FEDERATED INSURANCE SERIES, 485APOS, 1998-03-09

FEDERATED INSURANCE SERIES
485APOS, 1998-03-09

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1933 Act File No. 33-69268
1940 Act File No. 811-8042

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---

Pre-Effective Amendment No. ....................

Post-Effective Amendment No. 17 ........................ X
---- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 18 ................................... X
------- ---

FEDERATED INSURANCE SERIES

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds, 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

_ immediately upon filing pursuant to paragraph (b) on _________________
pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a) (i)
X on APRIL 22, 1998 pursuant to paragraph (a) (i) 75 days after filing
pursuant to paragraph (a)(ii) on _________________ pursuant to paragraph
(a)(ii) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies To:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037

<PAGE>

CROSS REFERENCE SHEET

This Amendment to the Registration Statement of Federated Insurance Series
(formerly, Insurance Management Series), which consists of eight portfolios: (1)
Federated American Leaders Fund II, (2) Federated Utility Fund II, (3) Federated
Fund for U.S. Government Securities II, (4) Federated High Income Bond Fund II,
(5) Federated Prime Money Fund II, (6) Federated International Equity Fund II,
(7) Federated Growth Stategies Fund II and (8) Federated Equity Income Fund II
is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(RULE 404(C) CROSS REFERENCE)

Item 1. Cover Page....................(1-8) Cover Page.
Item 2. Synopsis......................Not applicable.
Item 3. Condensed Financial
Information..................(1-8) Financial Highlights;
(1-8) Performance Information.
Item 4. General Description of
Registrant...................(1-8) General Information; (1-8)
Investment Information; (1-8)
Investment Objectives;
(1-8) Investment Policies; (4,5)
Investment Risks; (1-8) Investment
Limitations.

Item 5. Management of the Fund........(1-8) Fund Information; (1-8)
Management of the Fund; (1-8)
Distribution of Fund Shares;
(8) Distribution Plan;(1-8)
Administration of the Fund;
(3,4,5, 8) Brokerage Transactions.
Item 6. Capital Stock and Other
Securities...................(1-8) Dividends; (1-8) Shareholder
Information; (1-8) Tax Information;
(1-8) Federal Taxes; (1-8) State
and Local Taxes; (1-8) Voting Rights.
Item 7. Purchase of Securities Being
Offered......................(1-8) Net Asset Value; (1-8)
Investing in the Fund; (1-8)
Purchases and Redemptions;
(1-8) What Shares Cost.
Item 8. Redemption or Repurchase......(1-8) Purchases and Redemptions.
Item 9. Pending Legal Proceedings None.

<PAGE>

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page....................(1-8) Cover Page.
Item 11. Table of Contents.............(1-8) Table of Contents.
Item 12. General Information and
History Not Applicable.
Item 13. Investment Objectives and
Policies.....................(1-8) Investment Objectives and
Policies; (1-8) Investment
Limitations. (5) Regulatory
Compliance.
Item 14. Management of the Fund........(1-8) Federated Insurance Series
Management; (1-8) Trustees'
Compensation;
Item 15. Control Persons and Principal
Holders of Securities (1-8) Fund Ownership.
Item 16. Investment Advisory and Other
Services.....................(1-8) Investment Advisory Services;
(8) Distribution Plan;(1-8) Other
Services;(1-8) Fund Administration;
(1-8) Custodian and Portfolio
Accountant; (1-5,8) Transfer Agent;
(6,7) Transfer Agent and Dividend
Disbursing Agent; (1-8) Independent
Auditors.
Item 17. Brokerage Allocation..........(1-8) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered...(1-8) Purchasing Shares;
(1-8) Determining Net Asset Value.
Item 20. Tax Status....................(1-8) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data.........................(1-8) Total Return; (1-8) Yield;
(5) Effective Yield;
(1-8) Performance Comparisons.
Item 23. Financial Statements..........(1-8) to be filed by amendment.

FEDERATED AMERICAN LEADERS FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

This prospectus offers shares of Federated American Leaders Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment company.
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for investment
in the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated April 23,
1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS FUNDING VEHICLES FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR SUCH
CONTRACTS.

Prospectus dated April 23, 1998

<PAGE>

TABLE OF CONTENTS

(To be filed by Amendment.)

<PAGE>

FEDERATED AMERICAN LEADERS FUND II
FINANCIAL HIGHLIGHTS

(To be filed by Amendment.)

<PAGE>

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Equity Growth and Income Fund to
Federated American Leaders Fund II. The Declaration of Trust permits the Trust
to offer separate series of shares of beneficial interest in separate portfolios
of securities, including the Fund. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Trustees
have not established separate classes of shares.

Shares of the Fund are sold only to insurance companies as funding vehicles for
variable annuity contracts and variable life insurance policies issued by the
insurance companies. Shares of the Fund are sold at net asset value as described
in the section entitled "What Shares Cost." Shares of the Fund are redeemed at
net asset value.

For purposes of this prospectus, "Federated Funds" shall mean two or more funds
for which affiliates of Federated Investors serve as investment adviser and
principal underwriter.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVES

The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies described
in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in common stock of "blue-chip"
companies. "Blue-chip" companies generally are top-quality, established growth
companies which, in the opinion of the investment adviser, meet one or more of
the following criteria:

o industry leader with proven management capabilities;

o historical and future earnings growth rate of approximately 10%
compounded annually;

o strong balance sheet with pension liabilities funded;

o products with brand recognition and consumer acceptance;

o growing consumer-based demand with limited government sales;

o ability to meet social, political, and environmental problems;

o vigorous research effort with continuing new product flow;

o low external capital requirements; and

o not an import competitive company but possessing international
capabilities.

Unless indicated otherwise, the investment policies of the Fund may be changed
by the Trustees without the approval of shareholders. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of blue-chip companies. Given these long-term investment
horizons, the Fund will attempt to hold its portfolio securities throughout
market cycles.

COMMON STOCKS. The Fund invests primarily in common stocks of blue-chip
companies selected by the Fund's investment adviser based on the criteria set
forth above and traditional research techniques and technical factors, including
assessment of earnings and dividend growth prospects and of the risk and
volatility of the company's industry. Other factors, such as product position or
market share, will also be considered by the Fund's investment adviser.

AMERICAN DEPOSITARY RECEIPTS. The Fund may invest in American depositary
receipts ("ADRs") of foreign-domiciled blue-chip companies. ADRs are trust
receipts issued by U.S. banks or trust companies representing ownership
interests in the equity securities of these companies. ADRs are U.S.
dollar-denominated and traded on U.S. securities exchanges or over-the-counter.
The value of ADRs could be affected by changes in foreign currency exchange
rates.

CONVERTIBLE SECURITIES. Convertible securities include a spectrum of securities
which can be exchanged for or converted into common stock. Convertible
securities may include, but are not limited to: convertible bonds or debentures;
convertible preferred stock; units consisting of usable bonds and warrants; or
securities which cap or otherwise limit returns to the convertible security
holder, such as DECS- (Dividend Enhanced Convertible Stock, or Debt Exchangeable
for Common Stock when issued as a debt security), LYONS- (Liquid Yield Option
Notes, which are corporate bonds that are purchased at prices below par with no
coupons and are convertible into stock), PERCS- (Preferred Equity Redemption
Cumulative Stock (an equity issue that pays a high cash dividend, has a cap
price and mandatory conversion to common stock at maturity), and PRIDES-
(Preferred Redeemable Increased Dividend Securities (which are essentially the
same as DECS; the difference is little more than who initially underwrites the
issue).

Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Fund does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Fund. Therefore, the Fund invests in convertible securities
irrespective of their ratings. This could result in the Fund purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Fund holding such securities where they have acquired a
rating below investment grade after the Fund has purchased it.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

BANK INSTRUMENTS. Primarily to manage short-term cash, the Fund may also invest
in certificates of deposit, demand and time deposits, bankers' acceptances,
deposit notes, and other instruments of domestic and foreign banks and other
deposit institutions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest its
assets in securities of other investment companies as an efficient means of
carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.

REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities or other securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. The Fund or its custodian will take possession of the
securities subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that, under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/ dealers, which are found by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES. As a matter of investment practice, the Fund
may invest in restricted securities. This policy is not applicable to commercial
paper issued under Section 4(2) of the Securities Act of 1933. Restricted
securities are any securities in which the Fund may otherwise invest pursuant to
its investment objective and policies but which are subject to restriction on
resale under federal securities law. To the extent restricted securities are
deemed to be illiquid, the Fund will limit their purchase, including
non-negotiable time deposits, repurchase agreements providing for settlement in
more than seven days after notice, over-the-counter options, and certain
restricted securities determined by the Trustees not to be liquid, to 15% of the
net assets of the Fund.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
up to one-third of the value of its total assets to broker/dealers, banks, or
other institutional borrowers of securities. This is a fundamental policy which
may not be changed without the approval of shareholders. The Fund will only
enter into loan arrangements with broker/dealers, banks, or other institutions
which the adviser has determined are creditworthy under guidelines established
by the Trustees, and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the portfolio
securities loaned at all times.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous. Settlement dates may be
a month or more after entering into these transactions, and the market values of
the securities purchased may vary from the purchase prices.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also invest
temporarily in cash and cash items during times of unusual market conditions and
to maintain liquidity. Cash items may include short-term obligations such as:

o commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's, or
F-1 or F-2 by Fitch Investors Service, Inc.;

o securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies and instrumentalities; and

o repurchase agreements.

VARIABLE ASSET REGULATIONS. The Fund is also subject to variable contract asset
regulations prescribed by the U.S. Treasury Department under Section 817(h) of
the Internal Revenue Code. After a one year start-up period, the regulations
generally require that, as of the end of each calendar quarter or within 30 days
thereafter, no more than 55% of the total assets of the Fund may be represented
by any one investment, no more than 70% of the total assets of the Fund may be
represented by any two investments, no more than 80% of the total assets of the
Fund may be represented by any three investments, and no more than 90% of the
total assets of the Fund may be represented by any four investments. In applying
these diversification rules, all securities of the same issuer, all interests in
the same real property project, and all interests in the same commodity are each
treated as a single investment. In the case of government securities, each
government agency or instrumentality shall be treated as a separate issuer. If
the Fund fails to achieve the diversification required by the regulations,
unless relief is obtained from the Internal Revenue Service, the contracts
invested in the Fund will not be treated as annuity, endowment, or life
insurance contracts.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS. The Fund is intended to be a funding vehicle for
variable annuity contracts and variable life insurance policies offered by
certain insurance companies. The contracts will seek to be offered in as many
jurisdictions as possible. Certain states have regulations concerning, among
other things, the concentration of investments, sales and purchases of futures
contracts, and short sales of securities. If applicable, the Fund may be limited
in its ability to engage in such investments and to manage its portfolio with
desired flexibility. The Fund will operate in material compliance with the
applicable insurance laws and regulations of each jurisdiction in which
contracts will be offered by the insurance companies which invest in the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets and pledge up to 15% of its
total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

The net asset value per share of the Fund fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets of the
Fund, less liabilities, by the number of shares outstanding.

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable annuity contracts and variable life
insurance policies. The use of Fund shares as investments for both variable
annuity contracts and variable life insurance policies is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations,
resulting from mixed funding or shared funding, the Trustees will closely
monitor the operation of mixed funding and shared funding and will consider
appropriate action to avoid material conflicts and take appropriate action in
response to any material conflicts which occur. Such action could result in one
or more participating insurance companies withdrawing their investment in the
Fund.

Shares of the Fund are purchased or redeemed on behalf of participating
insurance companies at the next computed net asset value after an order is
received on days on which the New York Stock Exchange is open.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; and (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

Purchase orders from separate accounts investing in the Fund which are received
by the insurance companies by 4:00 p.m. (Eastern time), will be computed at the
net asset value of the Fund determined on that day, as long as such purchase
orders are received by the Fund in proper form and in accordance with applicable
procedures by 8:00 a.m. (Eastern time) on the next business day and as long as
federal funds in the amount of such orders are received by the Fund on the next
business day. It is the responsibility of each insurance company which invests
in the Fund to properly transmit purchase orders and federal funds in accordance
with the procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

Shares of the Fund will begin earning dividends if owned on the applicable
record date. Dividends of the Fund are automatically reinvested in additional
shares of the Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the business affairs of the Trust and for exercising
all of the Trust's powers except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.

Both the Trust and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of these codes are
subject to review by the Trustees, and could result in severe penalties.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary waiver
and reimbursement of expenses at any time at its sole discretion.

ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $110 billion invested across
more than 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more than
2,000 employees, Federated continues to be led by the management who founded
the company in 1955. Federated funds are presently at work in and through
4,500 financial institutions nationwide.

Scott B. Schermerhorn has been the Fund's portfolio manager since July
1996. Mr. Schermerhorn joined Federated Investors in 1996 as a Vice President of
the Fund's investment adviser. From 1990 through 1996, Mr. Schermerhorn was a
Vice President and Senior Investment Officer at J W Seligman & Co., Inc. Mr.
Schermerhorn received his M.B.A. in Finance and International Business from
Seton Hall University.

Michael P. Donnelly has been the Fund's portfolio manager since April
1997. Mr. Donnelly joined Federated in 1989 as an Investment Analyst and has
been a Vice President of the Fund's adviser since 1994. He served as an
Assistant Vice President of the Fund's adviser from 1992 to 1994. Mr. Donnelly
is a Chartered Financial Analyst and received his M.B.A. from the University of
Virginia.

DISTRIBUTION OF FUND SHARES

Federated Securities Corp. is the principal distributor for shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation organized
on November 14, 1969, and is the principal distributor for a number of
investment companies. Federated Securities Corp. is a subsidiary of Federated
Investors.

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to 0.25% of the average
daily net asset value of its shares, computed at an annual rate, to obtain
certain personal services for shareholders and to maintain shareholder accounts.
From time to time and for such periods as deemed appropriate, the amount stated
above may be reduced voluntarily. Under the Shareholder Services Agreement,
Federated Shareholder Services will either perform shareholder services directly
or will select institutions to perform shareholder services. Institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp.,
from its own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance may be predicated upon the amount of
shares the financial institution sells or may sell and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will
vote the Fund shares held in their separate accounts at meetings of the
shareholders. Voting will be in accordance with instructions received from
contract owners of the separate accounts, as more fully outlined in the
prospectus of the separate account. As of March 6, 1998, Aetna Insurance Company
of America, Hartford, Connecticut, and Aetna Life Insurance & Annuity Co.,
Hartford, Connecticut, owned 36.92% and 36.64%, respectively of the voting
securities of the Fund, and therefore, may for certain purposes be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees in certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.

TAX INFORMATION

FEDERAL TAXES

The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Aetna Insurance Company of America and Aetna Life Insurance & Annuity Co. are
owned by Aetna Inc.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.

The Fund intends to comply with the variable asset diversification regulations
which are described earlier in this prospectus. If the Fund fails to comply with
these regulations, contracts invested in the Fund shall not be treated as
annuity, endowment, or life insurance contracts under the Internal Revenue Code.

Contract owners should review the applicable contract prospectus for information
concerning the federal income tax treatment of their contracts and distributions
from the Fund to the separate accounts.

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.

Performance information will not reflect the charges and expenses of a variable
annuity or variable life insurance contract. Because shares of the Fund can only
be purchased by a separate account of an insurance company offering such a
contract, you should review the performance figures of the contract in which you
are invested, which performance figures will accompany any advertisement of the
Fund's performance.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

<PAGE>

ADDRESSES

Federated Insurance Series
Federated American Leaders Fund II Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

<PAGE>

FEDERATED AMERICAN LEADERS FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 23, 1998

Cusip 313916405
3113010A (4/98)

FEDERATED AMERICAN LEADERS FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus
of Federated American Leaders Fund II (the "Fund"), a portfolio of
Federated Insurance Series (the "Trust") dated April 23, 1998. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-341-7400.

