mutual Group.  Effective January 1, 2001, Specialty's property and
casualty business likewise became included in the pool.  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 limited Alfa
Corporation's participation in any single catastrophic event or series of storms
to its pool share (65%) of $10 million unless the loss exceeded $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.  Due to
increases in insured property risks, an amendment was made increasing the
Company's participation limits from its pool share of the $10 million level to
$11 million beginning July 1, 1999.  This limit has been amended effective
January 1, 2001 to $11.4 million. During 2000, the Company's share of losses
exceeding $249 million would have been 13%.  During the first six months of
2001, the Alfa Group incurred catastrophic losses of approximately $29.2
million, resulting in a reduction in the Company's net income of approximately
$0.12 per diluted share, after reinsurance and taxes. These parameters have been
amended to $284 million and 14% as of January 1, 2001.  The Company's
participation in the Pooling Agreement may be changed or terminated without the
consent or approval of the Company's shareholders.  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 six and three month periods ended June 30, 2001 and 2000:
<TABLE>
<CAPTION>

                                 Six  Months Ended June 30,    Three Months Ended June 30,
                                 --------------------------    ---------------------------
                                    2001            2000            2001          2000
                                 --------------------------    ---------------------------
                                                       (in thousands)
<S>                              <C>              <C>             <C>           <C>

Premiums ceded to pool            $ 34,613        $ 31,534        $17,606       $15,996
Premiums assumed from pool        $195,992        $186,063        $98,745       $94,138
Losses ceded to pool              $ 27,782        $ 20,734        $13,825       $ 9,865
Losses assumed from pool          $122,005        $113,114        $58,607       $54,418
</TABLE>

     The Company incurred $7.4 million and $2.5 million in storm losses in the
first three months of 2001 and 2000, respectively.  No storm losses were
incurred in the second quarter of either year.

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.

     Certain legal proceedings are in process at June 30, 2001.  Costs for these
and similar legal proceedings, including accruals for outstanding cases, totaled
approximately $352,000 in the first six months of 2001, $3.0 million in 2000,
$6.5 million in 1999 and $5.2 million in 1998.  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 mental
anguish and punitive damages.  Approximately 17 legal proceedings against Alfa
Life Insurance Corporation (Life) are in process at June 30, 2001.  Of the 17
proceedings, three were filed in 2001, five were filed in 2000, seven were filed
in 1999, one was filed in 1997, and one was filed in 1996.  In a case tried in
January 2001, in Barbour County, Alabama, the jury returned a verdict for the
plaintiff against Life for $500,000 in compensatory damages and $5,000,000 in
punitive damages.  After Life filed post-trial motions, the trial court reduced
the punitive damage award to $1,500,000.  Life has appealed the award to the
Alabama Supreme Court.  Two of the 17 pending legal proceedings against Life
were filed as purported class actions.  At present, only one class action has
been certified against Life.  The trial court order certifying that class action
has been appealed to the Alabama Supreme Court.  In addition, one purported
class action lawsuit is pending against both Alfa Builders, Inc. and Alfa Mutual
Fire Insurance Company.  Additionally, four purported class action lawsuits are
pending against the property and casualty mutual companies involving a number of
issues and allegations which could affect the Company because of a pooling
agreement between the companies.  No class has been certified in any of these
five purported class action cases.  It should be noted that in Alabama, where
the Company has substantial business, the likelihood of a judgment in any given
suit, including a large mental anguish and/or punitive damage award by a jury,
bearing little or no relation to actual damages, continues to exist, creating
the potential for unpredictable material adverse financial results.

                                       8
<PAGE>

4.   Segment Information
     -------------------

     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 six month and three month periods ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>


                                                       Six Months Ended June 30,          Three Months Ended June 30,
                                                    ------------------------------       ----------------------------
                                                       2001       2000    % Change         2001     2000    % Change
                                                    ------------------------------       ----------------------------
                                                                             (in thousands)
<S>                                                 <C>        <C>        <C>           <C>        <C>        <C>
Earned premiums
 Personal lines                                     $186,930   $177,338       5%         $94,162   $89,731      5%
 Commercial lines                                      6,909      6,709       3%           3,503     3,385      3%
 Pools, associations and fees                          2,153      2,016       7%           1,080     1,023      6%
 Reinsurance ceded                                      (764)      (668)    (14%)           (422)     (340)   (24%)
                                                    --------   --------    ----          -------   -------   ----

