FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


(Mark One)
|X|     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                         September 30, 1998

                                       OR

|_|     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

For the transaction period from                                 to

Commission file number

                         GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
                  (Exact name of registrant as specified in its charter)

                   Colorado                                   84-0467907
(State or other jurisdiction of incorporation     I.R.S. Employer Identification
               or organization)                                   Number)

                            8515 East Orchard Road,  Englewood,  CO
                              80111 (Address of principal executive
                              offices)
                                             (Zip Code)

                                           [303] 689-4128
                        (Registrant's telephone number, including area code)

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

As of September 30, 1998, 7,032,000 shares of the registrant's common stock were
outstanding, all of which were owned by the registrant's parent company.




<PAGE>


                                TABLE OF CONTENTS

<TABLE>


                                                                                         Page
                                                                                      -----------
Part I         FINANCIAL INFORMATION

<S>                 <C>                     
               Item 1   Financial Statements

                        Consolidated Statements of Income                                 3

                        Consolidated Balance Sheets                                       4

                        Consolidated Statements of Cash Flows                             6

                        Notes to Consolidated Financial Statements                        8

               Item 2   Management's Discussion and Analysis of Financial                 10
                        Condition and Results of Operations

Part II        OTHER INFORMATION

               Item 1   Legal Proceeding                                                  16

               Item 6   Exhibits and Reports on Form 8-K                                  16

               Signatures                                                                 17


</TABLE>






                                            - 2 -


<PAGE>


PART I   FINANCIAL INFORMATION
ITEM 1   FINANCIAL STATEMENTS

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
-----------------------------------------------------------------------------------------------
(Unaudited)
                                            Three Months Ended           Nine Months Ended
                                               September 30,               September 30,
                                         --------------------------  ---------------------------
                                            1998          1997           1998          1997
                                         ------------  ------------  ------------- -------------
REVENUES:
<S>                                    <C>           <C>           <C>              <C>              
  Premium and fee income               $    494,962  $    297,633  $  1,090,539     1,016,382        
  Net investment income                     222,294       223,496       669,719       653,891
  Net realized gains (losses) on             13,512         5,332        32,827        (1,828)
investments
                                         ------------  ------------  ------------- -------------

                                            730,768       526,461     1,793,085     1,668,445
                                         ------------  ------------  ------------- -------------
BENEFITS AND EXPENSES:
  Life and other policy benefits            244,721       144,125       537,189       395,967
  Increase in reserves                       71,989        37,313       120,152       220,687
  Interest paid or credited to              125,071       131,986       372,066       402,582
contractholders
  Provision for policyholders' share
of
    earnings on participating business        1,953           211         5,312         4,725
  Dividends to policyholders                 17,354        10,967        51,479        44,980
                                         ------------  ------------  ------------- -------------

                                            461,088       324,602     1,086,198     1,068,941

  Commissions                                41,872        25,659        98,708        75,690
  Operating expenses                        141,448       110,583       373,271       315,912
  Premium taxes                              11,031         6,360        24,215        15,656
                                         ------------  ------------  ------------- -------------

                                            655,439       467,204     1,582,392     1,476,199
                                         ------------  ------------  ------------- -------------

INCOME BEFORE INCOME TAXES                   75,329        59,257       210,693       192,246

PROVISION FOR INCOME TAXES:
   Current                                   28,322        30,252        69,611        62,357
   Deferred                                  (2,148)      (10,284)        1,598        12,649
                                         ------------  ------------  ------------- -------------

                                             26,174        19,968        71,209        75,006
                                         ------------  ------------  ------------- -------------

NET INCOME                             $     49,155  $     39,289  $    139,484       117,240    
                                         ============  ============  ============= =============

</TABLE>






See notes to consolidated financial statements.

                                             -3-


<PAGE>


GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
-----------------------------------------------------------------------------------------------

                                                                September 30,    December 31,
ASSETS                                                              1998             1997
------
                                                                --------------   --------------
                                                                 (Unaudited)
INVESTMENTS:
  Fixed Maturities:
<S>                                                          <C>               <C>           
    Held-to-maturity, at amortized cost                      $     2,180,369   $    2,082,716
       (fair value $2,309,203 and $2,151,476)
    Available-for-sale, at fair value                              7,053,513        6,698,629
       (amortized cost $6,743,525 and $6,541,422)
  Mortgage loans on real estate, net                               1,170,519        1,235,594
  Common stock                                                        39,216           39,021
  Real estate, net                                                    72,494           93,775
  Policy loans                                                     2,703,053        2,657,116
  Short-term investments, available-for-sale
       (cost approximates fair value)                                262,342          399,131
                                                                --------------   --------------