FEDERATED INSURANCE SERIES
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998
[GRAPHIC OMITTED]

Cusip 313916405
3113010B (4/98)

<PAGE>

98
I
TABLE OF CONTENTS (To be filed by Amendment.)

<PAGE>

GENERAL INFORMATION
The Fund is a portfolio of the Trust, which was established as Insurance
Management Series, a Massachusetts business trust, under a Declaration of Trust
dated September 15, 1993. At a meeting of the Board of Trustees (the "Trustees")
held on November 14, 1995, the Trustees approved an amendment to the Declaration
of Trust to change the name of the Trust from Insurance Management Series to
Federated Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from Equity Growth and Income Fund to Federated American
Leaders Fund II. The Declaration of Trust permits the Trust to offer separate
series of shares of beneficial interest in separate portfolios of securities,
including the Fund. The shares in any one portfolio may be offered in separate
classes. As of the date of this prospectus, the Trustees have not established
separate classes of shares.

INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without approval of shareholders.

TYPES OF INVESTMENTS

The Fund invests, under normal circumstances, at least 65% of its total assets
in common stock of "blue-chip" companies, as defined in the prospectus. The Fund
may also invest in other securities of these companies, U.S. government
securities, repurchase agreements, and bank instruments. The following
supplements the discussion of acceptable investments in the prospectus.

CONVERTIBLE SECURITIES

DECS, or similar instruments marketed under different names, offer a
substantial dividend advantage with the possibility of unlimited upside
potential if the price of the underlying common stock exceeds a certain
level. DECS convert to common stock at maturity. The amount received is
dependent on the price of the common stock at the time of maturity. DECS
contain two call options at different strike prices. The DECS participate
with the common stock up to the first call price. They are effectively
capped at that point unless the common stock rises above a second price
point, at which time they participate with unlimited upside potential.

PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is
limited to a predetermined level. PERCS are less risky and less volatile
than the underlying common stock because their superior income mitigates
declines when the common stock falls, while the cap price limits gains when
the common stock rises.

WARRANTS

Warrants are basically options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned common stock at
issuance) valid for a specific period of time. Warrants may have a life
ranging from less than a year to twenty years or may be perpetual. However,
most warrants have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not exceed the
warrant's exercise price during the life of the warrant, the warrant will
expire as worthless. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them.
The percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the market
price of the optioned common stock.

U.S. GOVERNMENT OBLIGATIONS

The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S. Treasury
bills, notes, and bonds) and obligations issued and/or guaranteed by the U.S.
government agencies or instrumentalities. These securities are backed by:

o the full faith and credit of the U.S. Treasury;

o the issuer's right to borrow from the U.S. Treasury;

o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or

o the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

o Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;

o Federal Home Loan Banks;

o Federal Home Loan Mortgage Corporation;

o Federal National Mortgage Association; and

o Student Loan Marketing Association.

BANK INSTRUMENTS

The Fund only invests in bank instruments (as defined in the prospectus)
either issued by an institution having capital, surplus, and undivided
profits over $100 million or insured by the Bank Insurance Fund ("BIF") or
the Savings Association Insurance Fund ("SAIF"), both of which are
administered by the Federal Deposit Insurance Corporation. Bank instruments
may include Eurodollar Certificates of Deposit, Yankee Certificates of
Deposit, and Eurodollar Time Deposits. Institutions issuing Eurodollar
instruments are not necessarily subject to the same regulatory requirements
that apply to domestic banks, such as reserve requirements, loan
limitations, examinations, accounting, auditing, recordkeeping and the
public availability of information.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to broker/dealers,
banks, or other institutional borrowers of securities. The collateral received
when the Fund lends portfolio securities must be valued daily and, should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination at the option of the Fund or the
borrower. The Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest earned
on the cash or equivalent collateral to the borrower or placing broker. The Fund
does not have the right to vote securities on loan, but would terminate the loan
and regain the right to vote if that were considered important with respect to
the investment.

<PAGE>

REPURCHASE AGREEMENTS

The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase agreements,
a court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are found by the Fund's investment adviser to be
creditworthy pursuant to guidelines established by the Trustees.

REVERSE REPURCHASE AGREEMENTS

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.

RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law and is generally sold to institutional investors, such as the Fund, who
agree that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity.

The Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:

O THE FREQUENCY OF TRADES AND QUOTES FOR THE SECURITY;

O THE NUMBER OF DEALERS WILLING TO PURCHASE OR SELL THE SECURITY AND THE
NUMBER OF OTHER POTENTIAL BUYERS;

O DEALER UNDERTAKINGS TO MAKE A MARKET IN THE SECURITY; AND

O THE NATURE OF THE SECURITY AND THE NATURE OF THE MARKETPLACE TRADES.

PORTFOLIO TURNOVER

Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may have
been held. Any such trading will increase the Fund's portfolio turnover rate and
transaction costs. The adviser to the Fund does not anticipate that portfolio
turnover will result in adverse tax consequences.

For the fiscal years ended December 31, 1996 and 1995, the portfolio turnover
rates for the Fund were 90% and 43%, respectively.

<PAGE>

INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of the
value of its total assets; provided that, while borrowings and reverse
repurchase agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are made. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes.

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if, as a result of such purchase, 25%
or more of its total assets would be invested in any one industry. However,
the Fund may at any time invest 25% or more of its total assets in cash or
cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in securities
of companies whose business involves the purchase or sale of real estate or
in securities secured by real estate or interests in real estate.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, entering
into repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objectives and policies or the Trust's
Declaration of Trust.

UNDERWRITING

The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objectives,
policies, and limitations.

DIVERSIFICATION OF INVESTMENTS

<PAGE>

10% of any class of the outstanding voting securities of any one issuer. For
these purposes, the Fund considers common stock and all preferred stock of
an issuer each as a single class, regardless of priorities, series,
designations, or other differences.

The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
to these limitations become effective.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

INVESTING IN ILLIQUID SECURITIES

The Fund will not invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice, and certain restricted
securities not determined by the Trustees to be liquid.

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."

FEDERATED INSURANCE SERIES MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924

Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934

Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

<PAGE>

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937

Trustee

President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918

Trustee

Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949

President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

<PAGE>

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Boca Grande Club
Boca Grande, FL
Birthdate: October 6, 1926

Trustee

Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.

<PAGE>

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning, Manchester Craftsmen's Guild;
Restaurant Consultant, Frick Art & History Center; Conference Coordinator,
University of Pittsburgh Art History Department; Director or Trustee of the
Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.

* THIS TRUSTEE IS DEEMED TO BE AN "INTERESTED PERSON" AS DEFINED IN THE
INVESTMENT COMPANY ACT OF 1940.

@ MEMBER OF THE EXECUTIVE COMMITTEE. THE EXECUTIVE COMMITTEE OF THE BOARD OF
TRUSTEES HANDLES THE RESPONSIBILITIES OF THE BOARD BETWEEN MEETINGS OF THE
BOARD.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc. ; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Wesmark Funds; and World Investment Series,
Inc.

FUND OWNERSHIP

Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 6, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Aetna Insurance Company of America,
Hartford, CT, owned approximately 5,967,885 shares (36.92%); Aetna Life
Insurance & Annuity Co., Hartford, CT, owned approximately 5,924,080 shares
(36.64%); Life of Virginia, Richmond, VA, owned approximately 2,104,742 shares
(13.02%); and Great-West Life & Annuity Insurance Co., Englewood, CO, owned
approximately 1,076,734 shares (6.66%).

<PAGE>

TRUSTEES' COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies
in the Fund Complex

Thomas G. Bigley $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John T. Conroy, Jr. $1,270 $119,615 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

William J. Copeland $1,270 $119,615 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

J. Christopher Donahue, $0 $0 for the Trust and
President and Trustee 15 other investment companies
in the Fund Complex

James E. Dowd $1,270 $119,615 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Lawrence D. Ellis, M.D. $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Edward L. Flaherty, Jr. $1,270 $119,615 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Peter E. Madden $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Gregor F. Meyer $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

John E. Murray, Jr., $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Wesley W. Posvar $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

Marjorie P. Smuts $1,154 $108,725 for the Trust and
Trustee 56 other investment companies
in the Fund Complex

* Information is furnished for the fiscal year ended December 31, 1996.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

+ The information is provided for the last calendar year.