  Total                                             $195,228   $185,935       5%         $98,323   $93,799      5%
                                                    ========   ========    ====          =======   =======   ====

Net underwriting income                             $ 14,821   $ 21,078     (30%)        $ 9,980   $11,636    (14%)
                                                    ========   ========    ====          =======   =======   ====

Loss ratio                                              62.1%      60.4%                    58.8%     58.0%
LAE ratio                                                4.0%       5.7%                     4.2%      6.4%
Expense ratio                                           26.3%      22.6%                    26.8%     23.2%
                                                    --------   --------                     ----   -------

GAAP basis combined ratio                               92.4%      88.6%                    89.8%     87.6%
                                                    ========   ========                     ====   =======
Underwriting margin                                      7.6%      11.4%                    10.2%     12.4%
                                                    ========   ========                     ====   =======

Net investment income                               $ 14,258   $ 14,000       2%         $ 7,331   $ 7,016      4%
                                                    ========   ========    ====          =======   =======   ====

Pre-tax operating income                            $ 29,215   $ 35,250     (17%)        $17,382   $18,753     (7%)
                                                    ========   ========    ====          =======   =======   ====

Operating income, net of tax                        $ 21,610   $ 26,379     (18%)        $12,497   $14,433    (13%)
                                                    ========   ========    ====          =======   =======   ====

</TABLE>

                                       9
<PAGE>

(Note 4. Continued)

     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 six month and three month periods ended June
30, 2001 and 2000:
<TABLE>
<CAPTION>

                                                 Six Months Ended June 30,     Three Months Ended June 30,
                                                ---------------------------   ----------------------------
                                                   2001      2000  % Change      2001    2000    % Change
                                                ---------------------------   ----------------------------
                                                                    (in thousands)
<S>                                             <C>        <C>       <C>       <C>       <C>      <C>
Premiums and policy charges
 Universal life policy charges                   $ 7,938   $ 7,305     9%      $ 3,992   $ 3,712     8%
 Universal life policy charges - COLI              1,732     1,610     8%          475       426    12%
 Interest sensitive life policy charges            5,052     5,018     1%        2,545     2,516     1%
 Traditional life insurance premiums              13,732    12,682     8%        6,642     6,273     6%
 Group life insurance premiums                       199       202    (1%)           0         0     0%
                                                 -------   -------  ----       -------   -------    --
  Total                                          $28,653   $26,817     7%      $13,654   $12,927     6%
                                                 =======   =======  ====       =======   =======    ==

Net investment income                            $22,906   $20,225    13%      $11,636   $10,269    13%
                                                 =======   =======  ====       =======   =======    ==

Benefits and expenses                            $32,920   $30,297     9%      $16,193   $14,454    12%
                                                 =======   =======  ====       =======   =======    ==

Pre-tax operating income                         $14,616   $13,112    11%      $ 7,091   $ 6,926     2%
                                                 =======   =======  ====       =======   =======    ==

Operating income, net of tax                     $10,431   $ 9,551     9%      $ 5,078   $ 5,064     0%
                                                 =======   =======  ====       =======   =======    ==
</TABLE>

5.   Acquisition of Commercial Lease Portfolio
     -----------------------------------------

     During the first quarter of 2000, the Company signed a definitive agreement
and completed the transaction to acquire the leasing portfolio and assets of OFC
Capital (OFC), an Atlanta-based business unit of First Liberty Bank, that
provides financing for commercial equipment leases.  The transaction involved a
cash purchase price of approximately $23.1 million, which is primarily for the
portfolio of leases.  OFC operates as a business unit of Alfa Financial
Corporation, a subsidiary of the Company.  OFC's operating results for the six
month and three month periods ended June 30, 2001 were income of approximately
$256,000 and $237,000, respectively.

6.   Financial Accounting Developments
     ---------------------------------

     The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard (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 that 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.  This
standard, as amended by SFAS No. 137 and SFAS No. 138, became effective for the
Company January 1, 2001.  At this time, the Company does not anticipate this
standard having a significant impact on the Company's financial position or
income as it does not use derivative instruments in the normal course of
business.  On January 1, 2001, the Company recorded approximately $259,000, net
of tax, as the effect upon adoption of this standard.