      Total Investments                                           13,481,506       13,205,982

Cash                                                                 149,262          126,278
Reinsurance receivable                                               140,078           84,364
Deferred policy acquisition costs                                    240,511          255,442
Investment income due and accrued                                    157,280          165,827
Other assets                                                         211,018          121,543
Premiums in course of collection                                      87,972           77,008
Deferred income taxes                                                181,089          193,820
Separate account assets                                            8,549,187        7,847,451
                                                                --------------   --------------





TOTAL ASSETS                                                 $    23,197,903   $   22,077,715
                                                                ==============   ==============


See notes to consolidated financial statements.                                   (Continued)
</TABLE>

                                            - 4 -


<PAGE>


GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
-----------------------------------------------------------------------------------------------

                                                                September 30,    December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY                                1998             1997
------------------------------------
                                                                --------------   --------------
                                                                 (Unaudited)
POLICY BENEFIT LIABILITIES:
<S>                                                           <C>              <C>           
    Policy reserves                                           $   11,752,129   $   11,102,719
    Policy and contract claims                                       445,551          375,499
    Policyholders' funds                                             175,262          165,106
    Experience refunds                                                89,417           84,935
    Provision for policyholders' dividends                            68,476           62,937

GENERAL LIABILITIES:
    Due to Parent Corporation                                        165,301          126,656
    Repurchase agreements                                            100,103          325,538
    Commercial paper                                                  99,706           54,058
    Other liabilities                                                405,449          605,032
    Undistributed earnings on
      participating business                                         148,898          141,865
    Separate account liabilities                                   8,549,187        7,847,451
                                                                --------------   --------------

      Total Liabilities                                           21,999,479       20,891,796
                                                                --------------   --------------

STOCKHOLDER'S EQUITY:
    Preferred stock, $1 par value,
       50,000,000 shares authorized:
            Series A, cumulative, 1,500 shares authorized,
              liquidation value of $100,000 per share,
              0 and 600 shares issued and outstanding                                  60,000
            Series B, cumulative, 1,500 shares authorized,
              liquidation value of $100,000 per share,
              0 and 200 shares issued and outstanding                                  20,000
            Series C, cumulative, 1,500 shares authorized,
              none outstanding
            Series D, cumulative, 1,500 shares authorized,
              none outstanding
            Series E, non-cumulative, 2,000,000
              shares authorized, liquidation value of $20.90                           41,800
              per share, 0 and 2,000,000 issued, and
outstanding
    Common stock, $1 par value; 50,000,000 shares
authorized;
       7,032,000 shares issued and outstanding                         7,032            7,032
    Additional paid-in capital                                       693,948          690,748
    Accumulated other comprehensive income                           103,832           52,807
    Retained earnings                                                393,612          313,532
                                                                --------------   --------------

      Total Stockholder's Equity                                   1,198,424        1,185,919
                                                                --------------   --------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                    $   23,197,903   $   22,077,715
                                                                ==============   ==============

</TABLE>

See notes to consolidated financial statements.

                                            - 5 -


<PAGE>


GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
-----------------------------------------------------------------------------------------------
(Unaudited)
                                                                       Nine Months Ended
                                                                         September 30,
                                                                  -----------------------------
                                                                      1998            1997
                                                                  -------------   -------------

OPERATING ACTIVITIES:
<S>                                                             <C>             <C>          
    Net income                                                  $     139,484   $     117,240
    Adjustments to reconcile net income to
      net cash provided by operating activities:
       Gain allocated to participating policyholders                    5,312           7,479
       Amortization of investments                                     (5,447)          2,150
       Realized losses (gains) on disposal of investments
           and write-downs of mortgage loans and real estate          (32,827)          1,828
       Amortization                                                    60,590          36,233
       Deferred income taxes                                           (9,035)         15,445
    Changes in assets and liabilities:
        Policy benefit liabilities                                    771,818         351,264
        Reinsurance receivable                                          4,669         127,350
        Accrued interest and other receivables                         25,742          29,186
        Other, net                                                   (353,675)       (216,353)
                                                                  -------------   -------------
                 Net cash provided by operating activities            606,631         471,822
                                                                  -------------   -------------