TRUSTEE LIABILITY

The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND

The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.

The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1996 and 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the adviser earned
advisory fees of $693,045, $142,579 and $4,397, respectively, of which $203,603,
$142,579 and $4,397, respectively, were voluntarily waived.

BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal years ended December 31, 1996 and 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the Fund paid
$234,623, $49,713 and $3,714, respectively, in brokerage commissions on
brokerage transactions.

Although investment decisions for the Fund are made independently from those of
any other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES
FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators". For the fiscal
years ended December 31, 1996 and 1995, and for the period from December 9, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000,
$125,000 and $73,288, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket expenses.

TRANSFER AGENT

Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.

<PAGE>

INDEPENDENT AUDITORS

The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

Shares of the Fund are sold at their net asset value without a sales charge on
days the New York Stock Exchange is open for business. The procedure for
purchasing shares of the Fund is explained in the prospectus under "Purchases
and Redemptions" and "What Shares Cost."

SHAREHOLDER SERVICES

This arrangement permits the payment of fees to Federated Shareholder Services
to cause services to be provided which are necessary for the maintenance of
shareholder accounts and to encourage personal services to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include but are not limited to
providing office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.

By adopting the Shareholder Services Agreement, the Trustees expect that the
Fund will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities are determined as follows:

O FOR EQUITY SECURITIES AND BONDS AND OTHER FIXED INCOME SECURITIES,
ACCORDING TO THE LAST SALE PRICE ON A NATIONAL SECURITIES EXCHANGE, IF
AVAILABLE;

O IN THE ABSENCE OF RECORDED SALES FOR EQUITY SECURITIES, ACCORDING TO THE
MEAN BETWEEN THE LAST CLOSING BID AND ASKED PRICES;

O FOR BONDS AND OTHER FIXED INCOME SECURITIES, AT THE LAST SALE PRICE ON A
NATIONAL SECURITIES EXCHANGE, IF AVAILABLE; OTHERWISE, AS DETERMINED BY AN
INDEPENDENT PRICING SERVICE;

O FOR UNLISTED EQUITY SECURITIES, THE LATEST MEAN PRICES;

O FOR SHORT-TERM OBLIGATIONS, ACCORDING TO THE MEAN BETWEEN BID AND ASKED
PRICES AS FURNISHED BY AN INDEPENDENT PRICING SERVICE; OR

O FOR ALL OTHER SECURITIES, AT FAIR VALUE AS DETERMINED IN GOOD FAITH BY THE
TRUSTEES.

MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

TAX STATUS
THE FUND'S TAX STATUS

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:

O DERIVE AT LEAST 90% OF ITS GROSS INCOME FROM DIVIDENDS, INTEREST, AND GAINS
FROM THE SALE OF SECURITIES;

O DERIVE LESS THAN 30% OF ITS GROSS INCOME FROM THE SALE OF SECURITIES HELD
LESS THAN THREE MONTHS;

O INVEST IN SECURITIES WITHIN CERTAIN STATUTORY LIMITS; AND

O DISTRIBUTE TO ITS SHAREHOLDERS AT LEAST 90% OF ITS NET INCOME EARNED DURING
THE YEAR.

SHAREHOLDERS' TAX STATUS

The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and this Statement. If the Fund fails to
comply with these regulations, contracts invested in the Fund shall not be
treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN
For the fiscal year ended December 31, 1996, and for the period from February 1,
1994 (date of initial public investment) to December 31, 1996, the average
annual total returns for the Fund were 21.58% and 18.03%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the quarterly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD
The Fund's 30-day yield for the thirty day period ended December 31, 1996 was
1.33%.

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This value is then annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. Also, the yield does not reflect the charges
and expenses of an insurance contract. You should review the performance figures
for your insurance contract, which figures reflect the applicable charges and
expenses of the contract. Such performance figures will accompany any
advertisement of the Fund's performance.

PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:

O PORTFOLIO QUALITY;

O AVERAGE PORTFOLIO MATURITY;

O TYPE OF INSTRUMENTS IN WHICH THE PORTFOLIO IS INVESTED;

O CHANGES IN INTEREST RATES AND MARKET VALUE OF PORTFOLIO SECURITIES;

O CHANGES IN FUND EXPENSES; AND

O THE RELATIVE AMOUNT OF THE FUND'S CASH FLOW.

The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.

<PAGE>

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:

O Lipper Analytical Services, Inc., RANKS FUNDS IN VARIOUS FUND CATEGORIES BY
MAKING COMPARATIVE CALCULATIONS USING TOTAL RETURN. TOTAL RETURN ASSUMES THE
REINVESTMENT OF ALL INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS, IF ANY.
FROM TIME TO TIME, THE FUND WILL QUOTE ITS LIPPER RANKING IN THE GROWTH AND
INCOME FUNDS CATEGORY IN ADVERTISING AND SALES LITERATURE.

O Dow Jones Industrial Average ("DJIA"), IS AN UNMANAGED INDEX REPRESENTING
SHARE PRICES OF MAJOR INDUSTRIAL CORPORATIONS, PUBLIC UTILITIES, AND
TRANSPORTATION COMPANIES. PRODUCED BY THE DOW JONES & COMPANY, IT IS CITED AS A
PRINCIPAL INDICATOR OF MARKET CONDITIONS.

O Standard & Poor's ("S&P") Ratings Group Daily Stock Price Index Of 500 Common
Stocks, A COMPOSITE INDEX OF COMMON STOCKS IN INDUSTRY, TRANSPORTATION, AND
FINANCIAL AND PUBLIC UTILITY COMPANIES, CAN BE USED TO COMPARE TO THE TOTAL
RETURNS OF FUNDS WHOSE PORTFOLIOS ARE INVESTED PRIMARILY IN COMMON STOCKS. IN
ADDITION, THE S&P INDEX ASSUMES REINVESTMENT OF ALL DIVIDENDS PAID BY STOCKS
LISTED ON ITS INDEX. TAXES DUE ON ANY OF THESE DISTRIBUTIONS ARE NOT INCLUDED,
NOR ARE BROKERAGE OR OTHER FEES CALCULATED IN THE S&P FIGURES.

O Morningstar, Inc., AN INDEPENDENT RATING SERVICE, IS THE PUBLISHER OF THE
BI-WEEKLY MUTUAL FUND VALUES. MUTUAL FUND VALUES RATES MORE THAN 1,000
NASDAQ-LISTED MUTUAL FUNDS OF ALL TYPES, ACCORDING TO THEIR RISK-ADJUSTED
RETURNS. THE MAXIMUM RATING IS FIVE STARS, AND RATINGS ARE EFFECTIVE FOR TWO
WEEKS.

Advertisements and sales literature for the Fund may quote total returns which
are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute. ABOUT FEDERATED INVESTORS Federated Investors is
dedicated to meeting investor needs which is reflected in its investment
decision making--structured, straightforward, and consistent. This has resulted
in a history of competitive performance with a range of competitive investment
products that have gained the confidence of thousands of clients and their
customers.

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.

In the equity sector, Federated Investors has more than 26 years experience. As
of December 31, 1996, Federated managed 31 equity funds totaling approximately
$7.6 billion in assets across growth, value, equity income, international, index
and sector (i.e. utility) styles. Federated Investors' value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.

BANK MARKETING

Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales. BROKER/DEALERS AND BANK BROKER/DEALER
SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any other
mutual fund distributor. Federated Investors' service to financial professionals
and institutions has earned it high ratings in several surveys performed by
DALBAR, Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS (To be filed by Amendment.)

*Source: Investment Company Institute

<PAGE>

APPENDIX
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS

AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

BAA--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA--Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

NR--NR indicates that Fitch does not rate the specific issue. Plus or Minus (-):
Plus or minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category.

STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

Moody's Investors Service, Inc., Commercial Paper Ratings

PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

O LEADING MARKET POSITIONS IN WELL ESTABLISHED INDUSTRIES.