                                       10
<PAGE>

(Note 6. Continued)

     The FASB also issued SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (a replacement of SFAS
No. 125)" in September 2000.  At this time, the Company does not anticipate this
standard having a significant impact on the Company's financial position or
income.

     The FASB recently issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets," in June 2001.  Based on current
information available and the fact that the Company has not engaged in material
transactions covered by these standards, the Company does not anticipate these
standards having a significant impact on the Company's financial position or
income.

                                       11
<PAGE>

                          INDEPENDENT AUDITORS' REPORT



To the Stockholders and Board of Directors
Alfa Corporation:

We have reviewed the consolidated balance sheet of Alfa Corporation and
subsidiaries as of June 30, 2001, and the related consolidated statements of
income and comprehensive income for the three-month and six-month periods ended
June 30, 2001 and 2000 and the consolidated statement of cash flows for the six-
month periods ended June 30, 2001 and 2000.  These consolidated financial
statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants.  A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole.  Accordingly, we do not express such an
opinion.

Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with accounting principles generally accepted in the United
States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the accompanying consolidated balance
sheet of Alfa Corporation and subsidiaries as of December 31, 2000, and the
related consolidated statements of income, stockholders' equity, cash flows and
comprehensive income for the year then ended (not presented herein); and in our
report dated February 6, 2001, we expressed an unqualified opinion on those
consolidated financial statements.  In our opinion, the information set forth in
the accompanying consolidated balance sheet as of December 31, 2000, is fairly
stated in all material respects, in relation to the consolidated balance sheet
from which it has been derived.

KPMG LLP
August 10, 2001
Birmingham, Alabama

                                       12
<PAGE>

                       MANAGEMENT'S DISCUSSION AND ANALYSIS

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

     The following table sets forth consolidated summarized income statement
information for the six month and three month periods ended June 30, 2001 and
2000:
<TABLE>
<CAPTION>
                                            Six Months Ended June 30,              Three Months Ended June 30,
                                      -------------------------------------    -----------------------------------
                                           2001         2000     % Change         2001        2000       % Change
                                      -------------------------------------    -----------------------------------
                                                   (in thousands, except share and per share data)
<S>                                    <C>             <C>           <C>       <C>           <C>         <C>
Revenues
Property and casualty
 insurance premiums                      $195,228      $185,395       5%          $ 98,323      $ 93,798      5%
Life insurance premiums
 and policy charges                        28,653        26,817       7%            13,654        12,927      6%
                                      -----------   -----------     ---        -----------   -----------    ---
   Total premiums and
     policy charges                      $223,881      $212,212       5%          $111,977      $106,725      5%
                                      ===========   ===========     ===        ===========   ===========    ===

Net investment income                    $ 39,576      $ 34,691      14%          $ 20,414      $ 17,559     16%
                                      ===========   ===========     ===        ===========   ===========    ===

Total Revenues                           $266,056      $254,071       5%          $133,125      $129,784      3%
                                      ===========   ===========     ===        ===========   ===========    ===

Net income
  Property and casualty
    insurance                            $ 21,610      $ 26,379     (18%)         $ 12,497      $ 14,433    (13%)
  Life insurance                           10,431         9,551       9%             5,078         5,064      0%
                                      -----------   -----------     ---        -----------   -----------    ---
    Total insurance
      operations                           32,041        35,930     (11%)           17,575        19,497    (10%)
  Noninsurance operations                   1,347         1,045      29%               535           464     15%
  Net realized investment gains               748         3,652     (80%)               68         3,089    (98%)
  Corporate expenses                       (2,129)       (3,442)     38%              (764)       (2,215)    66%
  Cumulative effect of change in
       accounting principle                  (259)            0      NM                  0             0      0%
                                      -----------   -----------     ---        -----------   -----------    ---
 Net income                              $ 31,748      $ 37,185     (15%)         $ 17,414      $ 20,835    (16%)
                                      ===========   ===========     ===        ===========   ===========    ===