INVESTING ACTIVITIES:
    Proceeds from sales, maturities, and
        redemptions of investments:
        Fixed maturities
             Held-to-maturity
                Maturities and redemptions                            385,071         287,314
             Available-for-sale
                Sales                                               5,137,042       1,820,194
                Maturities and redemptions                            990,923         528,737
        Mortgage loans                                                168,777         176,767
        Real estate                                                    16,456          13,809
        Common stock                                                    3,183          12,578
    Purchases of investments:
        Fixed maturities
             Held-to-maturity                                        (471,514)       (415,248)
             Available-for-sale                                    (5,940,683)     (2,518,279)
        Mortgage loans                                                (95,788)         (2,226)
        Real estate                                                    (3,075)         (5,144)
        Common stock                                                   (3,235)        (28,317)
    Acquisition of subsidiary                                         (87,840)
                                                                  -------------   -------------
                 Net cash provided by (used in) investing              99,317        (129,815)
activities
                                                                  -------------   -------------



                                                                                  (Continued)
</TABLE>

                                            - 6 -


<PAGE>


GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
-----------------------------------------------------------------------------------------------
(Unaudited)
                                                                        Nine Months Ended
                                                                          September 30,
                                                                   -----------------------------
                                                                       1998            1997
                                                                   -------------   -------------

FINANCING ACTIVITIES:
<S>                                                              <C>             <C>           
   Contract withdrawals, net of deposits                         $    (366,309)  $    (440,199)
   Net Parent Corporation borrowings (repayments)                       41,136         (16,872)
   Dividends paid                                                      (59,404)        (54,040)
   Net commercial paper borrowings (repayments)                         45,648         (10,165)
   Net repurchase agreements borrowings (repayments)                  (225,435)        155,297
   Capital contributions                                                 3,200
   Redemption of preferred shares                                     (121,800)
                                                                   -------------   -------------
              Net cash used in financing activities                   (682,964)       (365,979)
                                                                   -------------   -------------

NET DECREASE IN CASH                                                    22,984         (23,972)

CASH, BEGINNING OF YEAR                                                126,278         125,182
                                                                   -------------   -------------

CASH, END OF PERIOD                                              $     149,262   $     101,210
                                                                   =============   =============





See notes to consolidated financial statements.                                    (Concluded)
</TABLE>


                                            - 7 -


<PAGE>


GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands)
--------------------------------------------------------------------------------
(Unaudited)

1.      GENERAL

        The  consolidated  financial  statements and related notes of Great-West
        Life & Annuity  Insurance  Company (the  Company)  have been prepared in
        accordance with generally accepted accounting  principles  applicable to
        interim  financial  reporting and do not include all of the  information
        and footnotes required for complete financial statements. In the opinion
        of management, all adjustments (consisting of normal recurring accruals)
        considered  necessary for a fair presentation have been included.  These
        financial  statements  should be read in  conjunction  with the  audited
        consolidated  financial  statements and notes thereto for the year ended
        December 31, 1997. The results of operations for the interim periods are
        not  necessarily  indicative of the results that may be expected for the
        year ended December 31, 1998.

        Effective  September  30,  1998,  the  Company  repurchased  all  of its
        outstanding  preferred  stock  held  by The  Great-West  Life  Assurance
        Company (the Parent Corporation) for $121.8 million.

        Certain   reclassifications   have  been  made  to  the  1997  financial
        statements to conform with the basis of presentation in 1998.

2.      NEW ACCOUNTING PRONOUNCEMENTS

        Effective  January 1, 1998, the Company  adopted  Statement of Financial
        Accounting Standards (SFAS) No. 130, "Reporting  Comprehensive  Income".
        This  Statement  establishes  new rules for  reporting  and  display  of
        comprehensive  income and its components;  however, the adoption of this
        Statement  had no impact on the  Company's  net income or  shareholder's
        equity.  This  Statement  requires  unrealized  gains or  losses  on the
        Company's  available-for-sale  securities,  which prior to adoption were
        reported  separately in  shareholder's  equity,  to be included in other
        comprehensive   income.   Prior  year  financial  statements  have  been
        reclassified to conform to the  requirements of SFAS No. 130. During the
        three and nine months  ended  September  30, 1998 and 1997,  total other
        comprehensive  income  amounted  to  $44,933  and  $51,025  for 1998 and
        $29,334 and $33,250 for 1997, respectively.