O HIGH RATES OF RETURN ON FUNDS EMPLOYED.

O CONSERVATIVE CAPITALIZATION STRUCTURE WITH MODERATED RELIANCE ON DEBT AND
AMPLE ASSET PROTECTION.

O BROAD MARGINS IN EARNING COVERAGE OF FIXED FINANCIAL CHARGES AND HIGH
INTERNAL CASH GENERATION.

O WELL-ESTABLISHED ACCESS TO A RANGE OF FINANCIAL MARKETS AND ASSURED
SOURCES OF ALTERNATE LIQUIDITY.

PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

F-1--(Highest Grade) Commercial paper assigned this rating is regarded as having
the strongest degree of assurance for timely payment.

F-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

FEDERATED UTILITY FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

This prospectus offers shares of Federated Utility Fund II (the "Fund"), which
is a diversified investment portfolio in the Federated Insurance Series (the
"Trust"), an open-end, diversified management investment company. The Fund
invests in equity and debt securities of utility companies to achieve high
current income and moderate capital appreciation. Shares of the Fund may be sold
only to separate accounts of insurance companies to serve as the investment
medium for variable life insurance policies and variable annuity contracts
issued by insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable annuity contracts and variable life
insurance policies offered by the insurance companies which provide for
investment in the Fund. Keep this prospectus for future reference.

Prospectus dated April23, 1998

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Utility Fund to Federated Utility Fund
II. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest in separate portfolios of securities, including
the Fund. The shares in any one portfolio may be offered in separate classes. As
of the date of this prospectus, the Trustees have not established separate
classes of shares.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to achieve high current income and
moderate capital appreciation. The investment objective cannot be changed
without approval of shareholders. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
policies described in this prospectus.

INVESTMENT POLICIES

The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of equity and debt securities of
utility companies. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term, the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of utility companies. The Fund intends to achieve its
investment objective by investing in equity and debt securities of utility
companies that produce, transmit, or distribute gas and electric energy as well
as those companies that provide communications facilities, such as telephone and
telegraph companies. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities of utility companies. The prices of
fixed income securities fluctuate inversely to the direction of interest rates.

COMMON STOCKS. The Fund invests primarily in common stocks of utility companies
selected by the Fund's investment adviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects and
of the risk and volatility of the company's industry. However, other factors,
such as product position, market share, or profitability will also be considered
by the Fund's investment adviser.

AMERICAN DEPOSITARY RECEIPTS. The Fund may purchase American Depositary Receipts
("ADRs") issued by U.S. banks as a substitute for direct ownership of securities
of foreign companies in the utilities industry. ADRs are traded in the United
States on stock exchanges and in the over-the-counter markets like stocks of
domestic companies.

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts as well as securities
of foreign issuers that trade on foreign stock exchanges. Securities of a
foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial.

Investing in non-U.S. securities carries substantial risks in addition to those
associated with domestic investments. In an attempt to reduce some of these
risks, the Fund diversifies its investments broadly among foreign countries,
including both developed and developing countries.

The Fund will take advantage of the unusual opportunities for higher returns
available from investing in developing countries and may invest in the utility
and other securities of such countries. These investments carry considerably
more volatility and risk because they are associated with less mature economies
and less stable political systems. (See "Risk Considerations in Developing
Countries.")

RISK CONSIDERATIONS IN DEVELOPING COUNTRIES. Securities prices in developing
countries can be significantly more volatile than in developed countries,
reflecting the greater uncertainties of investing in lesser developed markets
and economies. In particular, developing countries may have relatively unstable
governments, and may present the risk of nationalization of businesses,
expropriation, confiscatory taxation or, in certain instances, reversion to
closed market, centrally planned economies. Such countries may also have
restrictions on foreign ownership or prohibitions on the repatriation of assets,
and may have less protection of property rights than developed countries.

The economies of developing countries may be predominantly based on only a few
industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in developing
countries may trade a small number of securities and may be unable to respond
effectively to increase in trading volume, potentially resulting in a lack of
liquidity and in volatility in the price of securities traded on those markets.
Also, securities markets in developing countries typically offer less regulatory
protection for investors.

The Fund's investments in convertible securities will not be subject to the
quality rating limit on other securities in which the Fund invests.

OTHER SECURITIES. The Fund may invest in preferred stocks, corporate bonds,
notes, and warrants of these companies and in cash, U.S. government securities,
and money market instruments in proportions determined by its investment
adviser.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. This policy is not applicable to commercial paper issued under
Section 4(2) of the Securities Act of 1933. Restricted securities are any
securities in which the Fund may otherwise invest pursuant to its investment
objective and policies, but which are subject to restriction on resale under
federal securities law. The Fund may also invest in illiquid securities but will
limit such investment to no more than 15% of its net assets. This limitation
will include certain restricted securities not determined to be liquid by the
Trustees, repurchase agreements providing for settlement in more than seven days
after notice and over-the-counter options.

TEMPORARY INVESTMENTS. The Fund may also invest temporarily in cash, cash items,
and short-term instruments, including notes and commercial paper, for liquidity
and during times of unusual market conditions for defensive purposes. Cash items
may include obligations such as:

o certificates of deposit (including those issued by domestic and foreign
branches of FDIC insured banks);

o obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities;

o and repurchase agreements.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental policy
which may not be changed without the approval of shareholders. The Fund will
only enter into loan arrangements with broker/dealers, banks, or other
institutions which the investment adviser has determined are creditworthy under
guidelines established by the Trustees and will receive collateral equal to at
least 100% of the value of the securities loaned at all times.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

The Fund may also write call options on all or any portion of its portfolio to
generate income for the Fund. The Fund will write call options on securities
either held in its portfolio or for which it has the right to obtain without
payment of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
must be listed on a recognized options exchange. Although the Fund reserves the
right to write covered call options on its entire portfolio, it will not write
such options on more than 25% of its total assets unless a higher limit is
authorized by its Trustees.

FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government at a certain time in the future. The seller of the contract
agrees to make delivery of the type of instrument called for in the contract and
the buyer agrees to take delivery of the instrument at the specified future
time.

The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts is unleveraged.

RISKS. When the Fund uses financial futures and options on financial futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities to market
changes. In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures contract
or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the investment adviser will
consider liquidity before entering into futures and options transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

REAL ESTATE INVESTMENT TRUSTS. The Fund may purchase interests in real estate
investment trusts. Risks associated with real estate investments include the
fact that equity and mortgage real estate investment trusts are dependent upon
management skill and are not diversified, and are, therefore, subject to the
risk of financing single projects or unlimited number of projects. They are also
subject to heavy cash flow dependency, defaults by borrowers, and
self-liquidation. Additionally, equity real estate investment trusts may be
affected by any changes in the value of the underlying property owned by the
trusts, and mortgage real estate investment trusts may be affected by the
quality of any credit extended. The investment adviser seeks to mitigate these
risks by selecting real estate investment trusts diversified by sector (shopping
malls, apartment building complexes, and health care facilities) and geographic
location.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

INVESTMENT LIMITATIONS

The Fund will not:

o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets and pledge up to 15% of the
value of those assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations
resulting from mixed funding or shared funding, the Trustees will closely
monitor the operation of mixed funding and shared funding and will consider
appropriate action to avoid material conflicts and take appropriate action in
response to any material conflict which occur. Such action could result in one
or more participating insurance companies withdrawing their investment in the
Fund.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares of the
Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION

MANAGEMENT OF THE FUND

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase and sale of portfolio instruments, for which it
receives an annual fee from the Fund.

ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .75% of the Fund's average daily net assets. The adviser may voluntarily
choose to waive a portion of its fees or reimburse the Fund for certain
operating expenses. The adviser can terminate this voluntary waiver and
reimbursement of expenses at any time at its sole discretion.

ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989 is a registered investment adviser under the
Investment Advisers Act of 1940.

SUB-ADVISER. Under the terms of the Sub-Advisory Agreement between the
fund's investment adviser and Federated Global Research Corp. (the
"Sub-Adviser"), the Sub-Adviser will provide the Fund's investment adviser
such investment advice, statistical and other factual information as may,
from time to time, be reasonably requested by the adviser.