       Net income per share-
        Basic                               $0.81         $0.95     (14%)            $0.44         $0.53    (17%)
                                      ===========   ===========     ===        ===========   ===========    ===
        Diluted                             $0.80         $0.94     (15%)            $0.44         $0.53    (17%)
                                      ===========   ===========     ===        ===========   ===========    ===

Weighted average
 shares outstanding - Basic            39,160,202    39,267,605                 39,166,321    39,097,428
                                      ===========   ===========                ===========   ===========
         Diluted                       39,451,134    39,483,252                 39,480,690    39,329,185
                                      ===========   ===========                ===========   ===========
</TABLE>

     Total premiums and policy charges increased 5% in the first six months of
2001 as a result of increased production in both property casualty and life
business and continued good persistency.  Net investment income

                                       13
<PAGE>

increased 14% in the first six months of 2001 while invested assets have grown
5.0% in the six months since December 31, 2000.

     Operating income for the first six months decreased by 18% in the property
casualty subsidiaries due primarily to an increased level of storm activity
during the first quarter of 2001.  The 9% increase in income in the life
subsidiary is due to greater premium production and increased investment income.
Noninsurance operations were up 29% due primarily to solid growth in the loan
and lease portfolios.  With an improved interest rate spread, the finance
subsidiary was the primary contributor to the approximately $300,000 increase in
noninsurance net income.

     The Company's net income was negatively impacted by a decrease in realized
investment gains.  Corporate expenses decreased in the first half of 2001 due to
lower interest expense on corporate-related debt primarily used to fund the
Company's stock repurchase program.

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 six month and three month periods ended June 30, 2001 and 2000:

<TABLE>
<CAPTION>
                                            Six Months Ended June 30,             Three Months Ended June 30,
                                         ------------------------------        -------------------------------
                                           2001        2000    % Change           2001       2000   % Change
                                         -------------------------------       -------------------------------
                                                                    (in thousands)
<S>                                      <C>         <C>        <C>              <C>       <C>         <C>
Earned premiums
   Personal lines                         $186,930   $177,338      5%            $94,162   $89,731       5%
   Commercial lines                          6,909      6,709      3%              3,503     3,385       3%
   Pools, associations and fees              2,153      2,016      7%              1,080     1,023       6%
   Reinsurance ceded                          (764)      (668)   (14%)              (422)     (340)    (24%)
                                          --------   --------   ----             -------   -------     ---

     Total                                $195,228   $185,395      5%            $98,323   $93,799       5%
                                          ========   ========   ====             =======   =======     ===

Net underwriting income                   $ 14,821   $ 21,078    (30%)           $ 9,980   $11,636     (14%)
                                          ========   ========   ====             =======   =======     ===

Loss ratio                                    62.1%     60.4%                       58.8%     58.0%
LAE ratio                                      4.0%      5.7%                        4.2%      6.4%
Expense ratio                                 26.3%     22.6%                       26.8%     23.2%
                                          --------   --------                    -------   -------

GAAP basis combined ratio                     92.4%     88.6%                       89.8%     87.6%
                                          ========   =======                     =======   =======

Underwriting margin                            7.6%     11.4%                       10.2%     12.4%
                                          ========   =======                     =======   =======

Net investment income                     $ 14,258   $ 14,000      2%            $ 7,331   $ 7,016       4%
                                          ========   ========   ====             =======   =======     ===

Pre-tax operating income                  $ 29,215   $ 35,250    (17%)           $17,382   $18,753      (7%)
                                          ========   ========   ====             =======   =======     ===

Operating income, net of tax              $ 21,610   $ 26,379    (18%)           $12,497   $14,433     (13%)
                                          ========   ========   ====             =======   =======     ===
</TABLE>

                                       14
<PAGE>

     Earned premiums increased 4.8% in the second quarter of 2001 and 5.3% for
the first six months of 2001 due to increased production in the number of new
homeowner policies written and from continued good persistency in both the
automobile and homeowner lines.