        In June 1998,  the Financial  Accounting  Standards  Board (FASB) issued
        Statement of Financial  Accounting  Standards (SFAS) No. 133 "Accounting
        for Derivative  Instruments and for Hedging Activities".  This Statement
        provides a comprehensive and consistent standard for the recognition and
        measurement  of  derivatives  and  hedging  activities.  This  Statement
        requires that all  derivative  financial  instruments be recorded on the
        balance sheet at fair value.  If the  derivative is not  designated as a
        hedging  instrument,  changes  in fair  value  are to be  recognized  in
        earnings  in the period of  change.  If  certain  conditions  are met, a
        derivative  may be designated as a hedge,  in which case the  accounting
        for a change in fair value will depend on the  specific  exposure  being
        hedged.  This  Statement is effective for all fiscal  quarters of fiscal
        years beginning after June 15, 1999, and earlier adoption is encouraged.
        The Company has not adopted this  Statement  as of  September  30, 1998.
        Management  estimates  the effect of the change will not have a material
        affect on the Company's financial statements.








                                            - 8 -


<PAGE>


3.      RELATED PARTY TRANSACTIONS

        On September 30, 1998,  the Company and the Parent  Corporation  entered
        into an Indemnity  Reinsurance  Agreement  pursuant to which the Company
        will  reinsure by  coinsurance  certain  Parent  Corporation  individual
        non-participating  life insurance  policies.  The Company  recorded,  at
        estimated fair value, the following at September 30, 1998 as a result of
        this transaction:
<TABLE>
        Assets                                        Liabilities and Stockholder's Equity
        --------------------------------------------- -----------------------------------------

<S>                                  <C>                                        <C>         
        Bonds                        $   147,475      Policy reserves           $    437,022
        Mortgages                         82,637      Due to Parent Corporation       17,620
        Cash                             134,900      Stockholder's equity             3,200
        Deferred policy acquisition       18,595
        costs
        Deferred income taxes             15,762
        Policy loans                      56,209
        Other                              2,264
                                       --------------
                                                                                  =============
                                     $   457,842                                $    457,842
                                       ==============                             =============
</TABLE>

4.      OTHER

        On July 8, 1998, the Company  acquired all of the outstanding  shares of
        Anthem Health & Life Insurance  Company  (AH&L) of  Piscataway,  NJ. The
        purchase price of $87.8 million was based on AH&L's adjusted book value,
        and is  subject to  further  minor  adjustments.  This  acquisition  was
        recorded using the purchase  method of accounting and  accordingly,  the
        results of operations  have been included in the Company's  consolidated
        financial statements from July 8, 1998. The Company is in the process of
        allocating the purchase  price to the fair value of assets  acquired and
        liabilities assumed.

        The Company is involved in various legal  proceedings  that arise in the
        ordinary  course of its business.  In the opinion of  management,  after
        consultation with counsel,  the resolution of these  proceedings  should
        not have a material adverse effect on its financial  position or results
        of operations.






                                            - 9 -



ITEM 2 MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
OF OPERATIONS
<TABLE>
                                    Three Months Ended Sept. 30,   Nine Months Ended Sept. 30,
                                    -----------------------------  -----------------------------
    Operating Summary (Millions)        1998            1997           1998           1997
                                    --------------  -------------  -------------  --------------

<S>                                <C>            <C>            <C>            <C>        
    Premiums and fee income        $     495      $       298    $    1,090     $     1,016
    Net investment income                222              223           670             654
    Realized investment gains             14                5            33              (2)
    (losses)
                                    --------------  -------------  -------------  --------------
         Total revenues                  731              526         1,793           1,668

    Total benefits and expenses          656              467         1,583           1,476
    Income tax expense                    26               20            71              75
                                    ==============  =============  =============  ==============
         Net income                $      49      $        39    $      139     $       117
                                    ==============  =============  =============  ==============


                                                                    September     December 31,
                                                                       30,
    Balance Sheet (Millions)                                           1998           1997
                                                                   -------------  --------------

    Investment assets                                            $   13,482     $    13,206
    Separate account assets                                           8,549           7,847
    Total assets                                                     23,198          22,078
    Total policyholder liabilities                                   12,531          11,791
    Long-term debt - due to
         Parent Corporation                                             117             118
    Total shareholder's equity                                        1,198           1,186
</TABLE>

        Introduction

        The  following  discussion  addresses  the  financial  condition  of the
        Company as of September 30, 1998,  compared with December 31, 1997,  and
        its  results  of  operations  for the  quarter  and  nine  months  ended
        September  30,  1998,  compared  with the same  periods  last year.  The
        discussion   should  be  read  in  conjunction   with  the  Management's
        Discussion and Analysis section included in the Company's report on Form
        10-K  for the year  ended  December  31,  1997 to which  the  reader  is
        directed for additional information.

        First Nine Months 1998 v. First Nine Months 1997

        Net income  increased  19% from $117 million in the first nine months of
        1997 to $139  million in the first nine  months of 1998.  Net income for
        the third  quarter of 1998  increased  25% from the same time  period in
        1997.  During  the  second  quarter of 1997,  the  Company's  results of
        operations  included a release of $48 million  from the tax  contingency
        liability to reflect the  resolution of certain tax matters with the IRS
        related  to the 1990 and 1991 audit  years.  The $48  million  liability
        release in 1997  included  $15  million  which was  attributable  to the
        participating  policyholders  and is  reflected  as a  liability  on the
        balance sheet,  thus, only $33 million of the release  directly  impacts
        net income. In addition to the contingent liability release, the Company
        also in the normal  course of business  reviewed its deferred tax assets
        and liabilities and increased its liability by $21 million (of which $10
        million is attributable to participating policyholders),  which resulted
        in an $11 million  impact to net income  during the first nine months of
        1997. The net impact of these  transactions is an increase in net income
        of $22 million in the first nine months of 1997. Excluding the effect of
        these  transactions,  the growth in net income for the third quarter and
        first nine months of 1998 is 25% and 46%,  respectively,  which reflects
        realized  capital gains on investments  (versus losses in 1997),  higher
        fee income from assets under  management,  higher  margins on investment
        products, and better mortality.

                                                - 10 -


<PAGE>



        The  premium and fee income  increase of $197  million or 66% during the
        third  quarter of 1998  includes  $123 million in premiums  generated by
        AH&L  subsequent  to its  acquisition  on July 8,  1998,  and higher fee
        income from assets  under  management.  The year to date premium and fee
        income increased only 7% over the corresponding  period of 1997 due to a
        significant 1997 reinsurance  transaction which resulted in $156 million
        of premium income and benefit expense,  and the release of a $48 million
        contingent  liability,  through premium  income,  both of which are more
        fully described in the 1997 10-K.

          Net investment  income decreased 1% for the third quarter of 1998, and
          increased  2% for the first  nine  months of 1998.  The  growth in net
          investment  income for the nine month  period is a result of  improved
          performance on the mortgage portfolio.  The actual earned rate for the
          first nine  months of 1998 was 7.14%  versus  7.15% for the first nine
          months of 1997 as the increased investment income partially offset the
          impact of declining interest rates.

          Realized investment gains (losses) changed from a net realized loss of
          $2 million in the first nine months of 1997 to a net realized  gain of
          $33 million in 1998.  The  decrease in interest  rates in 1998 and the
          second half of 1997  resulted in realized  gains  totaling $33 million
          and $4 million,  respectively, on the sale of fixed maturities for the
          first nine months of 1998 and 1997.  Provisions  for asset losses were
          $.6 million in 1998 versus $6 million in 1997.

        Total  benefits and expenses  increased 40% and 7% for the third quarter
        and the first nine months of 1998.  Operating expenses increased 28% and
        18% for the third  quarter  and the first  nine  months of 1998 from the
        first nine  months of 1997,  respectively,  as a result of the  expenses
        associated  with  AH&L,  costs  associated  with  systems   development,
        development of health maintenance organizations (HMOs) and the growth in
        pension plan administrative services provided by a subsidiary.

        The effective income tax rate in the first nine months of 1998 was lower
        than the rate for the first nine  months of 1997 due to the  recognition
        of net operating loss  carryforwards of subsidiaries in 1998 and the tax
        reserves strengthening in 1997.

        Investment  assets increased $276 million to $13.5 billion from December
        31, 1997 to September 30, 1998 reflecting the  reinsurance  transactions
        previously  discussed  in  the  Notes  to  the  Consolidated   Financial
        Statements.  At the same time,  separate  account assets  increased $702
        million, bringing the total to $8.5 billion. This reflects the continued
        trend  of   contractholders   moving  away  from  the  more  traditional
        guaranteed products to variable options.

        Effective  September  30,  1998,  the  Company  repurchased  all  of its
        outstanding  preferred  stock held by the Parent  Corporation for $121.8
        million.







                                                - 11 -


<PAGE>


        Major Business Units Results

        Employee Benefits

        First Nine Months 1998 v. First Nine Months 1997

        Total premium and fee income for group life and health  increased 31% to
        $781 million for the first nine months of 1998 from 1997  levels,  which
        is primarily related to AH&L (21%). Total premium equivalents  increased
        20% to  $1,784  million  for the  first  nine  months  of 1998 from 1997
        levels.  Case sales in the  Company's  group  life and  health  business
        increased  11% for the first nine months of 1998 over the same period in
        1997, resulting in a net case growth of 312 cases.

        Of the total 401(k) cash flow  received  during the first nine months of
        1998,  92%  was  allocated  to  variable   funds.   Total  assets  under
        administration  (including  third-party  administration)  grew from $5.4
        billion at December 31, 1997 to $5.7 billion at September 30, 1998.  The
        number of contributing  participants  increased from 430,000 at December
        31, 1997 to more than 481,000 at September 30, 1998.

        Financial Services

           Savings

        First Nine Months 1998 v. First Nine Months 1997

        Assets under  administration  in the public  non-profit (P/NP) business,
        including   Separate  Accounts  but  excluding   Guaranteed   Investment
        Contracts (GICS),  increased .5% during the first nine months of 1998 to
        $7.2 billion.  New contributions to variable business represented 59% of
        the total deposits received in the first nine months of 1998 compared to
        65% for the nine months of 1997.  The higher  percentage in 1997 was due
        to a large rollover in one particular case.

           Life Insurance

        First Nine Months 1998 v. First Nine Months 1997

        Excluding  the  effect  of  the  insurance  recapture,  individual  life
        insurance  premiums  increased  15% in the first nine  months of 1998 to
        $187 million.  Deposits for  investment-type  contracts increased 81% in
        the first nine months of 1998 to $850 million, which is primarily due to
        sales of the Company's  Bank-Owned  Life Insurance  (BOLI) product ($385
        million in 1998 versus $64 million in 1997).

        General Account Investments

        The Company's  primary  investment  objective is to acquire assets whose
        durations  and cash flows reflect the  characteristics  of the Company's
        liabilities,   while  meeting  industry,  size,  issuer  and  geographic
        diversification  standards and maintaining a competitive rate of return.
        Formal   liquidity  and  credit  quality   parameters   have  also  been
        established.  The  fixed  maturities  in  the  Company's  portfolio  are
        generally rated by external rating agencies and if not externally rated,
        are rated by the Company on a basis  believed to be similar to that used
        by rating agencies.








                                                - 12 -


<PAGE>


        The Company follows  rigorous  procedures to control  interest rate risk
        and  observes  strict asset and  liability  matching  guidelines.  These
        guidelines  are designed to ensure that even in changing  interest  rate
        environments,  the Company's assets will always be able to meet the cash
        flow  and  income  requirements  of  its  liabilities.  Through  dynamic
        modeling,  using  state-of-the-art  software to analyze the effects of a
        wide range of possible market changes upon  investments and policyholder
        benefits,  the Company seeks to ensure that its investment  portfolio is
        appropriately   structured  to  fulfill  financial  obligations  to  its
        policyholders.

        Fixed Maturities

        Fixed maturity  investments  include  publicly  traded bonds,  privately
        placed  bonds and public and  private  structured  assets.  This  latter
        category  contains both  asset-backed  and  mortgage-backed  securities,
        including CMOs. The Company's  strategy related to structured  assets is
        to focus on those with lower  volatility  and minimal  credit risk.  The
        Company  does not invest in higher risk CMOs such as  interest-only  and
        principal-only  strips,  and  currently  has no plans to  invest in such
        securities.

        Private   placement   investments,    which   are   primarily   in   the
        held-to-maturity  category,  are generally less marketable than publicly
        traded assets, yet they typically offer covenant protection which allows
        the Company,  if necessary,  to take  appropriate  action to protect its
        investment.  The  Company  believes  that  the  cost  of the  additional
        monitoring  and  analysis  required by private  placements  is more than
        offset by their enhanced yield.

        The  distribution  of the fixed  maturity  portfolio by credit rating is
        summarized as follows:
<TABLE>
                                                         September 30,         December 31,
                                                             1998                  1997
                                                       ------------------    ------------------

<S>                                                           <C>                  <C>  
        AAA                                                   45.5%                45.7%
        AA                                                     9.2%                 8.8%
        A                                                     24.5%                23.8%
        BBB                                                   20.2%                20.7%
        BB and Below (non-investment grade)                     .6%                 1.0%
                                                       ------------------    ------------------
                                                             100.0%               100.0%
</TABLE>

        During the first nine months of 1998, net  unrealized  gains (losses) on
        fixed  maturities  included  in  stockholders'  equity,  which is net of
        policyholder-related   amounts  and  deferred  income  taxes,  increased
        surplus by $51 million  resulting  in  accumulated  other  comprehensive
        income of $104 million.

        Liquidity and Capital Resources

        The Company's operations have liquidity requirements that vary among the
        principal  product  lines.  Life insurance and pension plan reserves are
        primarily long-term liabilities. Accident and health reserves, including
        long-term   disability,   consist  of  both   short-term  and  long-term
        liabilities.  Life insurance and pension plan reserve  requirements  are
        usually  stable  and  predictable,   and  are  supported   primarily  by
        long-term,  fixed income investments.  Accident and health claim demands
        are stable and predictable but generally shorter term, requiring greater
        liquidity.  The Company currently does not have any material commitments
        for capital expenditures







                                            - 13 -


<PAGE>


        Generally, the Company has met its operating requirements by maintaining
        appropriate levels of liquidity in its investment  portfolio and through
        utilization of overall  positive cash flows from  operations.  Liquidity
        for the Company has remained strong, as evidenced by significant amounts
        of short-term  investments and cash, which totaled $412 million and $526
        million as of September 30, 1998 and December 31, 1997, respectively.

        Funds provided from premiums and fees,  investment income and maturities
        of investment  assets are  reasonably  predictable  and normally  exceed
        liquidity  requirements  for payment of claims,  benefits and  expenses.
        However,  since the timing of available  funds cannot  always be matched
        precisely to  commitments,  imbalances  may arise when demands for funds
        exceed those on hand.  Also, a demand for funds may arise as a result of
        the Company taking advantage of current  investment  opportunities.  The
        Company's  capital  resources  represent  funds  available for long-term
        business  commitments  and  primarily  consist of retained  earnings and
        proceeds  from the  issuance  of  commercial  paper.  Capital  resources
        provide  protection  for  policyholders  and the  financial  strength to
        support the  underwriting  of insurance  risks,  and allow for continued
        business growth.  The amount of capital  resources that may be needed is
        determined by the Company's senior management and Board of Directors, as
        well as by regulatory  requirements.  The allocation of resources to new
        long-term  business  commitments  is designed  to achieve an  attractive
        return,  tempered by  considerations of risk and the need to support the
        Company's existing business.

        The Company's  financial  strength provides the capacity and flexibility
        to enable it to raise funds in the capital  markets through the issuance
        of commercial paper. The Company continues to be well capitalized,  with
        sufficient  borrowing  capacity  to meet  the  anticipated  needs of its
        business.  The Company  continues  to conduct  strategic  and  financial
        reviews  of  its  businesses  to  deploy  its  capital   resources  most
        efficiently.  The Company's  outstanding  commercial  paper totaled $100
        million and $54 million at  September  30, 1998 and  December  31, 1997,
        respectively.  The Company's commercial paper has been given a rating of
        A-1+ by  Standard  & Poor's  Corporation  and a rating of P-1 by Moody's
        Investors Service, each being the highest rating available.

        Year 2000 Issue

        The  Year  2000  ("Y2K")  problem  arises  when  a  computer  performing
        date-based  computations or operations produces erroneous results due to
        the  historical  practice  of using  two  digit  years  within  computer
        hardware and software.  This causes errors or  misinterpretations of the
        century in date  calculations.  Virtually all businesses,  including the
        Company,  are  required to determine  the extent of their Y2K  problems.
        Systems  that have a Y2K problem  must then be  converted or replaced by
        systems  that will operate  correctly  with respect to the year 2000 and
        beyond.

        The Company has a written plan that  encompasses all computer  hardware,
        software, networks, facilities (embedded systems) and telephone systems.
        The plan also includes  provisions  for  identifying  and verifying that
        major vendors and business  partners are Y2K  compliant.  The Company is
        developing contingency plans to address the possibility of both internal
        and external  failures as well.  The plan calls for full Y2K  compliance
        for core  systems  by March  31,  1999 and full Y2K  compliance  for all
        Company systems by October 31, 1999.

        The Company's plan  establishes  five phases for becoming Y2K compliant.
        Phase 1 is  "impact  analysis"  which  includes  initial  inventory  and
        preliminary  assessment  of Y2K impact.  Phase 2 is "solution  planning"
        which  includes  system by system  planning to outline the  approach and
        timing for reaching compliance. Phase 3 is "conversion/renovation" which
        means  the  actual  process  of  replacing  or  repairing  non-compliant
        systems.  Phase 4 is  "testing"  to  ensure  that the  systems  function
        correctly under a variety of different date scenarios  including current
        dates, year 2000 and leap year dates. Phase 5 is "implementation"  which
        means putting Y2K compliant systems back into production.


                                                - 14 -


<PAGE>


        As of September  30, 1998,  the Company had  completed  impact  analysis
        (phase 1) and  solution  planning  (phase 2) for all of core systems
        and was more than 95%  complete  for phase 1 and 2 with  respect  to its
        systems as a whole.  In  addition,  the  Company was  approximately  71%
        complete  with  respect  to  conversion  and  renovation  (phase 3), 55%
        complete  with  respect to testing  (phase  4),  and 40%  complete  with
        respect to implementation (phase 5).

        In  addition  to  ensuring  that  the  Company's  own  systems  are  Y2K
        compliant,  the  Company has  identified  third  parties  with which the
        Company has significant  business  relationships  in order to assess the
        potential  impact on the  Company of the third  parties'  Y2K issues and
        plans.  The Company  expects to complete  this process  during the first
        quarter of 1999 and will  conduct  system  testing  with  third  parties
        throughout  1999.  The Company  does not have  control  over these third
        parties  and  cannot  make any  representations  as to what  extent  the
        Company's  future  operating  results may be  adversely  affected by the
        failure of any third party to address successfully its own Y2K issues.

        On the basis of currently available information, the expense incurred by
        the Company,  including anticipated future expenses,  related to the Y2K
        issue  has not  and is not  expected  to be  material  to the  Company's
        financial  condition  or results of  operations.  The  Company has spent
        approximately  $7.5 million on its Y2K project through the end of 
        September 1998 and expects to spend up to  approximately  $15.3 million 
        on its Y2K project  by the end of  2000.  All of these  funds will come
        from the Company's  cash flow from  operations.The Company has continued
        other scheduled  non-Y2K  information  systems changes and upgrades.  
        Although work on Y2K  issues  may have  resulted  in minor  delays  on 
        the  other projects,  the delays are not expected to have a material 
        adverse effect on  the  Company's   consolidated  financial  condition  
        or  results  of operations.

        The most  reasonably  likely worst case Y2K scenario is that the Company
        will experience  isolated  internal or third party computer failures and
        will be  temporarily  unable to process  insurance  and annuity  benefit
        transactions.  All of the  Company's  Y2K efforts have been  designed to
        prevent such an occurrence.  However, if the Company identifies internal
        or third party Y2K issues which cannot be timely corrected, there can be
        no assurance that the Company can avoid Y2K problems or that the cost of
        curing the problem will not be material.

        In an effort to mitigate risks associated with Y2K failures, the Company
        is in the process of  developing  contingency  plans to address its core
        functions,  including  relations with third parties. It is the Company's
        expectation  that  contingency  plans  will  address  possible  failures
        generated internally, by vendors or business partners, and by customers.
        Possible general approaches  include manual  processing,  payments on an
        estimated basis and use of disaster recovery facilities.







                                            - 15 -


<PAGE>


Part II OTHER INFORMATION

        Item 1 Legal Proceedings

               There are no  material  pending  legal  proceedings  to which the
               Company or any of its  subsidiaries is a party or of which any of
               their property is the subject.

        Item 6 Exhibits and Reports on Form 8-K

               (a)    Index to Exhibits

                      Exhibit Number              Title                 Page
                      ----------------     ---------------------    -----------

                            27             Financial Data                15
                                              Schedule

               (b)    Reports on Form 8-K

                      The Company filed a Form 8-K on July 23, 1998,  disclosing
                      the  completion  of the  Company's  purchase of all of the
                      outstanding  shares  of  Anthem  Health  & Life  Insurance
                      Company of Piscataway, New Jersey.









                                            - 16 -


<PAGE>


SIGNATURES

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


                                    GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY



DATE:                                      BY:
                                           /s/
November 13, 1998
-------------------------------         --------------------------------------
                                         Glen R. Derback, Vice President &
                                         Controller
                                         (Duly authorized officer and chief
                                         accounting officer)






                                            - 17 -