SUB-ADVISORY FEES. For its services under the Sub-Advisory Agreement, the
Sub-Adviser receives an allocable portion of the Fund's advisory fee. Such
allocation is based on the amount of foreign securities which the
Sub-Adviser manages for the Fund. This fee is paid by the Adviser out of its
resources and is not an incremental Fund expense.

SUB-ADVISER'S BACKGROUND. Federated Global Research Corp., incorporated in
Delaware on May 12, 1995, is a registered investment adviser under the
Investment Advisers Act of 1940.

<PAGE>

The adviser and the Sub-Adviser are subsidiaries of Federated Investors.
All of the Class A (voting) Shares of Federated Investors are owned by a trust,
the trustees of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue,
who is President and Trustee of Federated Investors.

Federated Advisers, Federated Global Research Corp. and other subsidiaries
of Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $110
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,500 financial institutions nationwide.

Linda A Duessel has been a portfolio manager for the Fund since April 1995.
Ms. Duessel joined Federated Investors in 1991 and has been a Vice President of
the Adviser since 1995. Ms. Duessel was an Assistant Vice President of the
Adviser from 1991 until 1995. Ms. Duessel is a Chartered Financial Analyst and
received her M.S. in Industrial Administration from Carnegie Mellon University.

Steven J. Lehman will be named a portfolio manager of the Fund effective
August 1997. Mr. Lehman joined the Adviser in May 1997 as a Vice President. From
1985 to May 1997, Mr. Lehman served as a Portfolio Manager, then Vice
President/Senior Portfolio Manager, at First Chicago NBD Investment Management
Company. Mr. Lehman is a Chartered Financial Analyst; he received his M.A. from
the University of Chicago.

Drew J. Collins has been a portfolio manager of the Fund since July 1997.
Mr. Collins joined Federated Investors in 1995 as a Senior Vice President of the
Fund's investment adviser. Mr. Collins served as Vice President/Portfolio
Manager of international equity portfolios at Arnhold and Bleichroeder, Inc.
from 1994 to 1995. He served as an Assistant Vice President/Portfolio Manager
for international equities at the College Retirement Equities Fund from 1986 to
1994. Mr. Collins is a Chartered Financial Analyst and received his M.B.A. in
finance from the Wharton School of The University of Pennsylvania.

Henry A. Frantzen has been a portfolio manager of the Fund since July 1997.
Mr. Frantzen joined Federated Investors in 1995 as an Executive Vice President
of the Fund's investment adviser. Mr. Frantzen served as Chief Investment
Officer of international equities at Brown Brothers Harriman & Co. from 1992
until 1995.

<PAGE>

The Trust, the adviser, and the Sub-Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests of
shareholders ahead of the employees' own interest. Among other things, the
codes: require preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being purchased
or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days. Violations of these
codes are subject to review by the Trustees, and could result in severe
penalties.

DISTRIBUTION OF FUND SHARES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp.,
from its own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance may be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will
vote the Fund shares held in their separate accounts at meetings of the
shareholders. Voting will be in accordance with instructions received from
contract owners of the separate accounts, as more fully outlined in the
prospectus of the separate account. As of March 6, 1998, Life of Virginia,
Richmond, Virginia, owned 30.23% of the voting securities of the Fund, and,
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operations and for the election of Trustees in certain circumstances.

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

<PAGE>

ADDRESSES

Federated Insurance Series

Federated Utility Fund II Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

<PAGE>

FEDERATED UTILITY FUND II
(A PORTFOLIO OF FEDERATED
INSURANCE SERIES)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End, Management
Investment Company

April 23, 1998

Cusip 313916108
3113008A (4/98)

FEDERATED UTILITY FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated Utility Fund II (the "Fund") a portfolio of Federated Insurance Series
(the "Trust") dated April 23, 1998. This Statement is not a prospectus itself.
You may request a copy of a prospectus or a paper copy of this Statement, if you
have received it electronically, free of charge by calling 1-800-341-7400.

FEDERATED INSURANCE SERIES

FEDERATED INVESTORS FUNDS

5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

Cusip 313916108
3113008B (4/98)

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the Board
of Trustees (the "Trustees") held on November 14, 1995, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Trust from
Insurance Management Series to Federated Insurance Series. At a meeting of the
Trustees held on February 26, 1996, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Fund from Utility Fund to
Federated Utility Fund II. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to achieve high current income and moderate
capital appreciation. The investment objective cannot be changed without
approval of shareholders. The Fund endeavors to achieve its investment objective
by investing primarily in a professionally managed, diversified portfolio of
equity and debt securities of utility companies.

CONVERTIBLE SECURITIES.

DECS, or similar instruments marketed under different names, offer a substantial
dividend advantage with the possibility of unlimited upside potential if the
price of the underlying common stock exceeds a certain level. DECS convert to
common stock at maturity. The amount received is dependent on the price of the
common stock at the time of maturity. DECS contain two call options at different
strike prices. The DECS participate with the common stock up to the first call
price. They are effectively capped at that point unless the common stock rises
above a second price point, at which time they participate with unlimited upside
potential.

PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is limited to
a predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates declines when
the common stock falls, while the cap price limits gains when the common stock
rises.

U.S. GOVERNMENT OBLIGATIONS

The Fund may also invest in U.S. government obligations which generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued and/or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:

o the full faith and credit of the U.S. Treasury;

o the issuer's right to borrow an amount limited to a specific line of credit
from the U.S. Treasury;

o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or

o the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

o Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;

o Federal Home Loan Banks;

o Federal Home Loan Mortgage Corporation;

o Federal National Mortgage Association; and

o Student Loan Marketing Association.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to broker/dealers,
banks, or other institutional borrowers of securities. This policy may not be
changed without shareholder approval.

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.

REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law and is generally sold to institutional investors, such as the Fund, who
agree that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity.

The Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:

o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace trades.

For the fiscal year ended December 31, 1996 and 1995, the portfolio turnover
rates for the Fund were 63% and 62%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of the
value of its total assets; provided that, while borrowings and reverse
repurchase agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are made. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes.

PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of the value of its total assets at the time
of borrowing. For purposes of this limitation, the following are not deemed
to be pledges: margin deposits for the purchase and sale of futures
contracts and related options, any segregation or collateral arrangements
made in connection with options activities or the purchase of securities on
a when-issued basis.

CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities, if, as a result of such purchase, 25%
or more of its total assets would be invested in securities of companies
engaged principally in any one industry other than the utilities industry.
However, the Fund may at any time invest 25% or more of its total assets in
cash or cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.

INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures and stock index futures contracts and related options.

INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in securities
of companies whose business involves the purchase or sale of real estate or
in securities secured by real estate or interests in real estate.

LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, entering
into repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objective and policies or the Trust's
Declaration of Trust.

UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.

DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the Fund will not purchase
more than 10% of any class of the outstanding voting securities of any one
issuer. For these purposes, the Fund considers common stock and all
preferred stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.

INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice, over-the-counter options, and
certain restricted securities not determined by the Trustees to be liquid.

INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the securities
are held in the Fund's portfolio and not more than 5% of the Fund's total
assets would be invested in premiums on open put option positions.

WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value of total or net assets will not result in a violation
of such restriction. The Fund has no present intention to borrow money in excess
of 5% of the value of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*

Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley

15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

John T. Conroy, Jr.

Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail

North Naples, FL

Birthdate: June 23, 1937

Trustee

William J. Copeland

One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue*

Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

James E. Dowd

571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*

3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@

Miller, Ament, Henny & Kochuba
205 Ross Street

Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden

One Royal Palm Way
100 Royal Palm Way

Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer

Boca Grande Club
Boca Grande, FL

Birthdate: October 6, 1926

Trustee

Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.

President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar

1202 Cathedral of Learning
University of Pittsburgh

Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts

4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning, Manchester Craftsmen's Guild;
Restaurant Consultant, Frick Art & History Center; Conference Coordinator,
University of Pittsburgh Art History Department; Director or Trustee of the
Funds.

Edward C. Gonzales

Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle

Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.