     The Company's core underwriting results continued to be favorable in
comparison to other insurance carriers due in part to a continued good loss
ratio in the automobile line of 60%, compared to the 59% loss ratio experienced
in the first six months of 2000.  The overall loss ratio decreased to 62.1% for
the first two quarters of 2001 as the ratio fell to 58.8% for the second quarter
following $7.4 million of storm losses in the first quarter of 2001.
Approximately $2.5 million of storm losses were incurred in the first quarter of
2000.  Loss adjustment expenses in the first six months of 2001 were 4.0% of
earned premiums compared to 5.7% in the same period of 2000.  This improvement
resulted from a decrease in loss adjustment expense reserves made following a
review of reserve levels.  The increase in business resulting from the mandatory
insurance law becoming effective in Alabama in June 2000 has not resulted in the
emergence of additional claims cost at the anticipated levels.  Consequently,
reserves have been adjusted in 2001 to a more normal level.  Another factor in
the lower underwriting margin was an increase in expenses from 2000 levels
created by the inclusion of Specialty in the pool.  Another item contributing to
the increased expense level was the higher costs related to technology
initiatives.

     Net investment income increased 2% in the first six months of 2001 in the
property casualty subsidiaries due to continued positive cash flow from
profitable underwriting results which increased invested assets 7.1% since June
30, 2000.

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 six month and three month periods ended June
30, 2001 and 2000:
<TABLE>
<CAPTION>
                                               Six Months Ended June 30,    Three Months Ended June 30,
                                            ----------------------------   ----------------------------
                                                2001     2000   % Change       2001     2000   % Change
                                            ----------------------------   ----------------------------
                                                                  (in thousands)
<S>                                          <C>      <C>      <C>         <C>       <C>      <C>
Premiums and policy charges
   Universal life policy charges             $ 7,938  $ 7,305         9%    $ 3,992  $ 3,712         8%
   Universal life policy charges - COLI        1,732    1,610         8%        475      426        12%
   Interest sensitive life policy charges      5,052    5,018         1%      2,545    2,516         1%
   Traditional life insurance premiums        13,732   12,682         8%      6,642    6,273         6%
   Group life insurance premiums                 199      202        (1%)         0        0         0%
                                             -------  -------        --     -------  -------        --
     Total                                   $28,653  $26,817         7%    $13,654  $12,927         6%
                                             =======  =======        ==     =======  =======        ==

Net investment income                        $22,906  $20,225        13%    $11,636  $10,269        13%
                                             =======  =======        ==     =======  =======        ==

Benefits and expenses                        $32,920  $30,297         9%    $16,193  $14,454        12%
                                             =======  =======        ==     =======  =======        ==

Pre-tax operating income                     $14,616  $13,112        11%    $ 7,091  $ 6,926         2%
                                             =======  =======        ==     =======  =======        ==

Operating income, net of tax                 $10,431  $ 9,551         9%    $ 5,078  $ 5,064         0%
                                             =======  =======        ==     =======  =======        ==
</TABLE>

                                       15
<PAGE>

     The Company's life insurance premiums and policy charges increased 7% in
the first six months of 2001 due to new business and good persistency.  First
year collected premiums have increased over 29% in the first half of 2001 due to
a continuation of increases in sales of term products including the Company's
new 30-year level term product which was first offered in January 2001.  Written
premiums on this product totaled approximately $2.2 million in the first six
months of 2001.  Total new annualized premium increased 11.5% in the first half
of 2001 and 12.1% in all of 2000.

     Life insurance operating income increased approximately 9% in the first six
months of 2001.  This increase was the result of continuing increases in
production, good persistency and increased investment income.  The mortality
ratio of actual to expected death claims increased to 107% in the first six
months of 2001 from 97% in the first two quarters of 2000.  As a result of the
increase in earnings, positive cash flows resulted in a 13.4% increase in
invested assets since June 30, 2000, increasing investment income approximately
13%.

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

     Noninsurance operations were up 29% due primarily to improved operating
results of Alfa Financial Corporation, the Company's finance subsidiary.  Growth
in both the loan and lease portfolios combined with more favorable interest rate
spreads contributed to an increase in net income of $819,000 from the finance
subsidiary.  Noninsurance operations were negatively impacted by the timing of
fluctuations in the market value of assets held by the Company's subsidiary
covering certain employee benefits while earnings from the real estate and
construction subsidiaries were down a total of $325,000 in the first six months
of 2001 from the same period in 2000.

CORPORATE
---------

     Corporate expenses decreased 38%, or approximately $1.3 million, due to
favorable trends in short-term interest rates.  This reduction in rates allowed
the Company's interest expense to decline from levels experienced in the first
six months of 2000 despite an overall increase in commercial paper borrowings
since June 30, 2000 of $3.0 million.

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 six months ended June 30, 2001 and 2000:
<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                                       June 30,
                                                                  ------------------
                                                                     2001      2000
                                                                  ------------------
<S>                                                                <C>       <C>
Increase in invested assets since January 1, 2001 and 2000            5.0%      9.7%
Investment yield rate (annualized)                                    6.8%      6.6%
Increase in net investment income since June 30, 2000 and 1999       14.1%      6.2%

</TABLE>

                                       16
<PAGE>

     The marginal 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  $14.8 million in underwriting income in
the first six months of 2001 and to the improved operating results of the
Company's life subsidiary, which had $10.4 million in operating income in the
same period.  The premium from the COLI plan in the life insurance subsidiary is
collected in February and provided positive cash flow in the first quarter of
both periods. Increases in cash resulting from increased commercial paper
borrowings were primarily used to support growth in the loan and lease
portfolios of the finance subsidiary, and to fund the Company's stock repurchase
program. As a result of the overall positive cash flows from operations,
invested assets grew 5.0% since January 1, 2001 and 12.3% since June 30, 2000
(based on amortized cost, which excludes the impact of SFAS 115), and net
investment income increased 14.1%.  In addition to the increased investment
income created by positive cash flow from operations, the Company also had
improved investment income results from its finance subsidiary including
approximately $900,000 from its commercial lease portfolio purchased on March
31, 2000.  The overall yield rate, calculated using amortized cost, has
increased slightly to 6.8%.  The Company had net realized investment gains of
approximately $1.2 million in the first six months of 2001 and $5.6 million in
the similar period in 2000.  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 June
30, 2001 and December 31, 2000:
<TABLE>
<CAPTION>

                                 June 30,     December 31,
                                   2001          2000
                                 ------------------------
<S>                              <C>          <C>
Fixed maturities
 Taxable
  Mortgage backed (CMO's)          25.5%          25.4%
  Corporate bonds                  29.7           30.5
                                  -----          -----
   Total taxable                   55.2           55.9
 Tax exempts                       13.7           14.0
                                  -----          -----
  Total fixed maturities           68.9           69.9
                                  -----          -----
Equity securities                   7.7            8.5
Real estate                         0.1            0.2
Policy loans                        3.4            3.4
Collateral loans                    5.3            5.2
Other long term investments        10.1            8.7
Short term investments              4.5            4.1
                                  -----          -----
                                  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 December 31, 2000, the overall mix of investments has remained relatively
stable with changes due to a shift from fixed maturities to other long term
investments and to market value fluctuations in fixed maturities.

                                       17
<PAGE>

     The rating of the Company's portfolio of fixed maturities using the
Standard & Poor's rating categories is as follows at June 30, 2001 and December
31, 2000:
<TABLE>
<CAPTION>

                                            June 30,    December 31,
                                              2001         2000
                                            ------------------------
<S>                                          <C>          <C>
RATING
------
AAA to A-                                     91.2%            90.6%
BBB+ to BBB-                                   8.1              8.3
BB+ and Below (Below investment grade)         0.7              1.1
                                            ------------------------
                                             100.0%           100.0%
                                            ========================
</TABLE>

     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 June 30, 2001, approximately 37.0% 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 June
30, 2001, the Company's total portfolio of fixed maturities had gross unrealized
gains of $32,522,555 and gross unrealized losses of $17,562,685.  Securities are
priced by nationally recognized pricing services or by broker/dealer securities
firms.  No securities were priced by the Company.

     During the first six months of 2001, the Company sold approximately $21.0
million in fixed maturities available for sale.  These sales resulted in gross
realized gains of $115,669 and gross realized losses of $548,624.  During the
same period in 2000, the Company sold approximately $29.0 million in fixed
maturities available for sale.  These sales resulted in gross realized gains of
$120,365 and gross realized losses of $982,019.

     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 June 30, 2001, the Company had unrealized
gains of approximately $11.9 million in such investments.

     In the first six months of 2001, the Company wrote down four equity
securities totaling $2,080,968, whose declines in value were deemed to be other
than temporary and were recorded as a reduction in realized investment gains.
In addition, the Company wrote down four bonds during the same period totaling
$1,100,243, whose declines in value were also deemed to be other than temporary
and were recorded as a reduction in realized investment gains.