Richard B. Fisher

Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of
some of the Funds; Director or Trustee of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc. ; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Wesmark Funds; and World Investment Series,
Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 6, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Aetna Retirement Services Central Valuation
Unit, Hartford, CT, owned approximately 3,350,690 shares (44.28%), Life of
Virginia, Richmond, VA, owned approximately 2,280,472 shares (30.23%), Lincoln
Benefit Life Co., Lincoln, NE, owned approximately 519,455 shares (6.89%),
Safeco Mutual Funds owned approximately 399,496 shares (5.30%), and Provident
Mutual Life & Annuity Company of America, Valley Forge, PA, owned approximately
391,361 shares (5.19%).

TRUSTEES' COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX
<S> <C> <C>

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex

Thomas G. Bigley $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

John T. Conroy, Jr. $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex

William J. Copeland $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex

J. Christopher Donahue $0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund Complex

James E. Dowd $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Lawrence D. Ellis, M.D. $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Edward L. Flaherty, Jr. $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Peter E. Madden $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Gregor F. Meyer $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

John E. Murray, Jr. $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Wesley W. Posvar $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Marjorie P. Smuts $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex

</TABLE>

* Information is furnished for the fiscal year ended December 31, 1996.

# The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

The information is provided for the last calendar year.

TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.

ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal years ended December 31, 1996 and 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the adviser earned
advisory fees of $361,797, $89,752 and $2,077, respectively, of which $248,058,
$89,752 and $2,077 were waived.

SUB-ADVISER TO THE FUND
The Fund's sub-adviser is Federated Global Research Corp. (the "Sub-Adviser").

SUB-ADVISORY FEES
For its sub-advisory services, the Sub-Adviser receives an allocable portion of
the Fund's advisory fee as described in the prospectus.

BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The Adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
For the fiscal years ended December 31, 1996 and 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the Fund paid
$81,701, $59,746 and $476, respectively, in brokerage commissions on brokerage
transactions.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators". For the fiscal
years ended December 31, 1996 and 1995, and for the period from December 9, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000,
$125,000 and $73,289, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket expenses.

TRANSFER AGENT
Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.

INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh, PA.

PURCHASING SHARES

SHAREHOLDER SERVICES

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES
The values of the Fund's portfolio securities are determined as follows:

o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, if
available;

o in the absence of recorded sales for equity securities, according to
themean between the last closing bid and asked prices;

o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available; otherwise, as determined by an
independent pricing service;

o for unlisted equity securities, the latest mean prices;

o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or

o for all other securities, at fair value as determined in good faith by the
Trustees.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.

TAX STATUS

THE FUND'S TAX STATUS

o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;

o derive less than 30% of its gross income from the sale of securities held
less than three months;

o invest in securities within certain statutory limits; and

o distribute to its shareholders at least 90% of its net income earned during
the year.

SHAREHOLDERS' TAX STATUS
The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and this Statement. If the Fund fails to
comply with these regulations, contracts invested in the Fund shall not be
treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.

Contract owners should review the contract prospectus for information concerning
the federal income tax treatment of their contracts and distributions from the
Fund to the separate accounts.

TOTAL RETURN

For the fiscal year ended December 31, 1996, and for the period from April 14,
1994 (date of initial public investment) to December 31, 1996, the average
annual total returns for the Fund were 11.56% and 10.63%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1996 was
3.29%.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:

o portfolio quality;

o average portfolio maturity;

o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;

o changes in Fund expenses; and

o the relative amount of the Fund's cash flow.

O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "utility funds"
category in advertising and sales literature.

O LIPPER UTILITY FUND AVERAGE is composed of approximately 87 funds which invest
65% of their equity portfolio in utility stocks. From time to time, the
Trust/Fund will compare its total return to the average total return of the
funds comprising the average for the same calculation period.

O DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index representing share
prices of major industrial corporations, public utilities, and transportation
companies. Produced by the Dow Jones & Company, it is cited as a principal
indicator of market conditions.

O STANDARD & POOR'S RATINGS GROUP ("S&P") DAILY STOCK PRICE INDEX OF 500 COMMON
STOCKS, a composite index of common stocks in industry, transportation,
financial, and public utility companies, can be used to compare the total
returns of funds whose portfolios are invested primarily in common stocks. In
addition, the S&P index assumes reinvestment of all dividends paid by stocks
listed on its index. Taxes due on any of these distributions are not included,
nor are brokerage or other fees calculated in S&P figures.

O STANDARD & POOR'S RATINGS GROUP UTILITY INDEX is an unmanaged index of common
stocks from forty different utilities. This index indicates daily changes in the
price of the stocks. The index also provides figures for changes in price from
the beginning of the year to date, and for a twelve month period.

O DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The index
also provides the highs and lows for each of the past five years.

O MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

Advertisements and other sales literature for the Fund may quote total returns,
which are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.

From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs and descriptions compared to federally insured
bank products, including certificates of deposit and time deposits, and to money
market funds using the Lipper Analytical Services money market average.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their performance, or performance for the types of securities in which
it invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
funds industry, including the growth of the industry, from sources such as the
Investment Company Institute.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.

In the equity sector, Federated Investors has more than 26 years experience. As
of December 31, 1996, Federated managed 31 equity funds totaling approximately
$7.6 billion in assets across growth, value, equity income, international, index
and sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.

BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

to be filed by amendment

* Source: Investment Company Institute

<PAGE>

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B--Debt rated "BB" and "B" is regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. "B" indicates the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally known
as high grade Bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.

A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA--Bonds which are rate "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

This prospectus offers shares of Federated Fund for U.S. Government Securities
II (the "Fund"), which is a diversified investment portfolio in Federated
Insurance Series (the "Trust"), an open-end, diversified management investment
company. The Fund seeks current income by investing in a professionally managed,
diversified portfolio limited to U.S. government securities. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for investment
in the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated April 23,
1998 , with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

Prospectus dated April 23, 1998

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

FINANCIAL HIGHLIGHTS

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from U.S. Government Bond Fund to Federated
Fund for U.S. Government Securities II. The Declaration of Trust permits the
Trust to offer separate series of shares of beneficial interest in separate
portfolios of securities, including the Fund. The shares in any one portfolio
may be offered in separate classes. As of the date of this prospectus, the
Trustees have not established separate classes of shares.

For purposes of this prospectus, "Federated Funds" shall mean two or more funds
for which affiliates of Federated Investors serve as investment adviser and
principal underwriter.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

Under normal circumstances, the Fund pursues its investment objective by
investing at least 65% of the value of its total assets in securities issued or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities. For purposes of this 65% statement, the Fund will
consider collateralized mortgage obligations issued by U.S. government agencies
or instrumentalities to be U.S. government securities. Unless indicated
otherwise, the investment policies may be changed by the Trustees without the
approval of the shareholders. Shareholders will be notified before any material
change becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests in securities which are primary or
direct obligations of the U.S. government or its agencies or instrumentalities,
or which are guaranteed by the U.S. government, its agencies or
instrumentalities, and in certain collateralized mortgage obligations ("CMOs"),
described below, and repurchase agreements. The prices of fixed income
securities fluctuate inversely to the direction of interest rates.

The U.S. government securities in which the Fund invests include:

o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;

o notes, bonds, and discount notes issued or guaranteed by U.S.government
agencies and instrumentalities supported by the full faith and credit of
the United States;

o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

o notes, bonds, and discount notes of other U.S. government instrumentalities
supported only by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government are backed by the full faith and credit of the U.S.
Treasury. No assurances can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These instrumentalities are supported by:

o the issuer's right to borrow an amount limited to a specific line of credit
from the U.S. Treasury;

o the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

o the credit of the agency or instrumentality.

The Fund may also invest in CMOs which are rated AAA by a nationally recognized
statistical rating agency and which are issued by private entities such as
investment banking firms and companies related to the construction industry. The
CMOs in which the Fund may invest may be: (i) privately issued securities which
are collateralized by pools of mortgages in which each mortgage is guaranteed as
to payment of principal and interest by an agency or instrumentality of the U.S.
government; (ii) privately issued securities which are collateralized by pools
of mortgages in which payment of principal and interest are guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities; and
(iii) other privately issued securities in which the proceeds of the issuance
are invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the U.S.
government. The mortgage-related securities provide for a periodic payment
consisting of both interest and principal. The interest portion of these
payments will be distributed by the Fund as income, and the capital portion will
be reinvested.