     The Company's investment in other long term investments consists primarily
of consumer loans and commercial leases originated by the finance subsidiary.
These loans and leases are collateralized by automobiles, equipment and other
property.  At June 30, 2001, the delinquency ratio on the loan portfolio was
2.01%, up from 1.81% at December 31, 2000.  The delinquency ratio on the lease
portfolio at June 30, 2001 was 2.94%, down from 4.68% at December 31, 2000.
Credit losses of approximately $275,000 were incurred in the first six months of
2001 including an increase of approximately $50,000 in general reserves
attributable to

                                       18
<PAGE>

growth of the consumer loan portfolio. Leases charged off in the first two
quarters of 2001 were approximately $101,000. At June 30, 2001, the Company
maintained an allowance for loan losses of $732,363 or approximately 1.1% of the
outstanding loan balance. In addition, at June 30, 2001, the Company maintained
an allowance for lease losses of $857,075 or approximately 1.7% of the
outstanding lease balance. Other significant long term investments include
assets leased under operating leases, partnership investments and certain other
investments.

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

     The effective tax rate in the first six months of 2001 was 28.6% compared
to 29.5% for the full year 2000 and 29.3% for the first six months of 2000.  The
decrease in the effective tax rate in the first six months of 2001 is due
primarily to the reduction in income due to increased storm activity.  The
effective rate has also been impacted by increased tax preference credits on
certain investments.  Based on information available at June 30, 2001, the
Company currently anticipates the effective tax rate for all of 2001 to be
approximately 28.9%.

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

     The Company 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.

     The Company's subsidiaries require cash in order to fund policy acquisition
costs, claims, other policy benefits, interest expense, general operating
expenses, and dividends to the Company.  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 were
reserved for grant to key personnel.  On April 26, 2001, the plan was amended to
increase the maximum aggregate number of shares available for grant to 3,200,000
shares.  Under the plan, options ratably become exercisable annually over three
years and may not be exercised after ten years after the date of the award.
During March 2001, the Company issued 202,000 options.

                                       19
<PAGE>

     The Company's Board of Directors has approved stock repurchase programs
authorizing the repurchase of up to 4,000,000 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.  During the first six months of
2001, the Company repurchased 81,150 shares at a cost of $1,527,821.  At June
30, 2001, the total repurchased was 3,126,250 shares at a cost of $39,605,349.
The Company has reissued 451,366 treasury shares as a result of option
exercises.

     Total borrowings increased $24.0 million in the first six months of 2001 to
$167.2 million.  At June 30, 2001, the Company had approximately $136.8 million
in commercial paper outstanding at rates ranging from 3.82% to 4.25% with
maturities ranging from July 2, 2001 to August 17, 2001.  The Company intends to
continue to use the commercial paper program to fund the consumer loan
portfolio, commercial lease portfolio and other corporate short term needs.
Backup lines of credit are in place up to $180 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 $30.4 million in short-term
debt outstanding to affiliates at June 30, 2001 with interest equal to
commercial paper rates payable monthly.

     Cash surrenders paid to policyholders on a statutory basis totaled $8.2
million in the first six months of 2001 and $8.5 million for the first six
months of 2000.  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 June 30, 2001, the total amount of
cash that would be required to fund all amounts subject to surrender was
approximately $427.9 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.  In 1999, the Alabama legislature passed a tort reform package
that should help to curb some of the excessive litigation experienced in recent
years.  In addition, a mandatory insurance bill was passed to require motorists
to obtain insurance coverage beginning in June 2000.  While this requirement
will affect both the revenues and losses incurred by the Company in the future,
the full extent or impact is not possible to predict and the Company believes
any impact on future results will not be significant.

                                       20
<PAGE>

FINANCIAL ACCOUNTING DEVELOPMENTS
---------------------------------

     The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard (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 that 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.  This
standard, as amended by SFAS No. 137 and SFAS No. 138, became effective for the
Company January 1, 2001.  At this time, the Company does not anticipate this
standard having a significant impact on the Company's financial position or
income as it does not use derivative instruments in the normal course of
business.  On January 1, 2001, the Company recorded approximately $259,000, net
of tax, as the effect upon adoption of this standard.

     The FASB also issued SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (a replacement of SFAS
No. 125)" in September 2000.  At this time, the Company does not anticipate this
standard having a significant impact on the Company's financial position or
income.

     The FASB recently issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets," in June 2001.  Based on current
information available and the fact that the Company has not engaged in material
transactions covered by these standards, the Company does not anticipate these
standards having a significant impact on the Company's financial position or
income.

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 expressed 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,
technological changes, political and legal contingencies and general economic
conditions, as well as other risks and uncertainties 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 and may cause actual future results to differ
materially from those contemplated, projected, estimated or budgeted in such
forward-looking statements.

                                       21
<PAGE>

Item 3.
-------

MARKET RISK DISCLOSURES
-----------------------

     The Company's objectives in managing its investment portfolio are to
maximize investment income and investment returns while minimizing overall
credit risk.  Investment strategies are developed based on many factors
including underwriting results, overall tax position, regulatory requirements,
and fluctuations in interest rates.  Investment decisions are made by management
and approved by the Board of Directors.  Market risk represents the potential
for loss due to adverse changes in the fair value of securities.  The market
risk related to the Company's fixed maturity portfolio are primarily interest
rate risk and prepayment risk.  The market risk related to the Company's equity
portfolio is equity price risk.  There have been no material changes to the
Company's market risk for the six months ended June 30, 2001.  For further
information, reference is made to Management's Discussion and Analysis of
Results of Operations in Alfa Corporation's Annual Report on Form 10-K for the
year ended December 31, 2000.

                                       22
<PAGE>

                          PART II.  OTHER INFORMATION



Item 1.
-------

     LEGAL PROCEEDINGS
     -----------------

     Certain legal proceedings are in process at June 30, 2001.  Costs for these
and similar legal proceedings, including accruals for outstanding cases, totaled
approximately $352,000 in the first six months of 2001, $3.0 million in 2000,
$6.5 million in 1999 and $5.2 million in 1998.  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 mental
anguish and punitive damages.  Approximately 17 legal proceedings against Alfa
Life Insurance Corporation (Life) are in process at June 30, 2001.  Of the 17
proceedings, three were filed in 2001, five were filed in 2000, seven were filed
in 1999, one was filed in 1997, and one was filed in 1996.  In a case tried in
January 2001, in Barbour County, Alabama, the jury returned a verdict for the
plaintiff against Life for $500,000 in compensatory damages and $5,000,000 in
punitive damages.  After Life filed post-trial motions, the trial court reduced
the punitive damage award to $1,500,000.  Life has appealed the award to the
Alabama Supreme Court.  Two of the 17 pending legal proceedings against Life
were filed as purported class actions.  At present, only one class action has
been certified against Life.  The trial court order certifying that class action
has been appealed to the Alabama Supreme Court.  In addition, one purported
class action lawsuit is pending against both Alfa Builders, Inc. and Alfa Mutual
Fire Insurance Company.  Additionally, four purported class action lawsuits are
pending against the property and casualty mutual companies involving a number of
issues and allegations which could affect the Company because of a pooling
agreement between the companies.  No class has been certified in any of these
five purported class action cases.  It should be noted that in Alabama, where
the Company has substantial business, the likelihood of a judgment in any given
suit, including a large mental anguish and/or punitive damage award by a jury,
bearing little or no relation to actual damages, continues to exist, creating
the potential for unpredictable material adverse financial results.

Item 6.
-------

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

     (a)   Exhibits:

           11 - Statement of Computation of Per Share Earnings

           15 - Letter from KPMG LLP Regarding Unaudited Interim Financial
Information

     (b)   Reports on Form 8-K:

           There were no reports on Form 8-K filed during the quarter ended June
30, 2001.

           Items other than those listed above are omitted because they are not
required or are not applicable.


                                       23
<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      8/13/01                  By:    /s/ Jerry A. Newby
    ------------------------          -------------------------------
                                          Jerry A. Newby
                                          President



Date      8/13/01                   By:   /s/  Stephen G. Rutledge
    ------------------------           ------------------------------
                                          Stephen G. Rutledge
                                          Senior Vice President,
                                          (Chief Financial Officer and
                                             Chief Investment Officer)

                                       24