Mortgage-backed securities may be subject to certain prepayment risks because
the underlying mortgage loans may be prepaid without penalty or premium.
Prepayment risks on mortgage-backed securities tend to increase during periods
of declining mortgage interest rates because many borrowers refinance their
mortgages to take advantage of favorable rates. At the time the Fund reinvests
the proceeds, it may receive a rate of interest which is actually lower than the
rate of interest paid on those securities.

REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements. Repurchase
agreements are arrangements in which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities or other securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. The Fund or its custodian will take possession of the
securities subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that, under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are found by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental policy
which may not be changed without shareholder approval. The Fund will only enter
into loan arrangements with broker/dealers, banks, or other institutions which
the investment adviser has determined are creditworthy under guidelines
established by the Trustees and will receive collateral equal to at least 100%
of the value of the securities loaned in the form of cash or U.S. government
securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

INVESTMENT LIMITATIONS

The Fund will not:

o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets and pledge up to 15% of the
value of those assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

WHAT SHARES COST

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the business affairs of the Trust and for exercising
all of the Trust's powers except those reserved for the shareholders. An
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to 0.60% of the Fund's average daily net assets. The adviser may
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses. The adviser can terminate this voluntary waiver and
reimbursement of expenses at any time at its sole discretion.

Kathleen M. Foody-Malus has been the Fund's portfolio manager since the
Fund commenced operations. Ms. Foody-Malus joined Federated Investors in 1983
and has been a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment adviser from
1990 until 1992. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from
the University of Pittsburgh.

Todd A. Abraham has been the Fund's portfolio manager since April 1997. Mr.
Abraham joined Federated Investors in 1993 as an Investment Analyst and has been
an Assistant Vice President of the Fund's investment adviser since 1995. Mr.
Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from 1992 to 1993.
Mr. Abraham received his M.B.A. in finance from Loyola College.

DISTRIBUTION OF FUND SHARES

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million

SHAREHOLDER INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will
vote the Fund shares held in their separate accounts at meetings of the
shareholders. Voting will be in accordance with instructions received from
contract owners of the separate accounts, as more fully outlined in the
prospectus of the separate account. As of March 6, 1998, United Omaha Life
Insurance Co., Omaha, Nebraska, owned 32.88% of the voting securities of the
Fund, and therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote of
shareholders. United of Omaha Life Insurance Co. is owned by Mutual of Omaha
Insurance Company.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

Trustees may be removed by the Trustees or by the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Trustees upon
the written request of shareholders owning at least 10% of the outstanding
shares of all series of the Trust.

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time the Fund advertises total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

<PAGE>

ADDRESSES

Federated Insurance Series

Federated Fund for Federated Investors Funds
U.S. Government Securities II 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

<PAGE>

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

(A PORTFOLIO OF FEDERATED
INSURANCE SERIES)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 23, 1998

Cusip 313916207
3113007A (4/98)

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Federated Fund for U.S. Government Securities II (the "Fund"), a portfolio of
Federated Insurance Series (the "Trust") dated April 23, 1998. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INSURANCE SERIES

FEDERATED INVESTORS FUNDS

5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000

Statement dated April 23, 1998

Cusip 313916207
3113007B (4/98)

<PAGE>

TABLE OF CONTENTS

to be filed by amendment

<PAGE>

GENERAL INFORMATION

The Fund is a portfolio of the Trust, which was established as Insurance
Management Series, a Massachusetts business trust, under a Declaration of Trust
dated September 15, 1993. At a meeting of the Board of Trustees (the "Trustees")
held on November 14, 1995, the Trustees approved an amendment to the Declaration
of Trust to change the name of the Trust from Insurance Management Series to
Federated Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from U.S. Government Bond Fund to Federated Fund for U.S.
Government Securities II. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income. The investment
objective cannot be changed without the approval of shareholders. Current income
includes, in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all other U.S. government securities, and short-term
capital gains.

TYPES OF INVESTMENTS
The Fund invests in securities which are primary or direct obligations of the
U.S. government or its agencies or instrumentalities, or which are guaranteed by
the U.S. government, its agencies or instrumentalities and in certain
collateralized mortgage obligations, described below, and repurchase agreements.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
Privately issued CMOs generally represent an ownership interest in federal
agency mortgage pass-through securities such as those issued by the
Government National Mortgage Association. The terms and characteristics of
the mortgage instruments may vary among pass-through mortgage loan pools.

The market for such CMOs has expanded considerably since its inception. The
size of the primary issuance market and the active participation in the
secondary market by securities dealers and other investors make
government-related pools highly liquid.

STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may represent
an interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed securities
or "SMBSs"). Due to the possibility of prepayments on the underlying
mortgages, SMBSs may be more interest-rate sensitive than other securities
purchased by the Fund. If prevailing interest rates fall below the level at
which SMBSs were issued, there may be substantial prepayment on the
underlying mortgages, leading to the relatively early prepayment of
principal-only SMBSs and a reduction in the amount of payment made to
holders of interest-only SMBSs. It is possible that the Fund might not
recover its original investment on interest-only SMBSs if there are
substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to
use this characteristic of interest-only SMBSs to reduce the effects of
interest rate changes on the value of the Fund's portfolio, while continuing
to pursue current income.

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any interest paid
on such securities. Loans are subject to termination at the option of the Fund
or the borrower. The Fund may pay reasonable administrative and custodial fees
in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing broker.
The Fund does not have the right to vote securities on loan, but would terminate
the loan and regain the right to vote if that were considered important with
respect to the investment.

The Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:

o the frequency of trades and quotes for the security;

o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;

o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace trades.

REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to length of time a particular security may have been
held. The Fund's policy of managing its portfolio of U.S. government securities,
including the sale of securities held for a short period of time, to achieve its
investment objective of current income may result in high portfolio turnover.
The Fund will not attempt to set or meet a portfolio turnover rate as any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective.

For the fiscal years ended December 31, 1996 and 1995, the portfolio turnover
rates for the Fund were 97% and 65%, respectively.

INVESTMENT LIMITATIONS

CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25%
or more of its total assets would be invested in any one industry. However,
the Fund may at any time invest 25% or more of its total assets in cash or
cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.

INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the Fund
from purchasing or holding corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an issuer,
entering into repurchase agreements, or engaging in other transactions which
are permitted by the Fund's investment objective and policies or the Trust's
Declaration of Trust.

The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.

INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including, among others, repurchase agreements
providing for settlement more than seven days after notice, and certain
restricted securities not determined by the Trustees to be liquid.

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*

Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley

15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.

Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail
North Naples, FL

Birthdate: June 23, 1937

Trustee

William J. Copeland

One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue *

Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

President and Trustee

James E. Dowd

571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*

3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@

Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden

One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer

Boca Grande Club
Boca Grande, FL

Birthdate: October 6, 1926

Trustee

Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.

President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar

1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts

4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director
or Trustee of the Funds.

Edward C. Gonzales

Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle

Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary, and Treasurer

Richard B. Fisher

Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of
some of the Funds; Director or Trustee of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Wesmark Funds; and World Investment Series,
Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 6, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: United of Omaha Life Insurance Co.,Omaha,
NE, owned approximately 2,121,921 shares (32.88%), Aetna Retirement Services
Central Valuation Unit, Hartford, CT, owned approximately 1,749,298 shares
(27.10%), Great-West Life & Annuity Insurance Co., Englewood, CO, owned
approximately 1,013,102 shares (15.70%), Provident Mutual Life & Annuity Company
of America, Valley Forge, PA, owned approximately 378,703 shares (5.87%), and
Lincoln Benefit Life Co., Lincoln, NE, owned approximately 355,486 shares
(5.51%).

TRUSTEES' COMPENSATION

AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX