FEDERATED INSURANCE SERIES, N-30D, 1998-08-19

FEDERATED INSURANCE SERIES
N-30D, 1998-08-19

Previous: FEDERATED INSURANCE SERIES, 497, 1998-08-19

Next: RENAISSANCE GOLF PRODUCTS INC, 10QSB, 1998-08-19

PRESIDENT'S MESSAGE

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report for Federated American Leaders
Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1998 through June 30,
1998. It begins with a commentary by the fund's portfolio manager, which is
followed by a complete listing of the fund's stock holdings and the fund's
financial statements.

At the end of the reporting period, the selected high-quality stocks included
nearly 100 holdings that represent major industry groups and include leaders
like Allstate, Anheuser-Busch, Bristol-Myers Squibb, General Motors, IBM, Mobil,
and Wal-Mart.

For the six-month reporting period ended June 30, 1998, the fund achieved a
total return of 14.96%* through income totaling $0.10 per share, capital gains
totaling $1.25 per share, and a net asset value increase of $1.56. On June 30,
1998, its total net assets reached $395.9 million.

Thank you for participating in the long-term growth of American companies
through Federated American Leaders Fund II. As always, we welcome your comments
and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

INVESTMENT REVIEW

The first six months of 1998 were a good period for shareholders as the fund had
a total return of 14.96%.* Over the first six months of 1998, the stock market
reacted to events in Asia. A financial crisis there last fall triggered concerns
of a global economic slowdown. With economic uncertainty rising, U.S. interest
rates fell, providing support for the stock market. When the aftershocks of the
crisis failed to quickly slow the American economy, investors rushed to buy U.S.
stocks. The U.S. market ended the first quarter of 1998 with a significant gain
but was impeded in the spring by the effect of the Asian crisis on American
exports. Late in the spring, stock investors increasingly focused their
attention on a handful of large market capitalization growth companies. In fact,
in the second quarter of this year, the largest 50 companies in the Standard &
Poor's 500 Index** had an average total return of 8%, while the other 450 on
average declined. This emphasis on large-cap growth stocks meant that value-
oriented strategies generally lagged the market for the first six months of
1998. Such periods of underperformance by a value style happen from time to time
despite time tested benefits of emphasizing value in security selection.

There currently are significant tailwinds pushing the stock market: ample
liquidity driven by favorable demographics, low inflation and interest rates,
increased productivity due to technology, and enormous free cash flow generation
by corporate America. While these forces can justify current valuations on a
backward looking basis, moving forward it is imperative that corporate earnings
remain strong and inflation remains subdued for this bull market to continue.
There is nothing on the near-term horizon to suggest that this cannot be
accomplished, however one must recognize that the margin for error is quite
small given the market's high valuation.

Our largest area of underperformance can be attributed to our tobacco exposure.
Philip Morris, RJR and UST Inc. are three of the worst performing investments in
your fund for the past six months. While the outcome of any government
settlements as well as litigation remain unclear, we believe, with yields above
U.S. Treasury bonds (in the case of RJR Nabisco and UST) and the lowest relative
valuations to the market, we are being compensated for the current uncertainty.
We have used this period of underperformance to increase our exposure to this
group.

During the reporting period, the fund sold positions in such names as Dayton-
Hudson, Tele-Communications, Inc., General Motors Corp, (Class H), and MCI
Communications Corp. after they had achieved significant price appreciation and
no longer appeared to be attractive based on our valuation disciplines.

These securities were replaced by securities of companies such as Dillards,
Inc., Crown Cork & Seal Co., Inc., Electronic Data Systems Corp., and Motorola,
Inc. These new positions were selected because they appear attractive based on
our valuation disciplines, and we believe their long-term fundamentals are
solid.

* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

** The Standard & Poor's 500 Stock Index, 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. This index is unmanaged and actual investments
cannot be made in an index.

PORTFOLIO OF INVESTMENTS

Federated American Leaders Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
Common Stocks--99.0%
Basic Industry--8.2%
366,500 Archer-Daniels-Midland Co. $ 7,100,938
278,000 Barrick Gold Corp. 5,334,125
96,200 Consolidated Papers, Inc. 2,621,450
157,000 (a)Corn Products International, Inc. 5,318,375
52,500 Crown Cork & Seal Co., Inc. 2,493,750
32,000 Dow Chemical Co. 3,094,000
64,700 Nucor Corporation 2,976,200
112,000 Sherwin-Williams Co. 3,710,000
Total 32,648,838
Consumer Durables--2.9%
51,000 Borg-Warner Automotive, Inc. 2,451,188
70,000 Centex Corp. 2,642,500
55,000 Eastman Kodak Co. 4,018,438
33,500 General Motors Corp. 2,238,219
Total 11,350,345
Consumer Non-Durables--11.1%
107,800 Anheuser-Busch Cos., Inc. 5,086,813
63,000 BestFoods 3,657,938
89,000 Liz Claiborne, Inc. 4,650,250
125,500 Philip Morris Cos., Inc. 4,941,563
62,000 RJR Nabisco Holdings Corp. 1,472,500
134,800 (a)Reebok International Ltd. 3,732,275
59,700 Sara Lee Corp. 3,339,469
124,000 Seagram Co. Ltd. 5,076,250
287,000 UST, Inc. 7,749,000
52,000 Unilever N.V., ADR 4,104,750
Total 43,810,808
Energy Minerals--9.1%
55,500 Amerada-Hess Corp. 3,014,344
149,000 Ashland, Inc. 7,692,125
49,000 Exxon Corp. 3,494,313
44,500 Mobil Corp. 3,409,813
158,400 Occidental Petroleum Corp. $ 4,276,800
48,500 Royal Dutch Petroleum Co., ADR 2,658,406
137,500 Sun Co., Inc. 5,336,719
43,000 Texaco, Inc. 2,566,563
98,500 USX Corp. 3,379,781
Total 35,828,864
Finance--11.4%
29,000 Allstate Corp. 2,655,313
62,000 Bear Stearns Cos., Inc. 3,526,250
81,000 Boston Properties, Inc. 2,794,500
91,500 CIGNA Corp. 6,313,500
16,500 General RE Corp. 4,182,750
172,200 Green Tree Financial Corp. 7,372,313
45,000 MBIA Insurance Corporation 3,369,375
85,500 Marsh & McLennan Cos., Inc. 5,167,406
49,900 Morgan Stanley, Dean Witter, Discover & Co. 4,559,613
54,000 Republic New York Corp. 3,398,625
74,000 (a)Security Capital Group, Inc. 1,970,250
Total 45,309,895
Health Care--7.8%
92,000 Abbott Laboratories 3,760,500
54,000 Bristol-Myers Squibb Co. 6,206,625
28,000 Merck & Co., Inc. 3,745,000
241,100 (a)Oxford Health Plans, Inc. 3,691,844
161,500 (a)Perrigo Co. 1,625,094
180,000 Pharmacia & Upjohn, Inc. 8,302,500
59,000 United Healthcare Corp. 3,746,500
Total 31,078,063
Producer Manufacturing--5.7%
54,200 Cincinnati Milacron, Inc. 1,317,738
68,500 Deere & Co. 3,621,938
88,000 General Signal Corp. 3,168,000
99,500 ITT Industries, Inc. 3,718,813
72,500 Ingersoll-Rand Co. 3,194,531
63,700 Johnson Controls, Inc. 3,642,844
64,000 (a)Lexmark Intl. Group, Class A $ 3,904,000
Total 22,567,864
Retail Trade--7.0%
187,000 American Stores Co. 4,523,063
140,500 Dillards, Inc., Class A 5,821,969
212,800 (a)K Mart Corp. 4,096,400
232,400 (a)Toys `R' Us, Inc. 5,475,925
127,000 Wal-Mart Stores, Inc. 7,715,250
Total 27,632,607
Services--10.1%
43,500 ABB AB, ADR 6,008,438
82,098 Browning-Ferris Industries, Inc. 2,852,906
291,000 News Corp. Ltd., ADR 8,220,737
20,500 News Corp. Ltd., ADR 658,563
145,500 Readers Digest Association, Inc., Class A 3,946,688
177,500 (a)Tricon Global Restaurants, Inc. 5,624,531
68,000 (a)Viacom, Inc., Class A 3,978,000
44,000 (a)Viacom, Inc., Class B 2,563,000
169,000 Waste Management, Inc. 5,915,000
Total 39,767,863
Technology--11.6%
110,500 AMP, Inc. 3,798,438
219,000 Electronic Data Systems Corp. 8,760,000
219,500 First Data Corp., Class 7,312,094
26,000 International Business Machines Corp. 2,985,125
83,500 Motorola, Inc. 4,388,969
310,500 (a)Novell, Inc. 3,958,875
57,000 Raytheon Co., Class A 3,284,625
161,500 (a)Seagate Technology, Inc. 3,845,719
231,500 (a)Sequent Computer System, Inc. 2,792,469
112,000 (a)Storage Technology Corp. 4,858,000
Total 45,984,314
Transportation--2.7%
100,100 CNF Transportation, Inc. 4,254,250
</TABLE>

<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
<S> <C> <C>
Common Stocks--continued
Transportation--continued
68,500 Canadian National Railway $ 3,639,063
86,000 Ryder Systems, Inc. 2,714,375
Total 10,607,688
Utilities--11.4%
44,000 Coastal Corp. 3,071,750
46,500 Columbia Energy Group 2,586,563
95,400 Consolidated Natural Gas Co. 5,616,675
162,500 Entergy Corp. 4,671,875
59,000 GTE Corp. 3,281,875
128,800 Houston Industries, Inc. 3,976,700
151,000 P G & E Corp. 4,765,938
236,800 Peco Energy Co. 6,911,600
103,500 Public Service Enterprises Group, Inc. 3,564,281
83,600 SBC Communications, Inc. 3,344,000
73,000 U.S. West, Inc. 3,431,000
Total 45,222,257
Total Common Stocks (identified cost $315,168,106) 391,809,406
(b)Repurchase Agreement--1.8%
$7,245,000 BT Securities Corp., 5.87%, dated 6/30/1998, due 7/1/1998 (at amortized cost) 7,245,000
Total Investments (identified cost $322,413,106)(c) $399,054,406
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $322,413,106.
The net unrealized appreciation of investments on a federal tax basis
amounts to $76,641,300 which is comprised of $87,219,706 appreciation and
$10,578,406 depreciation at June 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($395,921,105) at June 30, 1998.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt
MBIA --Municipal Bond Investors Assurance

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated American Leaders Fund II

June 30, 1998 (unaudited)

Assets:

<TABLE>
<S> <C> <C>
Total investments in securities, at value (identified and tax cost $322,413,106) $399,054,406
Cash 3,577
Income receivable 479,373
Receivable for investments sold 738,256
Deferred organizational costs 8,042
Total assets 400,283,654
Liabilities:
Payable for investments purchased $ 4,322,675
Payable for taxes withheld 1,706
Accrued expenses 38,168
Total liabilities 4,362,549
Net Assets for 18,688,393 shares outstanding $395,921,105
Net Assets Consist of:
Paid in capital $295,201,233
Net unrealized appreciation of investments 76,641,300
Accumulated net realized gain on investments 22,332,816
Undistributed net investment income 1,745,756
Total Net Assets $395,921,105
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$395,921,105/18,688,393 shares outstanding $21.19
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated American Leaders Fund II

Six Months Ended June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $45,980) $3,147,998
Interest 132,168
Total income 3,280,166
Expenses:
Investment advisory fee $1,310,737
Administrative personnel and services fee 131,773
Custodian fees 9,095
Transfer and dividend disbursing agent fees and expenses 11,891
Trustees' fees 1,474
Auditing fees 6,409
Legal fees 2,973
Portfolio accounting fees 49,766
Share registration costs 9,152
Printing and postage 21,444
Insurance premiums 1,831
Miscellaneous 8,184
Total expenses 1,564,729
Waivers--
Waiver of investment advisory fee (29,986)
Net expenses 1,534,743
Net investment income 1,745,423
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 22,376,759
Net change in unrealized appreciation of investments 23,267,480
Net realized and unrealized gain on investments 45,644,239
Change in net assets resulting from operations $47,389,662
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated American Leaders Fund II

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 1,745,423 $ 2,628,059
Net realized gain on investments ($22,376,759 and $20,467,415, respectively,
as computed for federal tax purposes) 22,376,759 20,429,655
Net change in unrealized appreciation of investments 23,267,480 36,461,644
Change in net assets resulting from operations 47,389,662 59,519,358
Distributions to Shareholders--
Distributions from net investment income (1,591,758) (1,147,286)
Distributions from net realized gains on investments (20,469,565) (3,728,320)
Change in net assets resulting from distributions to shareholders (22,061,323) (4,875,606)
Share Transactions--
Proceeds from sale of shares 64,154,342 148,786,787
Net asset value of shares issued to shareholders in payment of distributions declared 22,060,601 4,876,320
Cost of shares redeemed (21,418,240) (44,727,260)
Change in net assets resulting from share transactions 64,796,703 108,935,847
Change in net assets 90,125,042 163,579,599
Net Assets:
Beginning of period 305,796,063 142,216,464
End of period (including undistributed net investment income of
$1,745,756 and $1,592,091, respectively) $395,921,105 $305,796,063
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated American Leaders Fund II

<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.63 $ 15.26 $ 12.80 $ 9.74 $ 10.00
Income from investment operations
Net investment income 0.10(f) 0.19 0.19 0.20 0.19
Net realized and unrealized gain (loss) on investments 2.81 4.64 2.54 3.06 (0.26)
Total from investment operations 2.91 4.83 2.73 3.26 (0.07)
Less distributions
Distributions from net investment income (0.10) (0.10) (0.18) (0.19) (0.19)
Distributions in excess of net investment income(b) -- -- -- (0.01) --
Distributions from net realized gain (1.25) (0.36) (0.09) -- --
Total distributions (1.35) (0.46) (0.27) (0.20) (0.19)
Net asset value, end of period $ 21.19 $ 19.63 $ 15.26 $ 12.80 $ 9.74
Total return(c) 14.96% 32.34% 21.58% 33.71% (0.70%)
Ratios to average net assets
Expenses 0.88%* 0.85% 0.85% 0.85% 0.54%*
Net investment income 1.00%* 1.18% 1.54% 2.03% 2.58%*
Expense waiver(d) 0.02%* 0.09% 0.22% 1.36% 25.42%*
Supplemental data
Net assets, end of period (000 omitted) $395,921 $305,796 $142,216 $48,514 $ 2,400
Average commission rate paid(e) $ 0.0480 $ 0.0499 $ 0.0012 -- --
Portfolio turnover 27% 56% 90% 43% 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 1, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9, 1993
(start of business) to January 31, 1994, the Fund had no investment activity.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.
(f) Per share information is based on the average number of shares outstanding.
(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated American Leaders Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated American Leaders Fund II
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The primary objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income.

Significant Accounting Policies

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

Investment Valuations

Repurchase Agreements

It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.

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 the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.

Investment Income, Expenses and Distributions

Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.

Federal Taxes

It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.

When-Issued and Delayed Delivery Transactions

The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.

Federated American Leaders Fund II

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.

Other
Investment transactions are accounted for on the trade date.

<PAGE>

Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:

<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Shares sold 3,096,898 8,511,603
Shares issued to shareholders in payment of distributions declared 1,061,627 304,810
Shares redeemed (1,048,636) (2,560,144)
Net change resulting from share transactions 3,109,889 6,256,269
</TABLE>
Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.

Portfolio Accounting Fees

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

Organizational Expenses

Organizational expenses of $47,855 were borne initially by the Adviser. The Fund
has agreed to reimburse the Adviser for these expenses. These expenses have been
deferred and are being amortized over the five-year period following the Fund's
effective date. For the six months ended June 30, 1998, the Fund expensed $7,910
of organizational expenses.

General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Federated American Leaders Fund II

Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1998, were as follows:

Purchases $139,984,506
Sales $93,969,684

Year 2000

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

TRUSTEES

John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer,

and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.

Federated

American

Leaders

Fund II

Federated Insurance Series

Semi-Annual Report

to Shareholders

June 30, 1998

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 313916405
G00433-04 (8/98)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated Fund for U.S.
Government Securities II, a portfolio of Federated Insurance Series.

The report covers the six-month period from January 1, 1998 through June 30,
1998. It begins with an investment review by the fund's portfolio manager, which
is followed by a complete listing of the fund's holdings as well as its
financial statements.

To pursue an attractive level of income, the fund invests primarily in short- to
intermediate-term U.S. government mortgage-backed securities and U.S. Treasury
notes and bonds.

During the six-month reporting period, the fund produced a total return of
3.41%* through dividends totaling $0.18 per share, capital gains totaling $0.01
per share and a net asset value increase of $0.17. On June 30, 1998, the fund's
total net assets reached $80.2 million.

Thank you for pursuing income through the diversification and professional
management of Federated Fund for U.S. Government Securities II. Your comments
and suggestions are always welcome.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

INVESTMENTREVIEW

Federated Fund for U.S. Government Securities II, a portfolio of Federated
Insurance Series, provides shareholders with a professionally managed portfolio
of U.S. government securities. The fund is managed for specific maturity levels
according to management's assumptions on market risk and volatility. Current
investment strategy emphasizes a diversified range of U.S. government and agency
mortgage securities with coupons averaging 6.91% and a weighted average
effective duration of 3.45 years.

The U.S. Treasury market has put in an impressive performance in the first half
of 1998. The 30-year Treasury proved to be the strongest performer as the yield
declined 30 basis points. Factors that drove the market were the perceived
slowing in the U.S. economy due to the Asian crisis, a favorable outlook for
commodity prices, the strength of the dollar, and the ongoing supply reduction
of U.S. Treasury notes and bonds. The overall impact of these factors has caused
a flattening of the yield curve. Currently, there exists no yield advantage in
moving from a 2-year Treasury to a 10-year Treasury. The one major risk to the
overall bond market is the potential for inflation to increase if labor demand
continues to outpace labor supply. The Federal Reserve Board's (the "Fed")
current monetary policy directive of asymmetric with a tightening bias reflects
greater concern of strong domestic growth versus the problems in Asia. The
economic data combined with Fed Chairman Alan Greenspan's Humphrey Hawkins
testimony will dictate bond market psychology in the second half of 1998.

The interest rate strategy of the fund during the reporting period was to remain
duration neutral. Within the mortgage-backed sector, the portfolio favored two
themes versus the Lehman Mortgage Index. The first involved an overweight of the
GNMA sector relative to the Lehman Mortgage Index. The reason for this
overweight is due to the underlying characteristics of the GNMA borrower. The
GNMA borrower tends to be slow to take advantage of refinancing due to income
constraints and the inability to finance the up-front costs. During the first
half of 1998, prepayments for current and premium GNMA securities have averaged
35% slower than comparable conventional securities. The second theme involved a
concentration in the discount and current coupon mortgage sectors. Within the
conventional sector, the issuance of 30-year discount and current coupon
securities has been considerable. The portfolio has been proactive in adding to
these sectors as opportunities have presented themselves. In addition, the
portfolio has been able to take advantage of covered dollar roll transactions to
enhance total rate of return.

The U.S. Treasury and agency portions are currently neutral to the Lehman
Government Index. The fund continues to add to positions in agency debentures
and U.S. Treasuries to aid in the management of the fund's overall duration.

During the semi-annual reporting period ended June 30, 1998, the portfolio
produced a net total rate of return of 3.41%* versus a blend of the Lehman
Mortgage and Government Indices** return of 3.64%. The portfolio, as of June 30,
1998, had $80.2 million in net assets and the average 30-day net yield as
calculated under SEC guidelines was 5.51% based upon the net asset value of
$10.71.

**The indices are a blend of 40% Lipper General U.S. Government Funds and 60%
Lehman Brothers Mortgage-Backed Securities Index. Lipper General U.S.
Government Funds invest at least 65% of assets in U.S. Government and agency
issues. Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. Lipper figures do not
reflect sales charges. Lehman Brothers Mortgage-Backed Securities Index is
composed of all fixed rate, securitized mortgage pools by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"),
including GNMAGraduated Payment Mortgages. Indexes are unmanaged and
investments cannot be made in an index.

PORTFOLIO OF INVESTMENTS

Federated Fund For U.S. Government Securities II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Intermediate-Term U.S. Government Obligations--17.0%
$1,000,000 Federal Farm Credit Bank, 7.350%, 3/24/2005 $1,086,910
900,000 Federal Farm Credit Bank, 9.000%, 3/7/2000 948,609
1,500,000 Federal Home Loan Bank System, 5.500%, 1/21/2003 1,486,095
1,000,000 Federal Home Loan Bank System, 5.530%, 1/15/2003 991,950
2,500,000 Federal Home Loan Bank System, 5.905%, 3/27/2008 2,508,775
3,000,000 Federal Home Loan Bank System, 6.050%, 9/16/1999 3,013,770
1,500,000 Federal Home Loan Bank System, 6.285%, 6/26/2000 1,518,453
1,000,000 Federal Home Loan Bank System, 6.830%, 7/17/2001 1,031,050
1,000,000 Federal Home Loan Bank System, 7.660%, 7/20/2004 1,095,650
Total Intermediate-Term U.S. Government Obligations (identified cost $13,557,462) 13,681,262
Long-Term U.S. Government Obligations--65.1%
4,300,000 (a)Federal Home Loan Mortgage Corp. TBA, 7.00%, 30 Year, July 4,361,834
11,231,887 Federal Home Loan Mortgage Corp., 6.00% - 9.00%, 9/1/2010 - 1/1/2028 11,403,236
1,000,000 (a)Federal National Mortgage Association TBA, 6.00%, 30 Year, July 972,810
4,500,000 (a)Federal National Mortgage Association TBA, 7.00%, 30 Year, August 4,561,875
1,800,000 (a)Federal National Mortgage Association TBA, 7.50%, 30 Year, August 1,845,558
10,161,176 Federal National Mortgage Association, 6.00% - 10.00%, 8/1/2011
- 6/1/2028 10,310,364 18,365,985 Government National Mortgage Association,
6.50% - 9.50%, 11/15/2016 - 6/15/2028 18,802,152
Total Long-Term U.S. Government Obligations (identified cost $51,884,686) 52,257,829
U.S. Treasury Obligations--16.8%
1,100,000 United States Treasury Bonds, 6.000%, 2/15/2026 1,145,254
1,000,000 United States Treasury Bonds, 6.125%, 11/15/2027 1,072,190
900,000 United States Treasury Bonds, 8.000%, 11/15/2021 1,160,577
900,000 United States Treasury Bonds, 9.250%, 2/15/2016 1,252,422
690,000 United States Treasury Bonds, 11.250%, 2/15/2015 1,105,173
1,000,000 United States Treasury Notes, 5.500%, 3/31/2000 1,000,210
800,000 United States Treasury Notes, 5.625%, 5/15/2008 811,248
2,300,000 United States Treasury Notes, 5.750%, 11/15/2000 2,312,075
2,500,000 United States Treasury Notes, 6.250%, 2/28/2002 - 6/30/2002 2,560,745
1,000,000 United States Treasury Notes, 6.625%, 3/31/2002 1,036,121
Total U.S. Treasury Obligations (identified cost $12,816,470) 13,456,015
(b)Repurchase Agreements--14.9%
1,385,000 BT Securities Corp., 5.870%, dated 6/30/1998, due 7/1/1998 1,385,000
Principal
Amount Value
(b)Repurchase Agreements--continued
$ 6,300,000 (c)Goldman Sachs Group, LP, 5.530%, dated 6/3/1998, due 7/14/1998 $ 6,300,000
4,300,000 (c)Morgan Stanley Group, Inc., 5.530%, dated 6/9/1998, due 7/14/1998 4,300,000
Total Repurchase Agreements (at amortized cost) 11,985,000
Total Investments (identified cost $90,243,618)(d) $91,380,106
</TABLE>

(a) These securities are subject to dollar roll transactions.
(b) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(c) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(d) The cost of investments for federal tax purposes amounts to $90,243,618. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,136,488 which is comprised of $1,176,731 appreciation and $40,243
depreciation at June 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($80,277,871) at June 30, 1998.

The following acronyms are used throughout this portfolio:

LP --Limited Partnership
TBA --To Be Announced

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated Fund For U.S. Government Securities II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Investments in repurchase agreements $11,985,000
Investments in securities 79,395,106
Total investments in securities, at value (identified and tax cost $90,243,618) $91,380,106
Cash 1,275
Income receivable 725,398
Receivable for investments sold 903,821
Total assets 93,010,600
Liabilities:
Payable for investments purchased 1,883,438
Payable for dollar roll transactions 10,771,247
Accrued expenses 78,044
Total liabilities 12,732,729
Net Assets for 7,493,202 shares outstanding $80,277,871
Net Assets Consist of:
Paid in capital $76,589,950
Net unrealized appreciation of investments 1,136,488
Accumulated net realized gain on investments 476,535
Undistributed net investment income 2,074,898
Total Net Assets $80,277,871
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$80,277,871 / 7,493,202 shares outstanding $10.71
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated Fund For U.S. Government Securities II

Six Months Ended June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Interest (net of dollar roll expense of $202,931) $2,326,186
Expenses:
Investment advisory fee $ 214,730
Administrative personnel and services fee 61,987
Custodian fees 3,992
Transfer and dividend disbursing agent fees and expenses 22,713
Directors'/Trustees' fees 1,517
Auditing fees 9,324
Legal fees 3,839
Portfolio accounting fees 48,689
Share registration costs 323
Printing and postage 46,137
Miscellaneous 21,851
Total expenses 435,102
Waiver --
Waiver of investment advisory fee (131,730)
Net expenses 303,372
Net investment income 2,022,814
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 477,041
Net change in unrealized depreciation of investments (130,435)
Net realized and unrealized gain on investments 346,606
Change in net assets resulting from operations $2,369,420
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated Fund For U.S. Government Securities II

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $2,022,814 $2,779,758
Net realized gain on investments
($477,041 and $181,810, respectively,as computed
for federal tax purposes) 477,041 181,810
Net change in unrealized appreciation/depreciation (130,435) 1,068,779
Change in net assets resulting from operations 2,369,420 4,030,347
Distributions to Shareholders--
Distributions from net investment income (1,184,452) (1,612,272)
Distributions from net realized gains (52,421) --
Change in net assets resulting from distributions
to shareholders (1,236,873) (1,612,272)
Share Transactions--
Proceeds from sale of shares 27,794,767 44,186,152
Net asset value of shares issued to shareholders
in payment of distributions declared 1,236,865 1,612,207
Cost of shares redeemed (12,985,258) (20,082,031)
Change in net assets resulting from share
transactions 16,046,374 25,716,328
Change in net assets 17,178,921 28,134,403
Net Assets:
Beginning of period 63,098,950 34,964,547
End of period (including undistributed
net investment income of $2,074,898 and
$1,236,536, respectively) $80,277,871 $63,098,950
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated Fund For U.S. Government Securities II

(a) Reflects operations for the period from March 29, 1994 (date of initial
public investment) to December 31, 1994. For the period December 8, 1993
(start of business), to March 28, 1994, net investment income was
distributed to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated Fund For U.S. Government Securities II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Fund For U.S. Government
Securities II (the "Fund"), a diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The investment objective of the Fund is to provide current
income.

Significant Accounting Policies

Investment Valuations

U.S. government securities are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.

Repurchase Agreements

Investment Income, Expenses and Distributions

Federal Taxes

When-Issued and Delayed Delivery Transactions

Dollar Roll Transactions

The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.

Use of Estimates

Other

Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

<TABLE>
<CAPTION>
Transactions in shares were as follows:
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Shares sold 2,614,196 4,326,667
Shares issued to shareholders in payment of distributions declared 117,350 160,196
Shares redeemed (1,222,233) (1,969,286)
Net change resulting from share transactions 1,509,313 2,517,577
</TABLE>

Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.60% of the Fund's
average daily net assets.

The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

Portfolio Accounting Fees

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

General

Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Year 2000

Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1998, were as follows:

Purchases $57,151,881
Sales $35,944,002

TRUSTEES

John F. Donahue

Thomas G. Bigley

John T. Conroy, Jr.

Nicholas P. Constantakis

William J. Copeland

J. Christopher Donahue

James E. Dowd, Esq.

Lawrence D. Ellis, M.D.

Edward L. Flaherty, Jr., Esq.

Peter E. Madden

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

Wesley W. Posvar

Marjorie P. Smuts

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer,
and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

Federated
Fund For
U.S.Government
Securities II

Federated Insurance Series

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Semi-Annual Report
to Shareholders
June 30, 1998

Cusip 313916207
G00433-01 (8/98)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present your Semi-Annual Report for Federated High Income Bond
Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1998 through June 30,
1998. It begins with a commentary by the fund's portfolio manager, which is
followed by a complete listing of the fund's high-yield bond holdings and the
financial statements.

For the six-month reporting period ended June 30, 1998, the fund's broadly
diversified, carefully researched portfolio of more than 250 high-yield, lower-
rated bonds* produced a total return of 4.02%.** Contributing to this total
return were an income stream totaling $0.26 per share, capital gains totaling
$0.07 per share, and an $0.11 increase in net asset value. On June 30, 1998,
total net assets reached $188.3 million.

Thank you for participating in the income opportunities of high-yield corporate
bonds through the diversification and professional management of Federated High
Income Bond Fund II. As always, we welcome your comments and suggestions.

Very sincerely yours,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Lower rated bonds involve a higher degree of risk than investment grade
bonds in return for higher yield potential.

** Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

INVESTMENT REVIEW

Two opposing factors impacted the high-yield market during the six month
reporting period ended June 30, 1998. On the positive side, the domestic economy
continued to generate strong growth. On the negative side, Asian economies
continued to struggle. In the early part of the reporting period, the strong
domestic economy held the upper hand. However, late in the second quarter, Asian
economic problems and their impact on the domestic economy became a key investor
focal point. Economic statistics seemed to indicate that domestic economic
growth was slowing, with imports increasing, exports decreasing, inventories
accumulating, and manufacturing activity slowing. This apparent slowing of the
domestic economy caused the spread between high-yield bonds and treasuries to
widen approximately 40 basis points and high quality bonds to outperform
high-yield bonds in the second quarter. However, strong first quarter
performance for high-yield bonds allowed them to outperform high quality bonds
for the six month reporting period. For example, the Lehman Brothers High Yield
Bond Index* returned 4.5% for the six months versus 3.94% for the Lehman
Brothers Aggregate Bond Index,* a measure of high quality bond performance.

The fund, which returned 4.02%**, underperformed the Lipper High Current Yield
Fund Average, which returned 4.40%***, and the Lehman Brothers High Yield Bond
Index during the reporting period. Several factors impacted performance during
the reporting period. The fund is over weight in the broadcast radio and TV
sector, which generated outstanding returns led by companies such as Chancellor
Media and Sinclair Broadcasting. The fund's cable TV positions outperformed the
overall market, driven by consolidation activity in the United Kingdom and
AT&T's acquisition of Telecommunication, Inc. in the U.S., which reinforced the
attractiveness of the cable platform. The fund also benefited by the strong
performance of several specific holdings including Nextel, Echostar, Six Flags,
and Dialog Corp. The energy sector was one of the worst performing sectors in
the market due to falling oil prices. The fund had several holdings which
underperformed the overall market but the fund did benefit by being underweight
in the sector. On the negative side, the fund's large holdings in
telecommunications issues suffered late in the reporting period given a
combination of an uncertain market and the step-up nature of many of the fund's
telecommunication holdings. Step-up securities tend to underperform in spread
widening environments because of their higher volatility. The fund was also
negatively impacted by its holdings in Renaissance Cosmetics (subsequently
sold), Icon Health and Fitness, Electronic Retailing and Highwaymaster, which
underperformed the overall market based on disappointing financial performance.

The performance of the high-yield market over the balance of 1998 will be a
function of the domestic economy and the strength of corporate profits. We
believe that the domestic economy is slowing and corporate profits may
disappoint optimistic expectations. Demand in Asia is weak while supply from
that region in industries such as semiconductors and steel is impacting domestic
companies. From a high-yield perspective, this weakness could lead to additional
spread widening. However, we believe that the economy will not sink into
recession and additional spread widening should be modest given the approximate
125 basis point widening since early October 1997. Also, the lull in the economy
in the second half of 1998 may set the stage for a continuation of the current
business cycle into 1999 and beyond, resulting in subsequent spread tightening.

The fund remains over weight in the telecommunication, cable TV and broadcasting
sectors given our belief that secular changes occurring in these industries will
make them superior performers over the next 6 to 12 months. We also believe
these sectors will outperform the overall market in a slowing economic
environment. We are maintaining a bias toward higher quality high-yield bonds in
light of potential spread widening although we are beginning to look for
attractive opportunities in lower quality high-yield bonds given the spread
widening to date.

* Lehman Brothers High Yield Bond Index is an unmanaged index which includes
fixed rate, public nonconvertible, non-investment grade issues that are
rated Ba1 or lower by Moody's Investors Service. Lehman Brothers Aggregate
Bond Index is an unmanaged total return index measuring both the capital
price changes and income provided by the underlying universe of securities,
weighted by market value outstanding. Investments cannot be made in an
index.

** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

*** Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.

PORTFOLIO OF INVESTMENTS

Federated High Income Bond Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Corporate Bonds--90.2%
Aerospace & Defense--0.4%
$ 650,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 $ 708,529
Automobile--2.3%
175,000 (a)(b)Accuride Corp., Sr. Sub. Note, 9.25%, 2/1/2008 175,875
225,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 249,188
350,000 Aftermarket Technology Co., Sr. Sub. Note, Series D, 12.00%, 8/1/2004 387,625
1,700,000 Collins & Aikman Products Co., Sr. Sub. Note, 11.50%, 4/15/2006 1,901,875
850,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 930,750
100,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 100,750
275,000 OshKosh Truck Corp., Sr. Sub., 8.75%, 3/1/2008 279,125
250,000 Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 6/15/2007 259,375
Total 4,284,563
Banking--1.4%
1,800,000 First Nationwide Escrow Corp., Sr. Sub. Note, 10.625%, 10/1/2003 2,029,500
500,000 First Nationwide Holdings, Inc., Sr. Sub. Note, 9.125%, 1/15/2003 521,250
Total 2,550,750
Beverage & Tobacco--0.3%
600,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 600,000
Broadcast Radio & TV--7.5%
900,000 ACME Television, LLC, Sr. Disc. Note, 0/10.875%, 9/30/2004 747,000
1,100,000 (a)(b)Big City Radio, Inc., Sr. Disc. Note, 0/11.25%, 3/15/2005 836,000
450,000 Capstar Broadcasting Partners, Inc., Sr. Sub. Note, 9.25%, 7/1/2007 473,625
600,000 Chancellor Media Corp., Company Guarantee, 10.50%, 1/15/2007 666,000
1,475,000 Chancellor Media Corp., Sr. Sub. Note, 8.125%, 12/15/2007 1,497,125
800,000 Chancellor Media Corp., Sr. Sub. Note, 8.75%, 6/15/2007 836,000
250,000 Chancellor Media Corp., Sr. Sub. Note, 9.375%, 10/1/2004 263,750
450,000 Cumulus Media, Inc., Sr. Sub. Note, 10.375%, 7/1/2008 456,750
2,050,000 Fox/Liberty Networks, LLC, Sr. Disc. Note, 0/9.75%, 8/15/2007 1,414,500
375,000 Fox/Liberty Networks, LLC, Sr. Note, 8.875%, 8/15/2007 383,438
250,000 Lamar Advertising Co., Sr. Sub. Note, 8.625%, 9/15/2007 256,250
550,000 Lamar Advertising Co., Sr. Sub. Note, 9.625%, 12/1/2006 591,938
1,575,000 Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, 6/15/2007 1,645,875
525,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 5/15/2006 581,438
575,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 10.00%, 9/30/2005 619,563
500,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 8.75%, 12/15/2007 517,500
900,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 9.00%, 7/15/2007 940,500
50,000 Sullivan Broadcast Holdings Inc., Deb., 13.25%, 12/15/2006 84,250
600,000 Sullivan Broadcast Holdings Inc., Sr. Sub. Note, 10.25%, 12/15/2005 687,084
475,000 Young Broadcasting, Inc., Sr. Sub. Note, 10.125%, 2/15/2005 515,375
150,000 Young Broadcasting, Inc., Sr. Sub. Note, 9.00%, 1/15/2006 158,625
Total 14,172,586
Building & Development--1.2%
500,000 American Architectural Products Corp., Sr. Note, 11.75%, 12/1/2007 517,500
700,000 American Builders & Contractors Supply Co., Inc., Sr. Sub. Note,
10.625%, 5/15/2007 703,500
500,000 Building Materials Corp. of America, Sr. Note, 8.00%, 10/15/2007 505,000
450,000 Building Materials Corp. of America, Sr. Note, 8.625%, 12/15/2006 468,000
Total 2,194,000
Business Equipment & Services--2.3%
750,000 (a)(b)American Business Information, Sr. Sub. Note, 9.50%, 6/15/2008 757,500
1,000,000 Dialog Corp. PLC, Sr. Sub. Note, 11.00%, 11/15/2007 1,100,000
300,000 Electronic Retailing Systems International, Inc., Sr. Disc. Note, 0/13.25%, 2/1/2004 133,500
575,000 Fisher Scientific International, Inc., Sr. Sub. Note, 9.00%, 2/1/2008 575,000
1,000,000 (a)(b)U.S. Office Products Co., Sr. Sub. Note, 9.75%, 6/15/2008 1,011,250
400,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 458,000
250,000 (a)(b)United Stationers Supply Co., Sr. Sub. Note, 8.375%, 4/15/2008 251,250
Total 4,286,500
Cable Television--10.7%
4,703 Australis Media Ltd., Sr. Disc. Note, 0/15.75%, 5/15/2003 635
275,000 Australis Media Ltd., Unit, 0/14.00%, 5/15/2003 37,125
500,000 CSC Holdings, Inc., Sr. Note, 7.875%, 12/15/2007 530,000
150,000 CSC Holdings, Inc., Sr. Sub. Deb., 9.875%, 2/15/2013 166,125
875,000 CSC Holdings, Inc., Sr. Sub. Note, 9.25%, 11/1/2005 940,625
650,000 CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 5/15/2006 715,000
550,000 Charter Communications Holdings, Inc., Sr. Disc. Note, 0/14.00%, 3/15/2007 453,750
425,000 Charter Communications Southeast, L.P., Sr. Note, 11.25%, 3/15/2006 473,875
1,250,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 1,340,625
</TABLE>

<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Corporate Bonds--continued
Cable Television--continued
$ 600,000 Comcast UK Cable, Deb., 0/11.20%, 11/15/2007 $ 504,000
1,175,000 Diamond Cable Communications PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007 869,500
525,000 Diamond Cable Communications PLC, Sr. Note, 9.125%, 2/1/2008 551,250
900,000 (a)(b)Diva Systems Corp., Unit, 0/12.625%, 3/1/2008 427,500
1,625,000 EchoStar Satellite Broadcasting Corp., Sr. Disc. Note, 0/13.125%, 3/15/2004 1,503,125
2,325,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/11.50%, 2/1/2006 1,918,125
475,000 International Cabletel, Inc., Sr. Disc. Note, 0/12.75%, 4/15/2005 420,375
850,000 Lenfest Communications Inc., Sr. Note, 8.375%, 11/1/2005 907,375
300,000 (a)(b)Lenfest Communications Inc., Sr. Sub. Note, 8.25%, 2/15/2008 312,750
1,500,000 (a)(b)NTL, Inc., Sr. Defd. Cpn. Note, 0/9.75%, 4/1/2008 982,500
575,000 Pegasus Communications Corp., Sr. Note, 9.625%, 10/15/2005 595,125
300,000 Pegasus Media, Note, 12.50%, 7/1/2005 340,500
400,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 446,000
900,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 1,003,500
400,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 11.00%, 12/1/2015 462,000
3,275,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 2,718,250
1,175,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 710,875
1,475,000 United International Holdings, Inc., Sr. Secd. Disc. Note, 0/10.75%, 2/15/2008 921,875
Total 20,252,385
Chemicals & Plastics--3.0%
500,000 Buckeye Cellulose Corp., Sr. Sub. Note, 8.50%, 12/15/2005 507,500
900,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 9/15/2008 945,000
200,000 Foamex L.P., Sr. Sub. Note, 13.50%, 8/15/2005 232,000
500,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 521,250
475,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 501,125
650,000 (a)(b)Polymer Group, Inc., Sr. Sub. Note, 8.75%, 3/1/2008 651,625
1,575,000 Polymer Group, Inc., Sr. Sub. Note, 9.00%, 7/1/2007 1,606,500
375,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 228,750
875,000 Sterling Chemicals Holdings, Inc., Sr. Disc. Note, 0/13.50%, 8/15/2008 503,125
Total 5,696,875
Clothing & Textiles--1.7%
350,000 Collins & Aikman Floorcoverings, Inc., Sr. Sub. Note, 10.00%, 1/15/2007 369,250
625,000 Dyersburg Corp., Sr. Sub. Note, 9.75%, 9/1/2007 600,000
</TABLE>

<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Corporate Bonds--continued
Clothing & Textiles--continued
$ 450,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 $ 470,250
575,000 Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007 618,125
950,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006 1,021,250
150,000 Pillowtex Corp., Sr. Sub. Note, 9.00%, 12/15/2007 154,875
Total 3,233,750
Conglomerates--0.5%
950,000 (a)(b)Eagle Picher Industries, Inc., Sr. Sub. Note, 9.375%, 3/1/2008 964,250
Consumer Products--4.6%
500,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 533,750
400,000 Amscan Holdings, Inc., Sr. Sub. Note, 9.875%, 12/15/2007 406,000
450,000 (a)(b)Chattem, Inc., Sr. Sub. Note, 8.875%, 4/1/2008 445,500
200,000 (a)(b)Diamond Brands Operating Corp., Sr. Sub. Note, 10.125%, 4/15/2008 201,000
250,000 (a)(b)Diamond Brands, Inc., Sr. Disc. Deb., 0/12.875%, 4/15/2009 135,000
150,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 164,250
150,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 8/1/2002 165,750
450,000 ICON Fitness Corp., Sr. Disc. Note, 0/14.00%, 11/15/2006 137,250
600,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 13.00%, 7/15/2002 603,000
750,000 NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007 765,000
525,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 540,750
500,000 Playtex Products, Inc., Sr. Note, 8.875%, 7/15/2004 515,000
625,000 Revlon Consumer Products Corp., Sr. Note, 8.125%, 2/1/2006 621,875
1,675,000 Revlon Consumer Products Corp., Sr. Sub. Note, 8.625%, 2/1/2008 1,683,375
200,000 (a)(b)Sealy Corporation, Sr. Sub. Note, 9.875%, 12/15/2007 205,000
325,000 (a)(b)Sealy Mattress Co., Sr. Sub. Disc. Note, 0/10.875%, 12/15/2007 212,875
450,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 483,750
300,000 Syratech Corp., Sr. Note, 11.00%, 4/15/2007 267,000
550,000 (a)(b)The Boyds Collection, Ltd., Sr. Sub. Note, 9.00%, 5/15/2008 551,375
Total 8,637,500
Container & Glass Products--0.9%
400,000 Owens-Illinois, Inc., Sr. Note, 8.10%, 5/15/2007 427,508
250,000 Plastic Containers, Inc., Sr. Secd. Note, 10.00%, 12/15/2006 270,000
1,000,000 Tekni-Plex, Inc., Sr. Sub. Note, 9.25%, 3/1/2008 1,005,000
Total 1,702,508
</TABLE>

<TABLE>
<CAPTION>
Principal
Amount Value
Corporate Bonds--continued
Ecological Services & Equipment--1.2%
<S> <C> <C>
$1,900,000 Allied Waste Industries, Inc., Sr. Disc. Note, 0/11.30%, 6/1/2007 $1,401,250
850,000 Allied Waste North America, Inc., Company Guarantee, 10.25%, 12/1/2006 936,063
Total 2,337,313
Electronics--1.1%
225,000 Fairchild Semiconductor Corp., Sr. Sub. Note, 10.125%, 3/15/2007 230,625
350,000 (a)(b)PX Escrow Corp., Sr. Sub. Disc. Note, 0/9.625%, 2/1/2006 252,875
1,000,000 (a)(b)Telecommunications Techniques Co., LLC, Sr. Sub. Note, 9.75%, 5/15/2008 1,027,500
600,000 Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 591,000
Total 2,102,000
Financial Intermediaries--0.3%
575,000 ContiFinancial Corp., Sr. Note, 8.125%, 4/1/2008 582,883
Food & Drug Retailers--1.5%
375,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 420,000
350,000 Community Distributors, Inc., Sr. Note, 10.25%, 10/15/2004 355,250
700,000 DiGiorgio Corp., Sr. Note, 10.00%, 6/15/2007 698,250
750,000 Jitney-Jungle Stores of America, Inc., Sr. Sub. Note, 10.375%, 9/15/2007 804,375
550,000 Stater Brothers Holdings, Inc., Sr. Sub. Note, 9.00%, 7/1/2004 566,500
Total 2,844,375
Food Products--2.0%
625,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007 665,625
550,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 605,000
550,000 (a)(b)Eagle Family Foods, Inc., Sr. Sub. Note, 8.75%, 1/15/2008 537,625
1,200,000 International Home Foods, Inc., Sr. Sub. Note, 10.375%, 11/1/2006 1,308,000
550,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 629,750
Total 3,746,000
Food Services--1.0%
225,000 AmeriServe Food Distribution, Inc., Sr. Note, 8.875%, 10/15/2006 227,250
1,650,000 AmeriServe Food Distribution, Inc., Sr. Sub. Note, 10.125%, 7/15/2007 1,705,688
Total 1,932,938
Forest Products--1.1%
50,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 54,250
450,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 483,750
500,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 556,250
$100,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 $ 107,750
800,000 Stone Container Corp., Sr. Note, 12.58%, 8/1/2016 896,000
Total 2,098,000
Healthcare--3.5%
425,000 Alliance Imaging, Inc., Sr. Sub. Note, 9.625%, 12/15/2005 431,375
975,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 1,101,750
525,000 (a)(b)Everest Healthcare Services Corp., Sr. Sub. Note, 9.75%, 5/1/2008 538,125
650,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.25%, 10/1/2006 659,750
275,000 (a)(b) Hudson Respiratory Care, Inc., Sr. Sub. Note, 9.125%, 4/15/2008 262,625
1,850,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005 1,905,075
1,550,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 1/15/2007 1,608,125
Total 6,506,825
Home Products & Furnishings--0.7%
975,000 Falcon Building Products, Inc., Sr. Sub. Disc. Note, 0/10.50%, 6/15/2007 653,250
150,000 Falcon Building Products, Inc., Sr. Sub. Note, 9.50%, 6/15/2007 148,500
500,000 Werner Enterprises, Inc., Sr. Sub. Note, 10.00%, 11/15/2007 522,500
Total 1,324,250
Hotels, Motels, Inns & Casinos--0.2%
350,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008 385,875
Industrial Products & Equipment--4.3%
700,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 740,250
600,000 Anchor Lamina, Inc., Sr. Sub. Note, 9.875%, 2/1/2008 588,000
400,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 451,000
750,000 Continental Global Group, Inc., Sr. Note, 11.00%, 4/1/2007 783,750
400,000 Euramax International PLC, Sr. Sub. Note, 11.25%, 10/1/2006 434,000
250,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 260,625
275,000 (a)(b)Grove Worldwide, LLC, Sr. Sub. Note, 9.25%, 5/1/2008 273,625
195,000 Hawk Corp., Sr. Note, 10.25%, 12/1/2003 212,550
225,000 (a)(b)International Utility Structures, Inc., Sr. Sub. Note, 10.75%, 2/1/2008 230,625
500,000 (a)(b)JTM Industries, Inc., Sr. Sub. Note, 10.00%, 4/15/2008 510,000
225,000 Johnstown America Industries, Inc., Sr. Sub. Note, 11.75%, 8/15/2005 250,313
375,000 Johnstown America Industries, Inc., Sr. Sub. Note, 11.75%, 8/15/2005 417,188
525,000 MMI Products, Inc., Sr. Sub. Note, 11.25%, 4/15/2007 577,500
550,000 Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 602,250
Principal
Amount Value
Corporate Bonds--continued
Industrial Products & Equipment--continued
$ 500,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 $ 525,000
875,000 (a)(b)WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 6/1/2008 870,625
500,000 (a)(b)WESCO International, Inc., Sr. Disc. Note, 0/11.125%, 6/1/2008 295,000
Total 8,022,301
Leisure & Entertainment--4.9%
1,164,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 937,020
925,000 Premier Parks, Inc., Sr. Disc. Note, 0/10.00%, 4/1/2008 619,750
850,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 945,625
250,000 Premier Parks, Inc., Sr. Note, 9.25%, 4/1/2006 259,063
175,000 Premier Parks, Inc., Sr. Note, 9.75%, 1/15/2007 190,969
1,100,000 (a)(b)Regal Cinemas, Inc., Sr. Sub. Note, 9.50%, 6/1/2008 1,116,500
1,325,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 1,510,500
3,500,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 3,626,875
Total 9,206,302
Machinery & Equipment--1.2%
500,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1/31/2003 543,750
900,000 Clark Material Handling Corp., Sr. Note, 10.75%, 11/15/2006 958,500
500,000 (a)(b)National Equipment Services, Inc., Sr. Sub. Note, 10.00%, 11/30/2004 507,500
244,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 281,820
Total 2,291,570
Metals & Mining--0.4%
500,000 (a)(b)AEI Holding Co., Inc., Sr. Note, 10.00%, 11/15/2007 501,250
400,000 Royal Oak Mines, Inc., Sr. Sub. Note, 11.00%, 8/15/2006 342,000
Total 843,250
Oil & Gas--3.7%
475,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 491,625
525,000 (a)(b)Chiles Offshore, LLC, Sr. Note, 10.00%, 5/1/2008 509,250
525,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 509,250
875,000 Dailey Petroleum Services Corp., Company Guarantee, 9.50%, 2/15/2008 861,875
950,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 8.50%, 2/15/2007 902,500
600,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 9.50%, 11/1/2006 606,000
400,000 KCS Energy, Inc., Sr. Sub. Note, 8.875%, 1/15/2008 382,000
200,000 (a)(b)Nuevo Energy Co., Sr. Sub. Note, 8.875%, 6/1/2008 203,500
675,000 Ocean Energy, Inc., Sr. Sub. Note, 10.375%, 10/15/2005 745,875
$ 350,000 Pacalta Resources Ltd., Sr. Note, 10.75%, 6/15/2004 $ 350,000
825,000 Pride Petroleum Services, Inc., Sr. Note, 9.375%, 5/1/2007 872,438
800,000 (a)(b)Universal Compression Holdings, Inc., Sr. Disc. Note, 0/9.875%, 2/15/2008 508,000
Total 6,942,313
Printing & Publishing--1.9%
750,000 Affiliated Newspaper Investments, Inc., Sr. Disc. Note, 0/13.25%, 7/1/2006 731,250
150,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 167,250
1,125,000 Garden State Newspapers, Inc., Sr. Sub. Note, 8.75%, 10/1/2009 1,147,500
450,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 2/1/2006 472,500
475,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 3/15/2007 498,750
550,000 Ziff-Davis, Inc., Sr. Sub. Note, 8.50%, 5/1/2008 558,250
Total 3,575,500
Real Estate--0.2%
335,000 Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005 378,550
Retailers--0.5%
425,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 449,438
525,000 Leslie's Poolmart, Inc., Sr. Note, 10.375%, 7/15/2004 553,875
Total 1,003,313
Services--0.6%
625,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 700,000
425,000 (a)(b)SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006 414,375
Total 1,114,375
Steel--1.0%
500,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 543,750
475,000 GS Technologies Operating Co., Inc., Sr. Note, 12.25%, 10/1/2005 527,250
450,000 Ryerson Tull, Inc., Note, 8.50%, 7/15/2001 470,250
325,000 Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006 362,375
Total 1,903,625
Surface Transportation--3.4%
650,000 Allied Holdings, Inc., Sr. Note, 8.625%, 10/1/2007 656,500
700,000 AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%, 11/15/2005 409,500
450,000 Chemical Leaman Corp., Sr. Note, 10.375%, 6/15/2005 478,125
850,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 932,875
500,000 Statia Terminals International N.V., 1st Mtg. Note, 11.75%, 11/15/2003 525,000
$1,500,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 $1,638,750
750,000 Stena AB, Sr. Note, 8.75%, 6/15/2007 755,625
300,000 Stena Line AB, Sr. Note, 10.625%, 6/1/2008 305,625
725,000 (a)(b)The Holt Group, Inc., Sr. Note, 9.75%, 1/15/2006 714,125
Total 6,416,125
Telecommunications & Cellular--18.2%
1,000,000 (a)(b)American Cellular Corp., Sr. Note, 10.50%, 5/15/2008 1,002,500
250,000 Arch Communications, Inc., Sr. Disc. Note, 0/10.875%, 3/15/2008 140,000
500,000 (a)(b)Arch Communications, Inc., Sr. Note, 12.75%, 7/1/2007 507,500
1,500,000 Call-Net Enterprises, Inc., Sr. Disc. Note, 0/9.27%, 8/15/2007 1,057,500
550,000 Comcast Cellular Holdings, Inc., Sr. Note, 9.50%, 5/1/2007 577,500
700,000 E.Spire Communications, Inc., Sr. Disc. Note, 0/12.75%, 4/1/2006 542,500
250,000 E.Spire Communications, Inc., Sr. Note, 13.75%, 7/15/2007 286,875
250,000 Esprit Telecom Group PLC, Sr. Note, 11.50%, 12/15/2007 258,438
925,000 Hermes Europe Railtel B.V., Sr. Note, 11.50%, 8/15/2007 1,040,625
400,000 HighwayMaster Communications, Inc., Sr. Note, 13.75%, 9/15/2005 300,000
1,450,000 (a)(b)ICG Services, Inc., Sr. Disc. Note, 0/9.875%, 5/1/2008 848,250
350,000 (a)(b)IXC Communications, Inc., Sr. Sub. Note, 9.00%, 4/15/2008 352,625
1,225,000 Intermedia Communications, Inc., Sr. Disc. Note, 0/11.25%, 7/15/2007 900,375
1,400,000 Intermedia Communications, Inc., Sr. Disc. Note, 0/12.50%, 5/15/2006 1,155,000
450,000 (a)(b)Intermedia Communications, Inc., Sr. Note, 8.60%, 6/1/2008 457,875
450,000 Intermedia Communications, Inc., Sr. Note, 8.875%, 11/1/2007 462,375
2,900,000 (a)(b)Level 3 Communications, Inc., Sr. Note, 9.125%, 5/1/2008 2,842,000
1,125,000 McLeod, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007 843,750
375,000 (a)McLeod, Inc., Sr. Note, 8.375%, 3/15/2008 375,938
400,000 McLeod, Inc., Sr. Note, 9.25%, 7/15/2007 417,000
250,000 MetroNet Communications Corp., Sr. Disc. Note, 0/10.75%, 11/1/2007 164,375
800,000 MetroNet Communications Corp., Sr. Note, 12.00%, 8/15/2007 904,000
1,275,000 (a)(b)MetroNet Escrow Corp., Sr. Disc. Note, 0/9.95%, 6/15/2008 795,281
1,550,000 Millicom International Cellular S. A., Sr. Disc. Note, 0/13.50%, 6/1/2006 1,205,125
2,050,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/10.65%, 9/15/2007 1,399,125
1,775,000 (a)(b)NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.95%, 2/15/2008 1,151,531
600,000 (a)(b)NEXTLINK Communications, Inc., Sr. Disc. Note, 0/9.45%, 4/15/2008 370,500
1,000,000 (a)(b)NEXTLINK Communications, Inc., Sr. Note, 9.00%, 3/15/2008 1,000,000
Principal
Amount
or Shares Value
Corporate Bonds--continued
Telecommunications & Cellular--continued
$ 600,000 (a)(b)Nextel International, Inc., Sr. Disc. Note, 0/12.125%, 4/15/2008 $ 352,500
1,500,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 1,565,625
800,000 (a)(b)Pathnet, Inc., Unit, 12.25%, 4/15/2008 852,000
300,000 PsiNet, Inc., Sr. Note, 10.00%, 2/15/2005 308,250
1,875,000 Qwest Communications International, Inc., Sr. Disc. Note, 0/9.47%, 10/15/2007 1,408,594
600,000 Qwest Communications International, Inc., Sr. Note, 10.875%, 4/1/2007 693,000
900,000 Rogers Cantel Mobile, Inc., Sr. Sub. Note, 8.80%, 10/1/2007 896,625
450,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 495,000
650,000 Telesystem International Wireless, Inc., Sr. Disc. Note, 0/10.50%, 11/1/2007 388,375
1,525,000 Telesystem International Wireless, Inc., Sr. Disc. Note, 0/13.25%, 6/30/2007 1,010,313
800,000 (a)(b)Teligent, Inc., Sr. Disc. Note, 0/11.50%, 3/1/2008 440,000
875,000 Teligent, Inc., Sr. Note, 11.50%, 12/1/2007 885,938
1,575,000 (a)(b)Triton PCS, Inc., Sr. Disc. Note, 0/11.00%, 5/1/2008 893,813
500,000 (a)(b)US Xchange, LLC, Sr. Note, 15.00%, 7/1/2008 516,250
350,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 320,250
700,000 Vanguard Cellular Systems, Inc., Deb., 9.375%, 4/15/2006 738,500
300,000 (a)(b)Viatel, Inc., Unit, 0/12.50%, 4/15/2008 184,500
825,000 (a)(b)Viatel, Inc., Unit, 11.25%, 4/15/2008 870,375
Total 34,178,471
Utilities--0.5%
525,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011 607,042
350,000 Niagara Mohawk Power Corp., Sr. Disc. Note, Series H, 0/8.50%, 7/1/2010 242,557
Total 849,599
Total Corporate Bonds (identified cost $166,860,849) 169,869,949
Preferred Stocks--5.2%
Banking--0.1%
10,000 California Federal Preferred Capital Corp., REIT Perpetual Pfd. Stock, Series A, $2.28 273,125
Broadcast Radio & TV--1.8%
600 (a)(b)Benedek Communications Corp., Sr. Exchangeable PIK 606,000
5,924 Capstar Broadcasting Partners, Inc., Sr. Pfd., $12.00 670,893
2,500 Chancellor Media Corp., PIK Pfd., Series A, 12.25% 360,000
450 Cumulus Media, Inc., Cumulative Sr. Red. Pfd. Stk., Series A, $13.75 462,375
4,252 SFX Broadcasting, Inc., Exchangeable Pfd. Stock, Series E 508,114
Shares Value
Preferred Stocks--continued
Broadcast Radio & TV--continued
7,300 Sinclair Broadcast Group, Inc., Pfd., $11.63 $ 799,350
Total 3,406,732
Cable Television--1.0%
6,300 CBS Radio Inc., Exchangeable Pfd. Stock 732,375
158 Echostar Communications Corp., Sr. Red. Pfd. Stk., $12.13 175,380
787 Pegasus Communications Corp., PIK Pfd., Series A, 12.75% 889,310
Total 1,797,065
Food Services--0.2%
3,592 Nebco Evans Holding Co., Exchangeable Pfd. Stock 365,037
Healthcare--0.1%
1,750 (a)(b)River Holding Corp., Sr. Exchangeable PIK 166,250
Industrial Products & Equipment--0.1%
</TABLE>

<TABLE>
<S> <C> <C>
150 Fairfield Manufacturing Co., Inc., Exchangeable Pfd. Stock 162,750
100 (a)(b)International Utility Structures, Inc., Unit, $13.00 109,500
Total 272,250
Printing & Publishing--1.3%
2,000 Primedia, Inc., Exchangeable Pfd. Stock, Series G 195,000
14,400 Primedia, Inc., Pfd., $9.20 1,476,000
7,000 Primedia, Inc., Pfd., Series D, $10.00 731,500
Total 2,402,500
Telecommunications & Cellular--0.4%
128 (a)(b)NEXTEL Communications, Inc., Exchangeable Pfd. Stock, Series E, $11.13 132,480
520 NEXTEL Communications, Inc., Pfd. 585,000
Total 717,480
Utilities--0.2%
3,207 El Paso Electric Co., PIK Pfd., Series A, 11.40% 354,374
Total Preferred Stocks (identified cost $9,017,214) 9,754,813
Common Stocks--0.0%
Broadcast Radio & Tv--0.0%
800 (a)Sullivan Broadcast Holdings Inc., Class B 24,000
Business Equipment & Services--0.0%
300 (a)(b)Electronic Retailing Systems International, Inc., Warrants 3,000
Cable Television--0.0%
200 Australis Holdings Property Ltd., Warrants 0

Shares or
Principal
Amount Value
Common Stocks--continued
Cable Television--continued
338 (a)Pegasus Communications Corp. $ 7,098
550 Pegasus Communications Corp., Warrants 18,150
1,175 UIH Australia/Pacific, Warrants 6,521
450 (a)Wireless One, Inc., Warrants 0
Total 31,769
Chemicals & Plastics--0.0%
425 (a)Sterling Chemicals Holdings, Inc., Warrants 10,200
Consumer Products--0.0%
50 (a)Hosiery Corp. of America, Inc. 263
Ecological Services & Equipment--0.0%
960 (a)ICF Kaiser International, Inc., Warrants 240
Printing & Publishing--0.0%
50 (a)Affiliated Newspaper Investments, Inc. 6,000
Steel--0.0%
100 (a)(b)Bar Technologies, Inc., Warrants 5,500
</TABLE>

<TABLE>
<CAPTION>
Telecommunications & Cellular--0.0%
<S> <C> <C>
375 (a)Cellular Communications International, Inc., Warrants 15,000
400 HighwayMaster Communications, Inc., Warrants 1,000
800 (a)(b)MetroNet Communications Corp., Warrants 38,100
Total 54,100
Total Common Stocks (identified cost $25,590) 135,072
U.S. Treasury--1.1%
$2,000,000 United States Treasury Note, 5.50%, 2/15/2008 (identified cost $1,995,625) 1,999,800
(c)Repurchase Agreements--2.1%
4,010,000 BT Securities Corp., 5.87%, dated 6/30/1998, due 7/1/1998 (at amortized cost) 4,010,000
Total Investments (identified cost $181,909,278)(d) $185,769,634
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1998, these securities amounted
to $31,892,705 which represents 16.9% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $181,909,278.
The net unrealized appreciation of investments on a federal tax basis
amounts to $3,860,356 which is comprised of $6,108,213 appreciation and
$2,247,857 depreciation at June 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($188,272,379) at June 30, 1998.

The following acronyms are used throughout this portfolio:

GTD --Guaranty
LLC --Limited Liability Corporation
LP --Limited Partnership
PIK --Payment in Kind
PLC --Public Limited Company
REIT --Real Estate Investment Trust

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated High Income Bond Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at value
(identified and tax cost $181,909,278) $185,769,634
Cash 12,220
Income receivable 3,212,084
Prepaid expenses 2,570
Deferred organizational costs 8,036
Total assets 189,004,544
Liabilities:
Payable for investments purchased $ 716,969
Payable for taxes withheld 1,986
Accrued expenses 13,210
Total liabilities 732,165
Net Assets for 17,019,535 shares outstanding $188,272,379
Net Assets Consist of:
Paid in capital $175,438,313
Net unrealized appreciation of investments 3,860,356
Accumulated net realized gain on investments 874,406
Undistributed net investment income 8,099,304
Total Net Assets $188,272,379
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$188,272,379 (divided) 17,019,535 shares outstanding $11.06
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
Federated High Income Bond Fund II
Six Months Ended June 30, 1998 (unaudited)
<S> <C> <C>
Investment Income:
Dividends $ 482,633
Interest 7,917,203
Total income 8,399,836
Expenses:
Investment advisory fee $ 525,538
Administrative personnel and services fee 66,341
Custodian fees 6,514
Transfer and dividend disbursing agent fees and expenses 12,091
Directors'/Trustees' fees 1,085
Auditing fees 6,409
Legal fees 1,525
Portfolio accounting fees 27,667
Share registration costs 4,869
Printing and postage 24,131
Insurance premiums 1,601
Miscellaneous 9,418
Total expenses 687,189
Net investment income 7,712,647
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 1,387,938
Net change in unrealized depreciation of investments (2,453,644)
Net realized and unrealized loss on investments (1,065,706)
Change in net assets resulting from operations $ 6,646,941
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated High Income Bond Fund II

<TABLE>
<CAPTION>
Six Months
Ended Year Ended
(unaudited) December 31,
June 30, 1998 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 7,712,647 $ 9,247,185
Net realized gain on investments ($1,387,938 net gain and $1,099,230 net gain,
respectively, as computed for federal tax purposes) 1,387,938 993,291
Net change in unrealized appreciation (depreciation) (2,453,644) 3,934,285
Change in net assets resulting from operations 6,646,941 14,174,761
Distributions to Shareholders--
Distributions from net investment income (3,656,789) (5,313,534)
Distributions from net realized gains (1,504,625) (286,146)
Change in net assets resulting from distributions to shareholders (5,161,414) (5,599,680)
Share Transactions--
Proceeds from sale of shares 64,169,810 110,484,533
Net asset value of shares issued to shareholders in payment of distributions declared 5,161,412 5,598,277
Cost of shares redeemed (38,707,998) (34,537,573)
Change in net assets resulting from share transactions 30,623,224 81,545,237
Change in net assets 32,108,751 90,120,318
Net Assets:
Beginning of period 156,163,628 66,043,310
End of period (including undistributed net investment income of $8,099,304 and
$4,043,446, respectively) $188,272,379 $156,163,628
</TABLE>
(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated High Income Bond Fund II

<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.95 $10.24 $9.79 $8.87 $10.00
Income from investment operations
Net investment income 0.45 0.88 0.88 0.85 0.75
Net realized and unrealized gain (loss) on investments (0.01) 0.48 0.45 0.89 (1.12)
Total from investment operations 0.44 1.36 1.33 1.74 (0.37)
Less distributions
Distributions from net investment income (0.26) (0.61) (0.88) (0.82) (0.75)
Distributions in excess of net investment income(d) -- -- -- -- (0.01)
Distributions from net realized gain on investments (0.07) (0.04) -- -- --
Total distributions (0.33) (0.65) (0.88) (0.82) (0.76)
Net asset value, end of period $ 11.06 $ 10.95 $ 10.24 $ 9.79 $ 8.87
Total return(b) 4.02% 13.83% 14.31% 20.38% (3.73%)
Ratios to average net assets
Expenses 0.78%* 0.80% 0.80% 0.80% 0.41%*
Net investment income 8.79%* 8.70% 9.23% 9.27% 9.11%*
Expense waiver/reimbursement(c) 0.00%* 0.09% 0.59% 3.40% 10.01%*
Supplemental data
Net assets, end of period (000 omitted) $188,272 $156,164 $66,043 $20,165 $ 1,457
Portfolio turnover 33% 52% 51% 48% 18%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to February 1, 1994, the Fund had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.

(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated High Income Bond Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated High Income Bond Fund II
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective is to seek high current income.

Significant Accounting Policies

Investment Valuations

Listed corporate bonds are generally valued at the mean of the latest bid and
asked price as furnished by an independent pricing service. Listed equity
securities are valued at the last sale price reported on a national securities
exchange. Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with remaining
maturities of sixty days or less at the time of purchase may be valued at
amortized cost, which approximates fair market value.

Repurchase Agreements

Investment Income, Expenses and Distributions

Federal Taxes

When-Issued and Delayed Delivery Transactions

Federated High Income Bond Fund II

Restricted Securities

Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.

Additional information on each restricted security held at June 30, 1998 is as
follows:

<TABLE>
<CAPTION>
Security Acquisition Date Acquisition Cost
<S> <C> <C>
Accuride Corp., Sr. Sub. Note 01/15/98-02/03/98 $ 174,906
Big City Radio, Inc., Sr. Disc. Note 03/17/98 829,261
American Business Information, Sr. Sub. Note 06/12/98 750,000
U.S. Office Products Co., Sr. Sub. Note 06/05/98 995,380
United Stationers Supply Co., Sr. Sub. Note 04/09/98 250,000
Diva Systems Corp., Unit 02/11/98-02/12/98 525,301
Lenfest Communications Inc., Sr. Sub. Note 01/30/98 299,178
NTL, Inc. 03/06/98-06/12/98 963,247
Polymer Group, Inc., Sr. Sub. Note 02/27/98-03/17/98 659,563
Eagle Picher Industries, Inc., Sr. Sub. Note 02/19/98-03/12/98 954,305
Chattem, Inc., Sr. Sub. Note 03/20/98 450,000
Diamond Brands Operating Corp., Sr. Sub. Note 04/15/98 200,500
Diamond Brands, Inc., Sr. Disc. Deb. 04/15/98 138,133
Sealy Corporation, Sr. Sub. Note 12/11/97 200,000
Sealy Mattress Co., Sr. Sub. Disc. Note 12/11/97 202,742
The Boyds Collection, Ltd., Sr. Sub. Note 04/16/98-05/20/98 549,500
PX Excrow Corp., Sr. Sub. Disc. Note 02/06/98-03/16/98 254,109
Telecommunications Techniques Co., LLC 05/14/98 1,000,000
Eagle Family Foods, Inc., Sr. Sub. Note 01/16/98-01/28/98 554,500
Everest Healthcare Services Corp., Sr. Sub. Note 04/30/98 525,000
Hudson Respiratory Care, Inc., Sr. Sub. Note 04/02/98 275,000
Grove Worldwide, LLC 04/22/98 275,000
International Utility Structures, Inc., Sr. Sub. Note 01/27/98-01/28/98 228,438
JTM Industries, Inc. Sr. Sub. Note 04/17/98 503,125
WESCO Distribution, Inc., Sr. Sub. Note 05/29/98 872,156
WESCO International, Inc., Sr. Disc. Note 05/29/98 290,105
Regal Cinemas, Inc., Sr. Sub. Note 05/21/98 1,098,141
National Equipment Services, Inc., Sr. Sub. Note 11/20/97 493,835
AEI Holding Co., Inc., Sr. Note 11/06/97-12/18/97 504,375
Chiles Offshore, LLC 04/24/98-05/13/98 523,719
Nuevo Energy Co., Sr. Sub. Note 06/03/98 200,000
Universal Compression Holdings, Inc., Sr. Disc. Note 02/13/98-03/24/98 513,375
SITEL Corp., Sr. Sub. Note 03/16/98 429,250
The Holt Group, Inc., Sr. Note 01/14/98-03/13/98 737,688
</TABLE>
Federated High Income Bond Fund II

<TABLE>
<CAPTION>
Security Acquisition Date Acquisition Cost
<S> <C> <C>
American Cellular Corp., Sr. Note 05/06/98-06/05/98 $ 995,575
Arch Communications, Inc., Sr. Note 06/24/98 490,245
ICG Services, Inc., Sr. Disc. Note 04/22/98 910,146
IXC Communications, Inc., Sr. Sub. Note 04/16/98 350,000
Intermedia Communications, Inc., Sr. Note 05/21/98 450,000
Level 3 Communications, Inc., Sr. Note 04/23/98-05/20/98 2,870,064
MetroNet Escrow Corp., Sr. Disc. Note 06/04/98 792,522
NEXTEL Communications, Inc., Sr. Disc. Note 02/06/98-06/08/98 1,135,401
NEXTLINK Communications, Inc., Sr. Disc. Note 03/27/98 385,665
NEXTLINK Communications, Inc., Sr. Note 02/26/98 997,980
Nextel International, Inc., Sr. Disc. Note 03/09/98 341,705
Pathnet, Inc., Unit 04/01/98 800,000
Teligent, Inc., Sr. Disc. Note 03/18/98-03/19/98 466,829
Triton PCS, Inc., Sr. Disc. Note 04/29/98 939,001
US Xchange, LLC, Sr. Note 06/22/98 500,000
Viatel, Inc., Unit, 0/12.50% 04/03/98 183,054
Viatel, Inc., Unit, 11.25% 04/03/98 864,848
Benedek Communications Corp. 05/07/98 600,000
River Holding Corp. 04/02/98 175,000
International Utility Structures, Inc., Unit 01/27/98 100,000
NEXTEL Communications, Inc. 02/06/98-05/01/98 128,219
Electronic Retailing Systems
International, Inc., Warrants 01/31/97-06/17/97 10,407
Bar Technologies, Inc., Warrants 08/28/96 5,588
MetroNet Communications Corp., Warrants 12/31/97 0
Use of Estimates
</TABLE>

Other
Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

Transactions in shares were as follows:

<TABLE>
<CAPTION>
Period Ended Year Ended
June 30, 1998 December 31,1997
<S> <C> <C>
Shares sold 5,776,572 10,549,129
Shares issued to shareholders in payment of distributions declared 469,646 543,973
Shares redeemed (3,488,350) (3,281,443)
Net change resulting from share transactions 2,757,868 7,811,659
</TABLE>
Federated High Income Bond Fund II

Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.60% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

Portfolio Accounting Fees

FServ maintains the Trust's accounting records for which it receives a fee. The
fee is based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.

Organizational Expenses

Organizational and/or start-up administrative service expenses of $47,820 were
borne initially by Adviser. The Fund has agreed to reimburse the Adviser for
these expenses. These expenses have been deferred and are being amortized over
the five-year period following the Fund's effective date.

General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Investment Transactions

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1998, were as follows:

Purchases $89,767,905
Sales $56,020,120

Year 2000

TRUSTEES

John F. Donahue

Thomas G. Bigley

John T. Conroy, Jr.

Nicholas P. Constantakis

William J. Copeland

J. Christopher Donahue

James E. Dowd, Esq.

Lawrence D. Ellis, M.D.

Edward L. Flaherty, Jr., Esq.

Peter E. Madden

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

Wesley W. Posvar

Marjorie P. Smuts

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer,

and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

This report is authorized for distribution to prospective investors only when
preceded or accompanied by the trust's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.

Federated
High Income
Bond Fund II

Federated Insurance Series

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Invesotrs Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Semi-Annual Report
to Shareholders
June 30, 1998

Cusip 313916306
G00433-02 (8/98)

PRESIDENT'SMESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated Utility Fund II, a
portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1998, through June 30,
1998. It begins with a commentary by the fund's portfolio managers, which is
followed by a complete listing of the fund's utility holdings and the fund's
financial statements.

Federated Utility Fund II helps shareholders participate in the income and
growth opportunities of a market that provides critical, ongoing services to the
U.S. and other nations.*

For the six-month reporting period ended June 30, 1998, the fund produced a
total return of 4.92%.** Contributing to the total return were dividend income
totaling $0.13 per share, capital gains totaling $0.81 per share, and a net
asset value change of ($0.23) per share. On June 30, 1998, total net assets
reached $125.5 million.

Thank you for participating in the income and growth opportunities of U.S. and
foreign utility stocks through Federated Utility Fund II. As always, we welcome
your comments and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Utility securities are interest rate sensitive and a rise in interest rates
can cause their value to fall.

** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. Performance information does not reflect the charges
and expenses of a variable annuity or variable life insurance contract.

INVESTMENT REVIEW

It was a mixed second quarter of 1998 for the overall market and for utilities.
The Standard & Poor's 500 Index ("S&P 500"),* which had declined through the
first two months of the quarter, surged to finish the quarter up 3.30%. Among
utilities, telecommunications stocks, which have moved with the market since the
beginning of 1997, also lost their momentum in the quarter. Telecom stocks fell
3.93%, but are still up 13.25% since December 31. Other utility sectors fared
better in the quarter. The S & P Utility Index** returned 1.21% on the strength
of natural gas stocks, which returned 6.05%. (Gas stocks are up 11.98% this
year.) Electric companies were flat (.09%) in the quarter and are up 5.54%
year-to-date. The Federated Utility Fund II returned (1.26%) in the quarter and
4.92%*** for the six month reporting period ended June 30, 1998.

In electric industry developments, prospects continue to improve. First, Peco
Energy, our fifth-largest holding, rose 32% in the quarter after reaching a
settlement with the Pennsylvania utility commission. Second, industry
consolidation has the potential to boost share prices. A recent example is
Consolidated Edison's takeover of Orange and Rockland at a 38% premium. Third,
utility managements and boards of directors are becoming more supportive of
shareholder interests. Entergy's stock, for example, rose 12% when its unpopular
CEO resigned under shareholder pressure. In addition, management ownership of
company stock has increased sharply in the past year, though it is still much
less than that of other industries. Fourth, electric stocks are supported by an
average 4.7% dividend yield (versus 1.4% for the S & P 500) and by some of the
lowest valuations on record versus the S & P 500.

In the natural gas sector, commodity prices are unexpectedly strong. Despite an
extraordinarily mild winter that left high gas storage levels, gas prices are
high this summer. The outage of substantial generating capacity and an early-
summer heat wave caused record prices for Midwest wholesale electricity and high
demand for gas for power generation. Enron, our sixth-largest holding, rose
16.5% in the quarter in part because its trading division was astutely "long" on
Midwest power.

Gas companies have valuable assets and management skills as the gas and electric
markets converge into a competitive market for power in the U.S. This
"convergence" continued in the quarter with the completed merger of a California
electric utility (Enova) and a California gas utility (Pacific Enterprises) to
form Sempra Energy, the largest combined gas and electric utility in the
country.

Merger activity also continued internationally. Texas Utilities acquired the
Energy Group of Britain. In addition, British utilities pursued electric
utilities in two of the most attractive states, Florida (Florida Progress) and
Texas (Houston Industries).

Consolidation occurred in the telecommunications sector as well, but the
near-term effect was generally negative for the stocks. AT & T, a large holding
of the fund, announced a merger with Telecommunications Inc., the largest cable
company. AT & T's stock fell 16% after the announcement and 13% for the full
quarter. Bell Atlantic fell 11% in the quarter, and the regional Bell company
stocks generally fell on the AT & T news because of increased competition,
higher costs to upgrade phone networks, and falling prices for phone service.
Conversely, European regulators approved the merger of MCI, our second-largest
holding, with Worldcom. MCI rose 17.4% in the quarter.

Among non-U.S. utilities, European utilities have risen sharply this year. Viag
of Germany, our largest foreign holding, rose 26% in the quarter on
restructuring progress. Latin American telecom stocks, however, have lagged as
problems in Asia have depressed emerging markets. After falling more than 10%
this year, Latin telecom stocks are at unusual discounts relative to their
growth prospects. Attention in the region is centered on the imminent breakup of
Brazil's Telebras into 12 companies, similar to the breakup of AT & T in 1984.
We hold four Latin telecoms that comprise 2% of the fund.

* Standard & Poor's 500 Index is an unmanged composite index of common stocks
in industrial, transportation, and financial and public utility companies,
and can be used to compare the total returns of funds whose portfolios are
invested primarily in common stocks. Investments cannot be made in an index.

** Standard &Poor's Utility Index is an unmanaged index of common stocks from
forty different electric and natural gas utilities indicating daily changes
in the price of the stocks. Investments cannot be made in an index.

*** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more of less than
their original cost. Performance information does not reflect the charges
and expenses of a variable annuity or variable life insurance contract.

Our non-utility portion of the fund is an unusually low 10.4% of the fund
because utilities are extraordinarily undervalued and the overall stock market
(S & P 500) is the most expensive ever. Real Estate Investment Trusts, with 6%
dividend yields and 1998 earnings growth that is twice that of the S & P 500,
are the primary non-utility investments.

Our strategy continues to emphasize the domestic electric and gas sectors. These
sectors are sharply undervalued, their fundamentals are improving, and they
offer relative safety in a more difficult stock market environment.

Comments Regarding Recent Purchases and Sales:

Purchases:

Niagara Mohawk Power reached a settlement with New York electric regulators that
clears the way for a substantial recovery of cash flow.

Latin American Telecoms are undervalued relative to their local markets and to
U.S. telecom companies. Concerns over Asia have pressured emerging markets,
including Latin America.

Real Estate Investment Trusts (REITs) have become sharply undervalued after
trailing the overall market since last autumn. Equity Office Properties Trust
and Apartment Investment & Management Co. are leaders in their sectors.

Sales:

Cincinnati Bell announced the long-awaited breakup of the company into three
separate companies. We sold on the good news, and the stock has since fallen
23%.

REITs Associated Estates and Meditrust have deteriorating fundamentals, and a
shift to higher-risk businesses, respectively.

PORTFOLIO OF INVESTMENTS

Federated Utility Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Shares Value
Common Stocks--94.6%
<C> <S> <C>
Basic Industry--1.1%
72,500 Barrick Gold Corp. $ 1,391,094
Consumer Non-Durables--0.9%
42,800 UST, Inc. 1,155,600
Electric Utilities: Central--6.8%
41,600 CMS Energy Corp. 1,830,400
35,400 Cinergy Corp. 1,239,000
73,200 Illinova Corp. 2,196,000
96,500 NIPSCO Industries, Inc. 2,702,000
14,500 Utilicorp United, Inc. 546,469
2,600 Wisconsin Energy Corp. 78,975
Total 8,592,844
Electric Utilities: East--12.7%
39,700 BEC Energy 1,647,550
52,700 DQE, Inc. 1,897,200
52,500 New England Electric System 2,270,625
138,800 Niagara Mohawk Power Corp. 2,073,325
114,600 Peco Energy Co. 3,344,887
93,500 Potomac Electric Power Co. 2,343,344
67,600 Public Service Enterprises Group, Inc. 2,327,975
Total 15,904,906
Electric Utilities: South--16.4%
</TABLE>

<TABLE>
<C> <S> <C>
72,900 Dominion Resources, Inc. 2,970,675
31,388 Duke Energy Corp. 1,859,739
68,600 Entergy Corp. 1,972,250
35,800 FPL Group, Inc. 2,255,400
27,900 Florida Progress Corp. 1,147,387
71,500 Houston Industries, Inc. 2,207,563
21,600 LG&E Energy Corp. 584,550
35,800 SCANA Corp. 1,067,288
64,800 Southern Co. 1,794,150
62,900 TECO Energy, Inc. 1,686,506
75,500 Texas Utilities Co. 3,142,688
Total 20,688,196
</TABLE>

<TABLE>
<CAPTION>
Shares Value
Common Stocks--continued
<C> <S> <C>
Electric Utilities: West--7.9%
54,000 Edison International $1,596,375
76,000 Montana Power Co. 2,641,000
30,300 New Century Energies, Inc. 1,376,756
68,700 Pacificorp 1,554,337
28,800 Pinnacle West Capital Corp. 1,296,000
52,800 Puget Sound Energy, Inc. 1,415,700
Total 9,880,168
Energy Minerals--0.7%
19,500 Burlington Resources, Inc. 839,719
Finance--6.3%
18,000 Apartment Investment & Management Co., Class A 711,000
28,649 Avalon Bay Communities, Inc. 1,088,662
37,300 Boston Properties, Inc. 1,286,850
10,000 Brandywine Realty Trust 223,750
8,000 Camden Property Trust 238,000
26,500 Duke Realty Investments, Inc. 626,062
57,000 Equity Office Properties Trust 1,617,375
13,700 Equity Residential Properties Trust 649,894
30,000 Liberty Property Trust 766,875
30,000 Security Capital Pacific Trust 675,000
Total 7,883,468
Major U.S. Telecommunications--18.7%
44,000 AT&T Corp. 2,513,500
65,100 Ameritech Corp. 2,921,362
66,800 Bell Atlantic Corp. 3,047,750
19,600 BellSouth Corp. 1,315,650
26,000 GTE Corp. 1,446,250
</TABLE>

<TABLE>
<C> <S> <C>
67,100 MCI Communications Corp. 3,900,188
42,272 SBC Communications, Inc. 1,690,880
58,300 Sprint Corp. 4,110,150
52,500 U.S. West, Inc. 2,467,500
Total 23,413,230
</TABLE>

<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
<S> <C> <C>
Common Stocks--continued
Natural Gas Distribution--10.9%
31,400 AGL Resources, Inc. $ 624,075
51,500 Consolidated Natural Gas Co. 3,032,062
24,400 K N Energy, Inc. 1,322,175
100,200 MCN Corp. 2,492,475
66,400 MarketSpan Corp. 1,987,850
26,300 National Fuel Gas Co. 1,145,694
78,047 Sempra Energy 2,170,688
39,600 UGI Corp. 985,050
Total 13,760,069
Non-U.S. Utilities--4.4%
30,000 CPT Telefonica del Peru S.A., Class B, ADR 613,125
34,800 Compania Telecomunicacion Chile, ADR 706,875
22,700 Telefonica de Argentina S.A., ADR 736,331
16,200 Telefonos de Mexico, Class L, ADR 778,613
3,900 Viag AG 2,685,852
Total 5,520,796
Oil/Gas Transmission--7.8%
7,950 Columbia Energy Group 442,219
90,500 El Paso Natural Gas 3,461,625
64,316 Enron Corp. 3,477,084
31,100 NGC Corp. 388,750
52,000 Sonat, Inc. 2,008,500
Total 9,778,178
Total Common Stocks (identified cost $103,498,695) 118,808,268
Convertible Preferred Stock--0.7%
Oil/Gas Transmission--0.7%
5,200 Williams Cos., Inc. (The), Conv. Pfd., $3.50 825,344
Total Convertible Preferred Stock (identified cost $360,100) 825,344
Convertible Corporate Bond--1.4%
Finance--1.4%
$1,750,000 Bell Atlantic Financial Services, Inc., Conv. Bond, 5.75%, 4/1/2003 1,792,665
Total Convertible Corporate Bond (identified cost $1,795,468) 1,792,665
(a)Repurchase Agreement--3.5%
$4,350,000 BT Securities Corp., 5.87%, dated 6/30/1998, due 7/1/1998 $4,350,000
Total Investments (identified cost $110,004,263)(b) $125,776,277
</TABLE>

(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $110,004,263.
The net unrealized appreciation of investments on a federal tax basis
amounts to $15,772,014 which is comprised of $17,473,734 appreciation and
$1,701,720 depreciation at June 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($125,523,381) at June 30, 1998.

The following acronym is used throughout this portfolio:

ADR--American Depositary Receipt

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated Utility Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at value
(identified and tax cost $110,004,263) $125,776,277
Cash 1,689
Income receivable 326,944
Receivable for investments sold 1,090,419
Deferred organizational costs 11,023
Total assets 127,206,352
Liabilities:
Payable for investments purchased $ 1,680,501
Accrued expenses 2,470
Total liabilities 1,682,971
Net Assets for 8,929,185 shares outstanding $125,523,381
Net Assets Consist of:
Paid in capital $104,059,031
Net unrealized appreciation of investments 15,772,014
Accumulated net realized gain on investments and foreign
currency transactions 3,884,094
Undistributed net investment income 1,808,242
Total Net Assets $125,523,381
Net Asset Value, Offering Price and Redemption Proceeds
Per Share:
$125,523,381 / 8,929,185 shares outstanding $14.06
</TABLE>

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated Utility Fund II

Six Months Ended June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $905) $2,132,627
Interest 187,455
Total income 2,320,082
Expenses:
Investment advisory fee $ 422,026
Administrative personnel and services fee 61,987
Custodian fees 6,970
Transfer and dividend disbursing agent fees and expenses 10,985
Directors'/Trustees' fees 1,254
Auditing fees 6,474
Legal fees 1,507
Portfolio accounting fees 23,921
Share registration costs 3,840
Printing and postage 20,757
Insurance premiums 1,413
Taxes 310
Miscellaneous 9,153
Total expenses 570,597
Waiver of investment advisory fee (59,295)
Net expenses 511,302
Net investment income 1,808,780
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:
Net realized gain on investments and foreign currency transactions 3,937,149
Net change in unrealized appreciation of investments (301,421)
Net realized and unrealized gain on investments and foreign currency 3,635,728
Change in net assets resulting from operations $5,444,508
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated Utility Fund II

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $1,808,780 $2,632,049
Net realized gain on investments and foreign currency transactions ($3,937,149 and
$6,250,253, respectively, as computed for federal tax purposes) 3,937,149 6,203,822
Net change in unrealized appreciation/depreciation of investments (301,421) 11,041,239
Change in net assets resulting from operations 5,444,508 19,877,110
Distributions to Shareholders--
Distributions from net investment income (1,023,585) (1,688,915)
Distributions from net realized gains on investments and foreign currency transactions (6,251,285) (1,464,468)
Change in net assets resulting from distributions to shareholders (7,274,870) (3,153,383)
Share Transactions--
Proceeds from sale of shares 31,952,741 37,584,111
Net asset value of shares issued to shareholders in payment of distributions declared 7,274,865 3,153,380
Cost of shares redeemed (16,336,022) (16,556,595)
Change in net assets resulting from share transactions 22,891,584 24,180,896
Change in net assets 21,061,222 40,904,623
Net Assets:
Beginning of period 104,462,159 63,557,536
End of period (including undistributed net investment income
of $1,808,242 and $1,023,047, respectively) $125,523,381 $104,462,159
</TABLE>
(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated Utility Fund II

<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.29 $11.81 $11.03 $ 9.29 $ 9.48
Income from investment operations
Net investment income 0.19 0.40 0.42 0.45 0.34
Net realized and unrealized gain (loss) on investments
and foreign currency 0.52 2.62 0.82 1.74 (0.19)
Total from investment operations 0.71 3.02 1.24 2.19 0.15
Less distributions
Distributions from net investment income (0.13) (0.28) (0.41) (0.45) (0.34)
Distributions from net realized gain on investments
and foreign currency transactions (0.81) (0.26) (0.05) -- --
Total distributions (0.94) (0.54) (0.46) (0.45) (0.34)
Net asset value, end of period $ 14.06 $14.29 $11.81 $11.03 $ 9.29
Total return(b) 4.92% 26.63% 11.56% 24.18% 1.12%
Ratios to average net assets
Expenses 0.91%* 0.85% 0.85% 0.85% 0.60%*
Net investment income 3.21%* 3.41% 3.92% 4.62% 4.77%*
Expense waiver/reimbursement(c) 0.11%* 0.27% 0.51% 2.24% 54.83%*
Supplemental data
Net assets, end of period (000 omitted) $125,523 $104,462 $63,558 $29,679 $974
Average commission rate paid(d) $ 0.0532 $ 0.0207 $0.0402 -- --
Portfolio turnover 41% 95% 63% 62% 73%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 14, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to April 13, 1994, net investment income was
distributed to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated Utility Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Utility Fund II (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to achieve high current income and
moderate capital appreciation.

Significant Accounting Policies

Investment Valuations

Listed foreign and domestic corporate bonds, other fixed income and asset-backed
securities, and unlisted securities and private placement securities are
generally valued at the mean of the latest bid and asked price as furnished by
an independent pricing service. Listed foreign and domestic equity securities
are valued at the last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. Investments in other open-end regulated
investment companies are valued at net asset value.

Repurchase Agreements

Investment Income, Expenses and Distributions

Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.

Federal Taxes

Withholding taxes on foreign interest and dividends have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.

When-Issued and Delayed Delivery Transactions

Federated Utility Fund II

Securities purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.

Foreign Exchange Contracts

The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund may enter into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Purchased
contracts are used to acquire exposure to foreign currencies; whereas, contracts
to sell are used to hedge the Fund's securities against currency fluctuations.
Risks may arise upon entering these transactions from the potential inability of
counterparties to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purposes as
unrealized until the settlement date. At June30, 1998, the Fund had no
outstanding foreign currency commitments.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income, and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.

Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.

Use of Estimates

Other

Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Shares sold 2,270,861 2,992,224
Shares issued to shareholders in payment of distributions declared 513,037 267,672
Shares redeemed (1,166,636) (1,330,203)
Net change resulting from share transactions 1,617,262 1,929,693
</TABLE>
Federated Utility Fund II

Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Administrative Fee

Transfer and Dividend Disbursing Agent Fees and Expenses

Fserv, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.

Portfolio Accounting Fees

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

Organizational Expenses

Organizational expenses of $49,266 were borne initially by Adviser. The Fund has
agreed to reimburse the Adviser for these expenses. These expenses have been
deferred and are being amortized over the five-year period following the Fund's
effective date. For the six months ended June 30, 1998, the Fund expensed $5,399
of its organizational expenses.

General

Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Investment Transactions

Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1998, were as follows:

Purchases $65,763,191
Sales $43,601,295

Concentration of Credit Risk

The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.

At June 30, 1998, the diversification of non-U.S. countries was as follows:

Percentage of
Country Net Assets

Argentina 0.6%
Canada 1.1%
Chile 0.6%
Germany 2.1%
Mexico 0.6%
Peru 0.5%

Year 2000

TRUSTEES

John F. Donahue

Thomas G. Bigley

John T. Conroy, Jr.

Nicholas P. Constantakis

William J. Copeland

J. Christopher Donahue

James E. Dowd, Esq.

Lawrence D. Ellis, M.D.

Edward L. Flaherty, Jr., Esq.

Peter E. Madden

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

Wesley W. Posvar

Marjorie P. Smuts

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer,
and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

Federated
Utility
Fund II

Federated Insurance Series

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Semi-Annual Report
to Shareholders
June 30, 1998

Cusip 313916108
G00433-03 (8/98)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated International
Equity Fund II, a portfolio of Federated Insurance Series.

The report covers the six-month reporting period from January 1, 1998 through
June 30, 1998. It begins with an investment review by the fund's portfolio
manager, which is followed by a complete listing of the fund's holdings as well
as its financial statements.

This international stock fund is managed to obtain a total return on its assets
by investing in large, successful corporations outside the United States.* At
the end of the period, the fund's $52.8-million portfolio was invested in 21
countries across 123 common stocks. The fund's largest positions were in the
United Kingdom, which represented 17.3% of the portfolio, and Canada, which
represented 12% of the portfolio.

During the period, the international stock market--particularly the European
region--performed extremely well. As a result, the fund's six-month total return
was 30.06%. Contributing to the total return were distributions totaling $0.02
per share and a sizable net asset value increase of $3.68.**

Thank you for joining the growing number of shareholders who are participating
in the opportunities of international stocks through the diversification and
professional management of Federated International Equity Fund II.

As always, we welcome your comments and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.

INVESTMENT REVIEW

Market Overview

The first quarter 1998 marked a turning point for the international stock
markets. For the first time in several years, international stocks, as measured
by the benchmark Morgan Stanley Capital International Europe, Australia, and Far
East Index ("EAFE Index"),* outperformed the U.S. stock market. The second
quarter of the year was characterized by increased volatility in Asia and the
emerging markets and a slight correction in Europe, which resulted in an overall
slowdown in returns relative to the first quarter.

Throughout the six-month period, strength in Europe continued to drive the
international markets, while difficulties in Asia and Latin America held back
returns. In addition, threats of a Russian devaluation hurt the emerging markets
in Eastern Europe toward the end of June.

Performance

For the first half of its fiscal year--the six-month period from January 1, 1998
through June 30, 1998--the fund produced an extremely strong total return of
30.06%.** This return significantly outpaced the 15.93% total return of the
overall international stock market as measured by the EAFE Index. The fund's
return also was far greater than the 15.49% average total return of all
international equity funds tracked by Lipper Analytical Services, Inc.+

The fund's strong performance can be mainly attributed to security selection,
but looking at the overall makeup of the fund a few characteristics should be
noted. First, the fund was heavily overweighted versus the EAFE benchmark in
Europe, especially in the Southern markets of Italy, Spain and Portugal. Second,
the fund had substantial investments in the financial services area and
telecommunications, both of which have experienced strong earnings and revenue
growth and a re-rating by the markets.

* The Morgan Stanley Capital International Europe, Australia, and Far East
Index is a market capitalization-weighted foreign securities index widely
used to measure the performance of European, Australian, New Zealand, and Far
Eastern stock markets. The index covers approximately 1,020 companies drawn
from 18 countries in the above regions. The index values its securities daily
in both U.S. dollars and local currency and calculates total returns monthly.
This index is unmanaged and investments cannot be made in an index.

** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

+ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category indicated. These figures do not reflect sales charges.

Portfolio

The fund's country allocations and top ten holdings as of June 30, 1998 are as
follows:

COUNTRY ALLOCATIONS

<TABLE>
<CAPTION>
Percentage
of
Country Net Assets
- ------------------------------------
<S> <C>
United Kingdom 17.3
Canada 12.0
Switzerland 9.4
France 7.9
Italy 7.8
Netherlands 7.7
Sweden 7.4
Spain 5.7
Portugal 4.1
Finland 4.0
Germany 3.6
Norway 1.8
Austria 1.3
Japan 1.0
Ireland 1.0
Greece 0.9
Australia 0.8
Hungary 0.7
Denmark 0.5
Belgium 0.3
India >0.1
TOP 10 HOLDINGS
</TABLE>

<TABLE>
<CAPTION>
Percentage
Name Country of Net Assets
- ---------------------------------------------------------------
<S> <C> <C>
Cable & Wireless
Communications PLCUnited Kingdom 2.83
Telefonica SA Spain 2.42
Kinnevik AB, Class B Sweden 2.17
Energis PLC United Kingdom 2.02
Orange PLC United Kingdom 2.01
Benckiser NV Netherlands 1.72
UBS AG Switzerland 1.66
CGI Group Inc. Canada 1.54
Alcatel Alsthom France 1.54
Castellum AB Sweden 1.49
Total Percentage of
portfolio (Net Assets) 19.40
Outlook
</TABLE>

We are still very positive on the outlook for the European markets going
forward; however, we must admit that the strength of these markets in the first
half of the year has surprised even us.

We should not be surprised to see some slowdown in the gains or even partial
retracement before these markets head higher on a longer-term view. The pieces
are in place for much stronger returns from equities in Europe than have
historically been recorded due to the creation of the common currency and the
nationalization of industries and enterprises.

With regard to Japan, while we retain some exposure to this market through
selected stocks such as Sony Music Entertainment, which owns 50% of the Sony
Playstation business as well as the rights to the soundtrack for the blockbuster
movie "Titanic," we remain skeptical as to the government's ability and/or
willingness to engineer an economic turnaround, and we remain skeptical about
the securities markets overall. We will continue to look for opportunities to
take advantage of the economic carnage in South East Asia, and are looking to
add positions in Latin America.

Strategy

We will continue to manage the Federated International Equity Fund II according
to a bottom-up, fundamental, stock-picking approach. We believe that choosing
the best companies, which are trading at attractive valuations given their
long-term business prospects, is the key to long-term capital appreciation.

We will continue to look for opportunities around the world that offer
substantial return potential, concentrating our efforts primarily in the
developed markets of Europe and Asia, but also taking advantage of the
diversification benefits offered by carefully selected investments in emerging
markets.

PORTFOLIO OF INVESTMENTS

Federated International Equity Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Shares Value
Common Stocks--92.6%
<S> <C> <C>
Australia--0.8%
Financial Services--0.3%
15,000 (a)AMP Ltd. $ 175,983
Leisure & Tourism--0.5%
173,000 (a)TAB Ltd. 255,587
Total Australia 431,570
Austria--0.0%
Banking--0.0%
8,700 Bank Austria AG, Rights 451
Belgium--0.3%
Telecommunications--0.3%
3,600 (a)Global TeleSystems Group, Inc., ADR 175,500
Canada--12.0%
Broadcasting & Publishing--0.7%
40,700 (a)Atlantis Communications, Inc 387,211
Business & Public Services--1.5%
40,000 (a)Informisssion Group 369,678
29,000 Mackenzie Financial Corp. 407,937
Total 777,615
Electrical & Electronics--1.0%
9,200 Northern Telecom Ltd. 521,409
Electronic Components, Instruments--2.0%
41,000 Celestica, Inc. 768,750
32,000 (a)MPACT Immedia Corp. 280,521
Total 1,049,271
Financial Services--1.4%
5,900 Investors Group, Inc. 213,098
10,400 Newcourt Credit Group, Inc. 510,618
Total 723,716
Health & Personal Care--1.1%
32,100 (a)The Laser Center Inc. 523,530
2,000 (a)The Laser Center Inc., ADR 32,750
Total 556,280

</TABLE>

Federated International Equity Fund II

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
Canada--continued
Pharmaceuticals--1.9%
21,000 (a)BioChem Pharma, Inc. $ 556,500
525 (a)CliniChem Development, Inc. 3,019
26,350 (a)QLT Phototherapeutics 435,123
Total 994,642
Telecommunications--2.4%
38,200 (a)CGI Group, Inc. 815,113
19,400 TELUS Corp. 501,628
Total 1,316,741
Total Canada 6,326,885
Denmark--0.5%
Health & Personal Care--0.5%
2,100 Novo-Nordisk, Class B 289,803
Finland--4.0%
Business & Public Services--1.2%
8,100 TT Tieto Oyj, Class B 616,251
Multi-Industry--1.3%
9,400 Nokia Oyj 692,002
Real Estate--0.4%
32,860 (a) Sponda Oyj 230,815
Telecommunications--0.6%
6,600 Helsingin Puhelin Oyj 307,058
Transportation - Shipping--0.5%
4,300 Finnlines Oyj 266,737
Total Finland 2,112,863
France--7.9%
Banking--0.6%
2,520 DEX 339,296
Broadcasting & Publishing--1.1%
3,700 Societe Television Francaise 1 573,449
Business & Public Services--0.4%
1,477 Cap Gemini Sogeti 232,091
Electrical & Electronics--1.6%
4,000 Alcatel Alsthom 814,463
</TABLE>

Federated International Equity Fund II

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
France--continued
Electronic Components, Instruments--1.0%
32,000 Bull $ 521,362
Insurance--2.0%
4,900 AXA 551,136
8,060 Scor SA 511,274
Total 1,062,410
Pharmaceuticals--1.2%
5,300 Sanofi SA 623,303
Total France 4,166,374
Germany--3.2%
Automobile--0.3%
723 BBS Kraftfahrzeugtechnik AG 138,310
Banking--0.3%
5,000 Bhf-Bank AG 190,468
Construction & Housing--0.9%
13,800 Tarkett Sommer AG 459,120
Electronic Components, Instruments--0.8%
8,400 (a)Graphisoft N.V. 242,668
2,000 (a)Singulus Technologies AG 196,290
Total 438,958
Machinery & Engineering--0.4%
2,270 Mannesmann AG 233,489
Multi-Industry--0.5%
700 Preussag AG 250,742
Total Germany 1,711,087
Greece--0.9%
Banking--0.1%
666 (a)Alpha Credit Bank 54,050
Energy - Oil & Gas--0.2%
12,960 (a)Hellenic Petroleum SA 105,967
Telecommunications--0.1%
1,600 (a)STET Hellas Telecommunications SA, ADR 66,400
Transportation - Shipping--0.5%
16,200 Attica Enterprises SA 234,002
Total Greece 460,419
</TABLE>

Federated International Equity Fund II

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
Hungary--0.7%
Banking--0.7%
7,000 OTP Bank RT, GDR $ 343,700
India--0.0%
Telecommunications--0.0%
500 Mahanagar Telephone Nigam Ltd. 2,104
Ireland--1.0%
Banking--0.2%
48,000 Anglo Irish Bank Corp. PLC 129,034
Data Processing & Reproduction--0.4%
4,300 (a)Saville Systems Ireland PLC, ADR 215,538
Financial Services--0.4%
15,500 Irish Permanent 182,946
Total Ireland 527,518
Italy--7.8%
Automobile--0.8%
196,000 Magneti Marelli SPA 430,224
Banking--4.2%
290,000 Banca Di Roma 603,911
13,200 Banca Popolare Bergamo-CV 271,912
84,500 Banca Popolare Di Milano 672,956
82,000 Credito Italiano 429,441
16,000 Istituto Mobiliare Italiano SPA 252,146
Total 2,230,366
Broadcasting & Publishing--0.8%
25,000 Gruppo Editoriale L Espresso 207,542
30,000 Mediaset SPA 191,558
Total 399,100
Business & Public Services--0.6%
47,000 (a)Aeroporti di Roma SPA 296,007
Financial Services--0.3%
58,000 Credito Emiliano SPA 165,831
Telecommunications--1.1%
22,000 Telecom Italia SPA 162,021
</TABLE>

Federated International Equity Fund II
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
Italy--continued
Telecommunications--continued
85,000 Telecom Italia SPA $ 411,665
Total 573,686
Total Italy 4,095,214
Japan--1.0%
Beverage & Tobacco--0.4%
20,000 Kirin Brewery Co., Ltd. 189,484
Recreation, Other Consumer Goods--0.6%
8,000 Sony Music Entertainment, Inc. 340,783
Total Japan 530,267
Netherlands--7.7%
Banking--0.5%
3,662 Kempen & Co. NV 283,742
Chemicals--0.6%
5,000 (a)Qiagen NV 312,179
Electrical & Electronics--0.7%
20,000 (a)Toolex Alpha NV 372,894
Financial Services--0.9%
7,029 ING Groep, NV 460,635
Food & Household Products--1.7%
14,800 (a)Benckiser NV 910,825
Manufacturing--1.9%
15,142 Nutreco Holding NV 530,400
19,300 (a)TNT Post Group NV 493,715
Total 1,024,115
Telecommunications--1.4%
19,300 Koninklijke PTT Nederland NV 743,421
Total Netherlands 4,107,811
Norway--1.8%
Data Processing & Reproduction--1.2%
50,000 Merkantildata ASA 632,788
Manufacturing--0.5%
8,000 Tomra Systems ASA 240,068
</TABLE>

Federated International Equity Fund II

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
Norway--continued
Mining--0.1%
3,700 (a)ProSafe ASA $ 60,826
Total Norway 933,682
Portugal--3.2%
Banking--1.6%
6,000 Banco Commercial Portugues, Class R 170,477
1,625 Banco Espirito Santo e Comercial de Lisboa 48,829
5,000 Banco Espirito Santo e Comercial de Lisboa 150,244
18,000 Banco Pinto & Sotto Mayor 447,075
Total 816,625
Construction & Housing--0.3%
4,000 (a)Brisa Auto Estradas de Portugal 171,181
Insurance--0.5%
9,600 Compania de Seguros Tranquilidade 260,022
Telecommunications--0.8%
8,300 Portugal Telecom SA 440,179
Total Portugal 1,688,007
Spain--5.7%
Banking--1.5%
5,020 Banco Pastor SA 283,163
20,000 Banco Santander 511,901
Total 795,064
Financial Services--0.9%
30,000 Corp Fin Reunida 452,886
Real Estate--0.9%
35,000 Inmobiliaria Urbis 488,425
Telecommunications--2.4%
27,704 Telefonica SA 1,280,870
Total Spain 3,017,245
Sweden--7.4%
Aerospace & Military Technology--0.6%
12,500 Celsius Industries Corp., Class B 291,499
Business & Public Services--0.5%
7,600 WM-Data AB 263,942
</TABLE>

Federated International Equity Fund II

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
Sweden--continued
Media--0.7%
30,000 (a)Modern Times Group, Class B $ 391,174
Multi-Industry--2.2%
35,300 Kinnevik AB, Class B 1,148,489
Real Estate--1.5%
66,600 (a)Castellum AB 784,905
Telecommunications--1.9%
10,850 (a)Europolitan Holdings AB 761,785
7,000 (a)NetCom Systems AB, Class B 268,117
Total 1,029,902
Total Sweden 3,909,911
Switzerland--9.4%
Banking--3.4%
120 Baer Holdings AG 376,015
2,500 Credit Suisse Group 557,188
2,350 UBS AG 875,256
Total 1,808,459
Data Processing & Reproduction--1.1%
6,000 (a)Gretag Imaging Group 576,504
Food & Household Products--0.8%
200 Nestle SA 428,713
Food Processing--2.2%
3,000 (a)Barry Callebaut AG 647,824
10 Lindt & Spruengli AG 260,847
10 Lindt & Spruengli AG, Class B 264,148
Total 1,172,819
Health & Personal Care--0.7%
265 Stratec Holding AG 372,746
Insurance--0.4%
315 Zurich Versicherungsgesellschaft 201,360
Manufacturing--0.5%
12,400 (a)Mettler Toledo International, Inc., ADR 248,775
Transportation - Airlines--0.3%
500 (a)Sairgroup 164,763
Total Switzerland 4,974,139
</TABLE>

<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Common Stocks--continued
United Kingdom--17.3%
Aerospace & Military Technology--0.3%
60,000 British Regional Air Lines $ 165,300
Banking--0.4%
20,000 Bank of Scotland, Edinburgh 224,074
Broadcasting & Publishing--1.0%
30,000 Pearson 549,999
Business & Public Services--1.3%
22,000 (a)ECsoft Group PLC, ADR 712,250
Electronic Components, Instruments--3.6%
7,380 (a) ARM Holdings PLC, ADR 452,025
6,820 Computacenter 85,747
42,950 (a) IT Net 309,803
192,000 PIC International Group PLC 724,516
19,000 Parity PLC 248,798
Total 1,820,889
Leisure & Tourism--1.5%
58,000 Airtours PLC 434,823
116,250 (a) Thomson Travel Group plc 362,972
Total 797,795
Manufacturing--0.6%
18,200 Bespak PLC 306,924
Pharmaceuticals--0.7%
14,500 (a)ICON plc, ADR 366,125
Telecommunications--7.3%
147,500 (a)Cable & Wireless Communications PLC 1,494,924
70,000 (a)Energis PLC 1,066,614
100,000 (a)Orange PLC 1,060,259
45,000 Racal Electronic PLC 255,088
Total 3,876,885
Utilities - Electrical & Gas--0.6%
43,350 National Grid Co. PLC 292,421
Total United Kingdom 9,112,662
Total Common Stocks (identified cost $39,010,534) 48,917,212
</TABLE>

<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
<S> <C> <C>
Corporate Bonds--0.0%
United Kingdom--0.0%
Utilities - Electrical & Gas--0.0%
11,000 National Grid Group PLC, 4.25%, 2/17/2008 $ 20,961
Total Corporate Bonds (identified cost $17,852) 20,961
Preferred Stocks--2.6%
Austria--1.3%
Banking--1.3%
8,700 Bank Austria AG 706,971
Germany--0.4%
Broadcasting & Publishing--0.4%
4,120 Pro Sieben Media AG, Preference 213,602
Portugal--0.9%
Multi-Industry--0.9%
35,380 Lusomundo Sociedade Gestora de Participacoes Sociais SA, Pfd. 466,878
Total Preferred Stocks (identified cost $1,021,706) 1,387,451
(b)Repurchase Agreement-6.0%
3,185,000 BT Securities Corp., 5.87%, dated 6/30/1998, due 7/1/1998 (at amortized cost) 3,185,000
Total Investments (identified cost $43,235,092)(c) $53,510,624
</TABLE>

(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $43,235,092.
The net unrealized appreciation of investments on a federal tax basis
amounts to $10,275,532 which is comprised of $10,903,660 appreciation and
$628,128 depreciation at June 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($52,823,724) at June 30, 1998. The following acronyms are used
throughout this portfolio:

ADR --American Depository Receipt
AG --Aktiengsellschaft
GDR --Global Depository Receipt
PLC --Public Limited Company
SA --Support Agreement
SPA --Standby Purchase Agreement

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated International Equity Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at value (identified cost $43,235,092) $53,510,624
Cash denominated in foreign currencies (identified cost $93,572) 93,215
Income receivable 132,950
Receivable for investments sold 1,233,845
Receivable for shares sold 93,298
Deferred organizational costs 7,844
Total assets 55,071,776
Liabilities:
Payable for investments purchased $ 1,875,461
Payable to Bank 331,943
Payable for taxes withheld 8,011
Accrued expenses 32,637
Total liabilities 2,248,052
Net Assets for 3,311,290 shares outstanding $52,823,724
Net Assets Consist of:
Paid in capital $38,550,221 Net unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 10,296,413 Accumulated
net realized gain on investments and foreign currency transactions 3,739,620
Undistributed net investment income 237,470
Total Net Assets $52,823,724
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$52,823,724 / 3,311,290 shares outstanding $15.95
</TABLE>

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated International Equity Fund II

Six Months Ended June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $73,657) $ 470,828
Interest 48,975
Total income 519,803
Expenses:
Investment advisory fee $ 224,869
Administrative personnel and services fee 61,987
Custodian fees 31,203
Transfer and dividend disbursing agent fees and expenses 10,494
Trustees' fees 724
Auditing fees 6,455
Legal fees 1,747
Portfolio accounting fees 30,113
Share registration costs 3,650
Printing and postage 21,043
Insurance premiums 1,267
Miscellaneous 4,179
Total expenses 397,731
Waiver of investment advisory fee $ (115,398)
Net expenses 282,333
Net investment income 237,470
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:
Net realized gain on investments and foreign currency transactions 3,739,508
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 7,127,787
Net realized and unrealized gain on investments and foreign currency 10,867,295
Change in net assets resulting from operations $11,104,765
</TABLE>

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated International Equity Fund II

<TABLE>
<CAPTION>
Six Months
Ended Year Ended
(unaudited) December 31,
June 30, 1998 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 237,470 $ 211,702
Net realized gain (loss) on investments and foreign currency transactions
($3,739,508 and $225,019, respectively, as computed for federal tax purposes) 3,739,508 (37,491)
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 7,127,787 2,044,058
Change in net assets resulting from operations 11,104,765 2,218,269
Distributions to Shareholders--
Distributions from net investment income -- (25,486)
Distributions from net realized gains on investments and foreign currency transactions (52,079) --
Change in net assets resulting from distributions to shareholders (52,079) (25,486)
Share Transactions--
Proceeds from sale of shares 7,703,578 18,823,244
Net asset value of shares issued to shareholders in payment of distributions declared 52,079 25,486
Cost of shares redeemed (2,559,576) (2,218,272)
Change in net assets resulting from share transactions 5,196,081 16,630,458
Change in net assets 16,248,767 18,823,241
Net Assets:
Beginning of period 36,574,957 17,751,716
End of period (including undistributed net investment
income of $237,470 and $0, respectively) $52,823,724 $36,574,957
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated International Equity Fund II

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.27 $ 11.16 $ 10.35 $ 10.00
Income from investment operations
Net investment income 0.07 0.07 0.11** 0.07
Net realized and unrealized gain (loss) on investments and foreign currency 3.63 1.05 0.75 0.28
Total from investment operations 3.70 1.12 0.86 0.35
Less distributions
Distributions from net investment income -- (0.01) (0.05) --
Distributions from net realized gain on investments
and foreign currency transactions (0.02) -- -- --
Total distributions (0.02) (0.01) (0.05) --
Net asset value, end of period $ 15.95 $ 12.27 $ 11.16 $ 10.35
Total return (b) 30.06% 10.08% 8.32% 3.50%
Ratios to average net assets
Expenses 1.26%* 1.23% 1.25% 1.22%*
Net investment income 1.06%* 0.76% 0.89% 1.63%*
Expense waiver/reimbursement (c) 0.51%* 0.98% 3.05% 11.42%*
Supplemental data
Net assets, end of period (000 omitted) $52,824 $36,575 $17,752 $ 4,760
Average commission rate paid (d) $0.0304 $0.0068 $0.0030 --
Portfolio turnover 112% 179% 103% 34%
</TABLE>
* Computed on an annualized basis.

** Per share information presented is based upon the monthly average number
of shares outstanding.

(a) Reflects operations for the period from May 5, 1995 (date of initial public
investment) to December 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.

(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated International Equity Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated International Equity Fund
II (the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to obtain a total return on its
assets.

Significant Accounting Policies

Investment Valuations

Listed equity securities are valued at the last sale price reported on a
national securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value. With respect to
valuation of foreign securities, trading in foreign cities may be completed at
times which vary from the closing of the New York Stock Exchange. Therefore,
foreign securities are valued at the latest closing price on the exchange on
which they are traded prior to the closing of the New York Stock Exchange.
Foreign securities quoted in foreign currencies are translated into U.S. Dollars
at the foreign exchange rate in effect at noon, eastern time, on the day the
value of the foreign security is determined.

Repurchase Agreements

Investment Income, Expenses and Distributions

Federal Taxes

However, federal taxes may be imposed on the Fund upon the disposition of
certain investment companies. Withholding taxes on foreign interest and
dividends have been provided for in accordance with the Fund's understanding of
the applicable country's tax rules and rates.

Federated International Equity Fund II

When-Issued and Delayed Delivery Transactions

Foreign Exchange Contracts

The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund may enter into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Contracts to
purchase are used to acquire exposure to foreign currencies; whereas, contracts
to sell are used to hedge the Fund's securities against currency fluctuations.
Risks may arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.

Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs; currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at period end, resulting from
changes in the exchange rate.

Use of Estimates

Other
Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

Federated International Equity Fund II

<TABLE>
<CAPTION>
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Shares sold 507,183 1,577,537
Shares issued to shareholders in payment of distributions declared 3,498 2,349
Shares redeemed (180,241) (189,323)
Net change resulting from share transactions 330,440 1,390,563
</TABLE>

Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Federated Global Research Corp., the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to 1.00% of
the Fund's average daily net assets. The Adviser may voluntarily choose to waive
any portion of its fee. The Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

Portfolio Accounting Fees

Fserv maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

Organizational Expenses

Organizational expenses of $15,465 were borne initially by the Adviser. The Fund
has agreed to reimburse the Adviser for these expenses. These expenses have been
deferred and are being amortized over the five-year period following the Fund's
effective date. For the period ended June 30, 1998, the Fund paid $2,208
pursuant to this agreement.

General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Concentration of Credit Risk

Year 2000

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1998, were as follows:

Purchases $52,068,634
Sales $48,214,002

TRUSTEES

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer,

and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

Variable funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in variable funds involves investment risk,
including the possible loss of principal.

This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses, and other
information.

[LOGO OF FEDERATED INVESTORS]

Federated
International
Equity Fund II

Federated Insurance Series

Semi-Annual Report
to Shareholder
June 30, 1998

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 313916603
G00433-06 (8/98) [recycled logo]

PRESIDENT'S MESSAGE Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Growth Strategies Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month reporting period from January 1, 1998 through
June 30, 1998. It begins with a commentary by the fund's portfolio managers,
which is followed by a complete listing of the fund's growth stock holdings and
the financial statements.

Federated Growth Strategies Fund II is managed to pursue long-term investment
growth through a highly diversified portfolio of common stocks issued by large,
quality companies. At the end of the reporting period, the fund's 132 stock
holdings included well-known names like Allstate, Coca-Cola, Dell Computer,
General Electric, HBO, Home Depot, Intel, Microsoft, Pfizer, and Procter &
Gamble.

As of June 30, 1998, this diversified portfolio produced a six-month total
return of 14.95%.* Contributing to the total return were a net asset value
increase of $1.39, capital gains totaling $1.00 per share, and dividend income
totaling $0.02 per share. On June 30, 1998, total net assets reached $60.2
million.

Thank you for putting your money to work in quality American companies through
the diversification and professional management of Federated Growth Strategies
Fund II. As always, we welcome your comments and suggestions.

Sincerely,

/s/J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

INVESTMENT REVIEW

Within the short time period of the second quarter of 1998, we saw a market with
three distinct personalities. From the beginning of April to early May, not much
happened: most sectors of the market traded basically in line with each other
and were generally unchanged. Around the second week in May, the Asian markets
began to weaken considerably. This caused investors to move from value/cyclicals
to growth and from smaller stocks to larger stocks. Within growth stocks,
capital moved from Technology (seen as risky and leveraged compared to the state
of the economy) into Health Care and Consumer Non-Durables. Concerns over Asia
also put more pressure on oil prices and caused long-term Treasuries to rally.
The last two weeks of the quarter saw technology stocks, and to a lesser degree
small-caps, snap back. This came after a couple of high-profile technology
conferences reassured investors that near-term earnings for most tech companies
were still going to be decent and signs that some Asian markets could be
bottoming.

The tale of the tape for the quarter was:
. the S&P 500 Index returned 3.3% in the quarter, while the S&P 400 MidCap
Index was down 2.2% and the S&P 600 Small Cap Index lost 4.5%;*
. the NASDAQ Composite Index gained 2.8%,**
. the S&P Barra Growth Index was up 5.8% while the S&P Barra Value Index
returned only 0.4%,*** and
. long-term interest rates fell as the yield on the 30-year Treasury bond went
from 5.93% to 5.63%.

The Federated Growth Strategies Fund II returned 1.04% for the second quarter
and 14.95%+ for the first half of 1998. The fund lagged the average Lipper
growth fund++ (up 1.85% and 15.10%, respectively), as that universe of funds has
a heavy weighting of funds with larger average market capitalizations. The
Federated Growth Strategies Fund II has had a mid-cap bias, as that part of the
market is where we believe we can currently find faster growing companies at
better prices. Recently, the market has placed a much higher value on
consistency of earnings and the trading liquidity of the stocks. Both of those
attributes tend to be more readily found in larger capitalized stocks. We
believe that the market will recognize that the premium currently being paid for
consistency and liquidity is excessive and that investor sentiment will swing
back toward mid-cap stocks.

Concerns of slowing earnings growth was the catalyst for the strong performance
of growth stocks in the quarter. This caused the sectors most closely tied to
the economy to lag. The underperforming sectors included Transportation, Basic
Industries, Energy, Producer Manufacturing and Utilities. The leading sectors
were Retail, Technology, Health Care and Finance.

COMMENTS regarding selected holdings or purchases:

Abercrombie & Fitch: ANF is a fast-growing, Generation-X retailer with superior
same-store sales growth and aggressive store expansion plans, including a test
of stores targeting kids. ANF's exceptional internal design team is key to its
ongoing success in attaining superior sales growth.

WinStar: WCII is a telecommunications service company that offers the usual fare
of local and long distance service. The company differs from most of its peers
in that its networks are wireless. As a result, they can build out at a fraction
of the cost and time typically associated with comparably sized wired networks.

Barnes & Noble: BKS is a leading superstore bookstore, with a fledgling on-line
bookstore. The on-line division is small, but fast-growing and probably the
driver to stock performance. To-date, the on-line service is below break-even
and increased management spending has hurt EPS estimates, but growth potential,
we believe, is very strong.

Capstar: CRB is a large consolidator in the radio industry, concentrating on
mid-sized markets. Operational efficiencies versus its peers should be attained
through its new on-line ad purchasing management system and through its "Star
System" which allows it to digitally deliver area-specific programming to
multiple listening areas from one site.
* S&P 500 Index, S&P 400 Mid Cap Index, and the S&P 600 Small Cap Index are
unmanaged composite indices of common stock in industry, transportation,
and financial and public utility companies. Investments cannot be made in
an index.

** NASDAQ Composite Index is an unmanaged index that measures all NASDAQ
domestic & non-U.S.-based common stock, listed on the NASDAQ Stock Market.

*** S&P Barra Growth Index is a capitilization-weighted index of all the
stocks in the S&P 500 that have high price-to-book ratios. S&P Barra Value
Index is a market capitalization-weighted index of the stocks in the S&P
500 Index having the highest book-to-price ratios. The index consists of
approximately half of the S&P 500 on a market capitilization basis.

+ Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investors shares, when redeemed, may be worth more or less than
their original cost.

++ Lipper figures represent the average total returns reported by all mutual
funds designated by Lipper Analytical Sercices as falling into the
respective categories indicated. These figures do not reflect sales
charges.

PORTFOLIO OF INVESTMENTS

Federated Growth Strategies Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Shares Value
Common Stocks--97.0%
<C> <S> <C>
Basic Industry--2.9%
6,600 Goodrich (B.F.) Co. $ 327,525
7,700 Monsanto Co. 430,238
13,900 (a)Royal Group Technologies Ltd. 403,100
5,100 Southdown, Inc. 364,013
4,400 Texas Industries, Inc. 233,200
Total 1,758,076
Consumer Durables--2.9%
10,900 Centex Corp. 411,475
17,700 (a)Fairfield Communities, Inc. 339,619
19,000 (a)Furniture Brands International, Inc. 533,188
25,800 (a)Gentex Corp. 467,625
Total 1,751,907
Consumer Non-Durables--11.1%
9,600 (a)American Italian Pasta Co., Class A 357,600
3,100 Clorox Co. 295,663
5,800 Coca-Cola Co. 495,900
4,500 Colgate-Palmolive Co. 396,000
7,400 Gillette Co. 419,488
20,000 (a)Jones Apparel Group, Inc. 731,250
9,000 (a)Keebler Foods Co. 247,500
9,600 Procter & Gamble Co. 874,200
6,500 Quaker Oats Co. 357,094
15,500 (a)Smithfield Foods, Inc. 472,750
5,600 St. John Knits, Inc. 216,300
7,900 (a)Suiza Foods Corp. 471,531
8,300 (a)Tommy Hilfiger Corp. 518,750
11,000 Wolverine World Wide, Inc. 238,563
5,700 Wrigley (Wm.), Jr. Co. 558,600
Total 6,651,189
Energy Minerals--5.3%
16,300 (a)BJ Services Co. 473,719
7,700 (a)Cooper Cameron Corp. 392,700
Shares Value
Common Stocks--continued
Energy Minerals--continued
8,000 Diamond Offshore Drilling, Inc. $ 320,000
14,500 (a)Friede Goldman International, Inc. 418,688
21,000 (a)Global Industries Ltd. 354,375
17,900 (a)Global Marine, Inc. 334,506
7,700 (a)National-Oilwell, Inc. 206,456
16,900 (a)Varco International, Inc. 334,831
6,600 (a)Veritas DGC, Inc. 329,588
Total 3,164,863
Finance--15.9%
10,300 Ahmanson (H.F.) & Co. 731,300
5,400 Allstate Corp. 494,438
3,400 American International Group, Inc. 496,400
4,500 Bank of New York Co., Inc. 273,094
5,300 BankAmerica Corp. 458,119
19,300 (a)Catellus Development Corp. 341,369
13,000 Conseco, Inc. 607,750
8,200 (a)E*Trade Group, Inc. 188,088
10,900 Equitable Cos., Inc. 816,819
11,200 (a)Golden State Bancorp, Inc. 333,200
25,687 MBNA Corp. 847,671
7,600 Mellon Bank Corp. 529,150
6,500 Merrill Lynch & Co., Inc. 599,625
7,825 Morgan Stanley, Dean Witter & Co. 715,009
14,750 Old Republic International Corp. 432,359
6,400 Providian Financial Corp. 502,800
10,050 Raymond James Financial, Inc. 300,872
17,400 Sirrom Capital Corp. 452,400
7,549 Travelers Group, Inc. 457,658
Total 9,578,121
Health Care--12.0%
5,300 (a)Boston Scientific Corp. 379,613
6,300 (a)Dura Pharmaceuticals, Inc. 140,963
5,700 Guidant Corp. 406,481
15,800 HBO & Co. 556,950
Shares Value
Common Stocks--continued
Health Care--continued
14,100 (a)HEALTHSOUTH Corp. 376,294
7,400 Lilly (Eli) & Co. 488,863
4,300 Merck & Co., Inc. 575,125
20,500 (a)PSS World Medical, Inc. 299,813
5,900 Pfizer, Inc. 641,256
34,800 (a)PharMerica, Inc. 419,775
8,200 (a)Quintiles Transnational Corp. 403,338
8,100 Schering Plough Corp. 742,163
9,800 Smithkline Beecham Corp., ADR 592,900
8,300 (a)Universal Health Services, Inc., Class B 484,513
10,200 Warner-Lambert Co. 707,625
Total 7,215,672
Producer Manufacturing--3.7%
8,300 (a)Evi Weatherford, Inc. 308,138
3,400 General Electric Co. 309,400
15,000 Miller Herman, Inc. 364,688
6,000 Precision Castparts Corp. 320,250
8,900 (a)SLI, Inc. 232,513
11,200 Tyco International, Ltd. 705,600
Total 2,240,589
Retail Trade--6.9%
10,300 (a)Abercrombie & Fitch Co., Class A 453,200
9,900 (a)Barnes & Noble, Inc. 370,631
14,700 (a)Dollar Tree Stores, Inc. 597,188
14,200 (a)General Nutrition Cos., Inc. 441,975
7,800 Home Depot, Inc. 647,888
15,100 (a)Safeway, Inc. 614,381
14,900 (a)Staples, Inc. 431,169
25,400 TJX Cos., Inc. 612,775
Total 4,169,207
Services--6.3%
17,000 (a)Allied Waste Industries, Inc. 408,000
12,300 CKE Restaurants, Inc. 507,375
16,700 (a)Capstar Broadcasting Corp., Class A 419,588
Shares Value
Common Stocks--continued
Services--continued
12,758 (a)Cendant Corp. $ 266,323
7,000 (a)Chancellor Media Corp., Class A 347,594
13,050 (a)Liberty Media Group, Class A, Series A (LBTYA) 506,503
3,200 (a)Pixar, Inc. 193,200
5,000 (a)Premier Parks, Inc. 333,125
6,300 Service Corp. International 270,113
12,200 (a)Snyder Communications, Inc. 536,800
Total 3,788,621
Technology--22.6%
18,500 (a)Advanced Fibre Communications 741,156
6,800 (a)America Online, Inc. 720,800
10,300 (a)Apple Computer, Inc. 295,481
6,600 (a)Ascend Communications 327,113
7,500 (a)At Home Corp., Class A 354,844
8,000 (a)BMC Software, Inc. 415,500
13,700 (a)Bay Networks, Inc. 441,825
5,800 (a)CIENA Corp. 403,825
11,100 (a)Cadence Design Systems, Inc. 346,875
7,900 (a)Cisco Systems, Inc. 727,294
6,700 (a)Citrix Systems Inc. 458,113
9,200 (a)Compuware Corp. 470,350
11,000 (a)Cymer, Inc. 177,375
4,800 (a)Dell Computer Corp. 445,500
11,500 (a)EMC Corp. Mass 515,344
10,400 (a)Echostar Communications Corp., Class A 250,250
7,600 (a)Gemstar International Group Ltd. 284,525
10,200 (a)HNC Software 416,288
3,700 Intel Corp. 274,263
7,600 (a)Keane, Inc. 425,600
9,700 Lucent Technologies, Inc. 806,919
31,600 (a)Mastech Corp. 888,750
6,600 (a)Microsoft Corp. 715,275
5,400 Northern Telecom Ltd. 306,450
4,700 (a)Peoplesoft, Inc. 220,900
Shares Value
Common Stocks--continued
Technology--continued
17,300 (a)Platinum Technology, Inc. $ 494,131
5,100 (a)Rambus, Inc. 311,738
7,400 (a)Sportsline USA, Inc. 270,563
10,100 (a)Tellabs, Inc. 723,413
6,200 (a)Xilinx, Inc. 210,800
1,200 (a)Yahoo, Inc. 189,000
Total 13,630,260
Transportation--1.2%
6,100 Expeditors International Washington, Inc. 268,400
15,600 Southwest Airlines Co. 462,150
Total 730,550
Utilities--6.2%
8,300 Coastal Corp. 579,444
8,400 (a)Globalstar Telecommunications Ltd. 226,800
9,200 (a)ICG Communications, Inc. 336,375
7,100 (a)ITC DeltaCom, Inc. 303,414
16,200 (a)IXC Communications, Inc. 785,700
11,200 MCI Communications Corp. 651,000
9,200 (a)PanAmSat Corp. 523,250
7,600 (a)WinStar Communications, Inc. 326,329
Total 3,732,312
Total Common Stocks (identified cost $45,621,028) 58,411,367
(b) Repurchase Agreement--3.0%
1,780,000 BT Securities Corp., 5.87%, dated 6/30/1998,
due 7/1/1998 (at amortized cost) 1,780,000
Total Investments (identified cost $47,401,028) (c) $60,191,367
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $47,401,028.
The net unrealized appreciation of investments on a federal tax basis
amounts to $12,790,339 which is comprised of $14,541,816 appreciation and
$1,751,477 depreciation at June 30, 1998.

Note: The categories of investments are shown as a percentage of net assets
($60,231,190) at June 30, 1998.

The following acronym is used throughout this portfolio:

ADR--American Depositary Receipt

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated Growth Strategies Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Assets:
<S> <C>
Total investments in securities, at value (identified cost $47,401,028 and tax cost $47,401,028) $60,191,367
Cash 2,025
Income receivable 18,252
Receivable for investments sold 77,002
Total assets 60,288,646
Liabilities:
Payable for investments purchased $ 36,168
Payable for taxes withheld 303
Accrued expenses 20,985
Total liabilities 57,456
Net Assets for 3,435,892 shares outstanding $60,231,190
Net Assets Consist of:
Paid in capital $47,611,996
Net unrealized appreciation of investments 12,790,339
Accumulated net realized loss on investments (164,881)
Distributions in excess of net investment income (6,264)
Total Net Assets $60,231,190
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$60,231,190 / 3,435,892 shares outstanding $17.53
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated Growth Strategies Fund II

Six Months Ended June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Dividends (net of foreign taxes withheld of $954) $ 129,064
Interest 61,094
Total income 190,158
Expenses:
Investment advisory fee $ 199,603
Administrative personnel and services fee 61,987
Custodian fees 5,900
Transfer and dividend disbursing agent fees and expenses 9,491
Directors'/Trustees' fees 1,132
Auditing fees 5,160
Legal fees 1,446
Portfolio accounting fees 24,279
Share registration costs 2,230
Printing and postage 10,587
Insurance premiums 1,220
Taxes 32
Miscellaneous 1,048
Total expenses 324,115
Waivers and reimbursements--
Waiver of investment advisory fee $ (91,295)
Net expenses 232,820
Net operating loss (42,662)
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments (57,971)
Net change in unrealized appreciation of investments 7,446,850
Net realized and unrealized gain on investments 7,388,879
Change in net assets resulting from operations $7,346,217
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated Growth Strategies Fund II

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income/operating loss $(42,662) $47,448
Net realized gain (loss) on investments ($(57,971) and $2,977,511, respectively,
as computed for federal tax purposes) (57,971) 2,940,396
Net change in unrealized appreciation 7,446,850 3,823,952
Change in net assets resulting from operations 7,346,217 6,811,796
Net equalization credits (debits)-- 36,544 141,139
Distributions to Shareholders--
Distributions from net investment income (47,544) (37,404)
Distributions from net realized gains (3,039,173) (109,551)
Change in net assets resulting from distributions to shareholders (3,086,717) (146,955)
Share Transactions (Exclusive of amounts allocated to net investment income)--
Proceeds from sale of shares 7,172,217 24,630,467
Net asset value of shares issued to shareholders in payment of distributions declared 3,074,207 146,049
Cost of shares redeemed (1,591,634) (1,286,989)
Change in net assets resulting from share transactions 8,654,790 23,489,527
Change in net assets 12,950,834 30,295,507
Net Assets:
Beginning of period 47,280,356 16,984,849
End of period (including distributions in excess of net investment income, and
undistributed net investment income of $(6,264) and $47,398, respectively) $60,231,190 $47,280,356
</TABLE>
(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated Growth Strategies Fund II

<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995(a)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.14 $ 12.80 $ 10.30 $ 10.00
Income from investment operations
Net investment income/operating loss (0.01)** 0.02** 0.05 0.03
Net realized and unrealized gain on investments 2.42 3.41 2.45 0.27
Total from investment operations 2.41 3.43 2.50 0.30
Less distributions
Distributions from net investment income (0.02) (0.02) (0.004) --
Distributions from net realized gain on investments (1.00) (0.07) -- --
Total distributions (1.02) (0.09) (0.004) --
Net asset value, end of period $ 17.53 $ 16.14 $ 12.80 $ 10.30
Total return (b) 14.95% 27.03% 24.32% 3.00%
Ratios to average net assets
Expenses 0.87%* 0.85% 0.85% 0.85%*
Net investment income/operating loss (0.16%)* 0.14% 0.55% 1.91%*
Expense waiver/reimbursement (c) 0.34%* 0.67% 3.87% 76.95%*
Supplemental data
Net assets, end of period (000 omitted) $ 60,231 $47,280 $16,985 $ 368
Average commission rate paid (d) $ 0.0547 $0.0566 $0.0376 --
Portfolio turnover 43% 148% 96% 4%
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the
monthly average number of shares outstanding.
(a) Reflects operations for the period from November 9, 1995 (date of initial
public investment) to December 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income/operating loss ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.

(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated Growth Strategies Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Growth Strategies Fund II
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is capital appreciation.

Significant Accounting Policies

Investment Valuations

Repurchase Agreements

Investment Income, Expenses, and Distributions

Federal Taxes

Equalization

The Fund follows the accounting practice known as equalization. With
equalization, a portion of the proceeds from sales and costs of redemptions of
Fund shares (equivalent, on a per share basis, to the amount of undistributed
net investment income on the date of the transaction) is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or redemptions of fund shares.

When-Issued and Delayed Delivery Transactions

Federated Growth Strategies Fund II

Securities purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.

Use of Estimates

Other
Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

<TABLE>
<CAPTION>
Transactions in shares were as follows:
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Shares sold 424,040 1,679,568
Shares issued to shareholders in payment of distributions declared 178,629 11,313
Shares redeemed (95,280) (89,183)
Net change resulting from share transactions 507,389 1,601,698
</TABLE>
Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee and/or reimburse certain operating expenses of the Fund. The
Adviser can modify or terminate this voluntary waiver and/or reimbursement at
any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

Portfolio Accounting Fees

Federated Services Company maintains the Fund's accounting records for which it
receives a fee. The fee is based on the level of the Fund's average daily net
assets for the period, plus out-of-pocket expenses.

General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Federated Growth Strategies Fund II

Year 2000

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1998, were as follows:

Purchases $27,102,235
Sales $22,278,542

TRUSTEES

OFFICERS

John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer,
and Secretary
Richard B. Fisher
Vice President
Matthew S. Hardin
Assistant Secretary

Federated
Growth
Strategies
Fund II

Federated Insurance Series

Semi-Annual Report
to Shareholders
June 30, 1998

Cusip 313916702
G00433-08 (8/98)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated International
Equity Fund II, a portfolio of Federated Insurance Series.

As always, we welcome your comments and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.

INVESTMENT REVIEW

Market Overview

Performance

** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance information does not reflect the charges and
expenses of a variable annuity or variable life insurance contract.

Portfolio

The fund's country allocations and top ten holdings as of June 30, 1998 are as
follows:

COUNTRY ALLOCATIONS

We are still very positive on the outlook for the European markets going
forward; however, we must admit that the strength of these markets in the first
half of the year has surprised even us.

Strategy

PORTFOLIO OF INVESTMENTS

Federated International Equity Fund II

June 30, 1998 (unaudited)

</TABLE>

Federated International Equity Fund II

Note: The categories of investments are shown as a percentage of net assets
($52,823,724) at June 30, 1998. The following acronyms are used
throughout this portfolio:

ADR --American Depository Receipt
AG --Aktiengsellschaft
GDR --Global Depository Receipt
PLC --Public Limited Company
SA --Support Agreement
SPA --Standby Purchase Agreement

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated International Equity Fund II

June 30, 1998 (unaudited)

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated International Equity Fund II

Six Months Ended June 30, 1998 (unaudited)

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated International Equity Fund II

(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated International Equity Fund II

(For a share outstanding throughout each period)

** Per share information presented is based upon the monthly average number
of shares outstanding.

(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated International Equity Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated International Equity Fund
II (the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to obtain a total return on its
assets.

Significant Accounting Policies

Investment Valuations

Repurchase Agreements

Investment Income, Expenses and Distributions

Federal Taxes

Federated International Equity Fund II

When-Issued and Delayed Delivery Transactions

Foreign Exchange Contracts

The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund may enter into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Contracts to
purchase are used to acquire exposure to foreign currencies; whereas, contracts
to sell are used to hedge the Fund's securities against currency fluctuations.
Risks may arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.

Use of Estimates

Other
Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

Federated International Equity Fund II

Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

Portfolio Accounting Fees

Fserv maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

Organizational Expenses

General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Concentration of Credit Risk

Year 2000

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1998, were as follows:

Purchases $52,068,634
Sales $48,214,002

TRUSTEES

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer,

and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

[LOGO OF FEDERATED INVESTORS]

Federated
International
Equity Fund II

Federated Insurance Series

Semi-Annual Report
to Shareholder
June 30, 1998

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Cusip 313916603
G00433-06 (8/98) [recycled logo]

PRESIDENT'S MESSAGE

Dear Shareholder:

I'm pleased to present your Semi-Annual Report to Shareholders for Federated
Prime Money Fund II, a portfolio of Federated Insurance Series.

The Report covers the six-month reporting period from January 1, 1998 through
June 30, 1998. It begins with an investment review by the fund's portfolio
manager, which is followed by a complete listing of the fund's holdings and its
financial statements.

This high-quality money market fund keeps your ready cash pursuing daily income
while keeping your principal stable.* And, you have convenient, daily access to
your money.

To help provide a competitive daily yield, the fund invests in a diversified
portfolio of high-quality money market securities. At the end of the six-month
reporting period, the portfolio was invested in repurchase agreements (32.5%),
commercial paper (29.3%), variable rate notes (20.0%), short-term notes (9.7%),
and certificates of deposit (8.4%).

During the six-month reporting period, the fund paid a total of $0.02 per share
in dividends to shareholders while maintaining a stable $1.00 share price. On
June 30, 1998, net assets reached $78.3 million.

Thank you for choosing Federated Prime Money Fund II to put your cash to work
pursuing income every day. We'll continue to keep you up to date on your
investment, and we welcome your comments and suggestions.

Sincerely,

/s/J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1998

* Although money market funds seek to maintain a share value of $1.00, there is
no guarantee that they will do so. An investment in the fund is neither
insured nor guaranteed by the U.S. government.

INVESTMENT REVIEW

Federated Prime Money Fund II (the "Fund") invests in money market instruments
maturing in 397 days or less. The average maturity of these securities, computed
on a dollar weighted basis, is restricted to 90 days or less. Portfolio
securities must be rated in one of the two highest short-term rating categories
by one or more of the nationally recognized statistical rating organizations or
be of comparable quality to securities having such ratings. Typical security
types include, but are not limited to, commercial paper, certificates of
deposit, time deposits, variable rate instruments and repurchase agreements.

During the first half of 1998, inflation remained subdued although inflationary
pressures were building. The strength in domestic consumer spending and housing
was offset by the turbulence in many Asian economies and a domestic inventory
overhang as imports to the U.S. exceeded exports. Monetary policy remained on
hold throughout the first half of 1998 due to the continued problems in Asia,
despite strong domestic economic growth. Nevertheless, the Federal Reserve Board
(the "Fed") maintained a bias toward tightening due to strong domestic growth,
tight labor markets and rapidly rising labor costs. The dampening inflationary
effects of the emerging markets and domestic inventory adjustments could prove
to be temporary and inflationary pressures could rise.

Market interest rates should remain in a narrow trading range throughout the
second half of 1998. The 30-day commercial paper rate began 1998 at a high of
5.56% and traded as low as 5.43% on January 22, 1998. Thirty-day commercial
paper has traded around the federal funds target rate of 5.50% throughout the
first half of 1998. Ninety-day commercial paper rates have also traded within
this range as the yield curve remains extremely flat.

The target average maturity range for the Fund remained in the 35-45 day target
range for the entire period, reflecting a neutral position regarding Fed policy.
In structuring the Fund, there is continued emphasis placed on positioning 30-
35% of the Fund's core assets in variable rate demand notes and accomplishing a
modest barbell structure.

During the six months ended June 30, 1998, the net assets of the Fund increased
from $59.7 to $78.3 million while the 7-day net yield decreased from 5.10% to
4.94%.* The effective average maturity of the Fund on June 30, was 44 days.

* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings. Performance information does not reflect
the charges and expenses of a variable annuity or variable life insurance
contract.

PORTFOLIO OF INVESTMENTS

Federated Prime Money Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Short-Term Notes--9.7%
Banking--1.3%
$1,000,000 SALTS II Cayman Islands Corp., (Guaranteed by Bankers Trust International, PLC),
5.737%, 6/17/1999 $ 1,000,000
Brokerage--1.3%
1,000,000 Goldman Sachs & Co., 5.600%, 7/27/1998 1,000,000
Finance - Automotive--0.7%
500,000 Chase Manhattan Auto Owner Trust 1998-C, Class A1, 5.588%, 7/9/1999 499,944
52,176 Ford Credit Auto Owner Trust 1997-B, Class A-1, 5.748%, 10/15/1998 52,176
Total 552,120
Finance - Commercial--3.8%
2,000,000 CIT Group Holdings, Inc., 6.125% - 6.500%, 7/13/1998 - 9/1/1998 2,000,584
1,000,000 (b) Triangle Funding Ltd., 5.656%, 11/16/1998 1,000,000
Total 3,000,584
Finance - Equipment--0.4%
274,719 Caterpillar Financial Asset Trust 1997-B, Class A-1, 5.805%, 11/25/1998 274,719
Finance - Retail--0.6%
500,000 Associates Corp. of North America, 8.800%, 8/1/1998 501,158
Insurance--1.0%
295,306 Arcadia Automobile Receivables Trust 1998-A, Class A-1, (Guaranteed by FSA),
5.628%, 3/15/1999 295,306
500,000 WFS Financial 1998-B Owner Trust, Class A-1, (Guaranteed by FSA), 5.658%,
7/20/1999 500,000
Total 795,306
Recreation--0.6%
500,000 GreenTree Recreational, Equipment & Consumer Trust 1998-B, Class A-1, 5.668%,
7/15/1999 500,000
Total Short-Term Notes 7,623,887
Certificate of Deposit--8.4%
Banking--8.4%
1,000,000 Bankers Trust Co., New York, 6.000%, 9/9/1998 999,908
3,600,000 Societe Generale, Paris, 5.610% - 5.870%, 8/6/1998 - 4/27/1999 3,599,275
2,000,000 Svenska Handelsbanken, Stockholm, 5.755%, 4/6/1999 1,999,342
Total Certificates of Deposit 6,598,525
Commercial Paper--29.3%
Banking--10.1%
$3,000,000 Commonwealth Bank of Australia, Sydney, 5.490%, 11/12/1998 $2,938,695
1,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal de Belgique, Brussles),
5.500%, 11/9/1998 979,986
3,000,000 Gotham Funding Corp., 5.680%, 7/15/1998 2,993,373
1,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska Handelsbanken, Stockholm),
5.520%, 11/6/1998 980,373
Total 7,892,427
Brokerage--1.3%
1,000,000 Credit Suisse First Boston, Inc., 5.510%, 9/17/1998 988,062
Chemicals--1.1%
895,000 IMC Global, Inc., 5.710%, 7/22/1998 892,019
Finance - Automotive--2.5%
2,000,000 Chrysler Financial Corp., 5.540%, 8/19/1998 1,984,919
Finance - Commercial--6.4%
2,000,000 Greenwich Funding Corp., 5.520%, 9/8/1998 1,978,840
2,000,000 Sheffield Receivables Corp., 5.540%, 7/1/1998 2,000,000
1,000,000 Sheffield Receivables Corp., 5.525%, 8/25/1998 991,559
Total 4,970,399
Finance - Equipment--0.9%
700,000 Comdisco, Inc., 5.720%, 7/28/1998 696,997
Forest Products--0.3%
250,000 Temple-Inland, Inc., 6.150%, 7/9/1998 249,658
Industrial Products--0.9%
700,000 Praxair, Inc., 5.650%, 7/27/1998 697,144
Insurance--3.8%
2,000,000 CXC, Inc., 5.480%, 7/10/1998 1,997,260
1,000,000 Marsh & McLennan Cos., Inc., 5.400%, 12/14/1998 975,100
Total 2,972,360
Oil & Oil Finance--1.0%
800,000 Occidental Petroleum Corp., 5.680% - 5.700%, 7/6/1998 - 7/30/1998 798,610
Retail--1.0%
800,000 Safeway, Inc., 5.670% - 5.720%, 7/10/1998 - 9/29/1998 797,003
Total Commercial Paper 22,939,598
Principal
Amount Value
(a)Notes - Variable--20.0%
Banking--15.2%
$160,000 Alabama State IDA, (Wellborn Cabinet, Inc.), Tax Revenue Bonds, (Amsouth Bank N.A.,
Birmingham LOC), 5.750%, 7/1/1998 $160,000
1,000,000 Bankers Trust Co., New York, 5.770%, 7/1/1998 999,368
6,000 Capital One Funding Corp., Series 1995-A, (Bank One, Indianapolis, N.A. LOC), 5.630%, 6,000
7/2/1998
180,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque Paribas, Paris LOC),
5.770%, 7/2/1998 180,000
400,000 Edgefield County, SC, Series 1997 (Bondex Inc Project), (Marine Midland Bank N.A.,
Buffalo, NY LOC), 5.687%, 7/2/1998 400,000
185,000 Franklin County, OH, Edison Wielding, Series 1995, (Huntington National Bank, Columbus,
OH LOC), 5.780%, 7/2/1998 185,000
1,000,000 Kenny, Donald R. and Cheryl A., Series 1996-C, (Star Bank, NA, Cincinnati LOC),
5.710%, 7/2/1998 1,000,000
400,000 La-Man Corp., (SouthTrust Bank of Alabama, Birmingham LOC), 5.740%, 7/3/1998 400,000
1,725,012 (b)Liquid Asset Backed Securities Trust, Series 1997-1, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.656%, 7/15/1998 1,725,012
1,000,000 Long Lane Master Trust III, Series 1997-C, 5.749%, 8/3/1998 1,000,000
700,000 Lynn Haven, FL, Merrick Industries Inc. Project, Taxable Revenue Bond (Series 1998-B),
(Bank One, Ohio, N.A. LOC), 5.860%, 7/2/1998 700,000
565,000 Madison, WI Community Development Authority, Series 1997-B Hamilton Point Apts.,
(Bank One, Wisconsin, N.A. LOC), 5.760%, 7/2/1998 565,000
238,000 Maryland State IDFA, Human Genome, Series1994, (First National Bank of Maryland,
Baltimore LOC), 5.640%, 7/6/1998 238,000
275,000 Mississippi Business Finance Corp., Metalloy Project, (Comerica Bank, Detroit, MI LOC),
5.560%, 7/2/1998 275,000
1,000,000 Portage, IN, American Iron Oxide Co. Project (Series 1998-B), (Bank of Tokyo-Mitsubishi Ltd.
LOC), 5.925%, 7/2/1998 1,000,000
645,468 (b) Rabobank Optional Redemption Trust, Series 1997-101, 5.687%, 7/15/1998 645,468
370,000 Roby Company Ltd. Partnership, (Huntington National Bank, Columbus, OH LOC),
5.660%, 7/2/1998 370,000
135,000 Southeast Regional Holdings, LLC, Series 1995-A,
(Columbus Bank and Trust Co., GA LOC), 5.890%, 7/2/1998 135,000
1,750,000 Trap Rock Industries, Inc., Series 1997, (Corestates Bank
N.A., Philadelphia, PA LOC), 5.750%, 7/1/1998 1,750,000
191,000 Vista Funding Corp., Series 1994-A, (Fifth Third Bank of
Northwestern OH LOC), 5.660%, 7/2/1998 191,000
(a)Notes-Variable--continued
Insurance--4.8%
$ 1,000,000 General American Life Insurance Co., 5.860%, 7/21/1998 $ 1,000,000
1,000,000 Jackson National Life Insurance Co., 5.758%, 7/25/1998 1,000,000
710,975 (b) Liquid Asset Backed Securities Trust, Series 1997-3 Senior Notes, (Guaranteed by AMBAC),
5.658%, 9/28/1998 710,975
1,000,000 Travelers Insurance Company, 5.665%, 7/1/1998 1,000,000
Total 3,710,975
Total Notes-Variable 15,635,823
(c)Repurchase Agreements--32.5%
4,000,000 Fuji Government Securities, Inc., 5.880%, dated 6/30/1998, due 7/1/1998 4,000,000
4,000,000 Goldman Sachs Group, LP, 6.250%, dated 6/30/1998, due 7/1/1998 4,000,000
4,000,000 Morgan Stanley Group, Inc., 6.250%, dated 6/30/1998, due 7/1/1998 4,000,000
4,000,000 PaineWebber Group, Inc., 5.870%, dated 6/30/1998, due 7/1/1998 4,000,000
4,000,000 Salomon Brothers, Inc., 6.250%, dated 6/30/1998, due 7/1/1998 4,000,000
4,000,000 Societe Generale Securities Corp., 6.000%, dated 6/30/1998, due 7/1/1998 4,000,000
1,400,000 UBS Securities, Inc., 6.050%, dated 6/30/1998, due 7/1/1998 1,400,000
Total Repurchase Agreements 25,400,000
Total Investments (at amortized cost)(d) $78,197,833
</TABLE>
(a) Floating rate note with current rate and next reset date shown. (b) Denotes
a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1998, these securities amounted
to $4,081,455 which represents 5.2% of net assets.
(c) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($78,267,173) at June 30, 1998.

The following acronyms are used throughout this portfolio:

AMBAC --American Municipal Bond Assurance Corporation FSA -- Federal Security
Assurance IDA -- Industrial Development Authority IDFA - -Industrial Development
Finance Authority LLC -- Limited Liability Corporation LOC -- Letter of Credit
LP -- Limited Partnership PLC -- Public Limited Company

(See Notes which are an integral part of the Financial Statements)

STATEMENT OF ASSETS AND LIABILITIES

Federated Prime Money Fund II

June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Investments in repurchase agreements $25,400,000
Investments in securities 52,797,833
Total investments in securities, at amortized cost and value $78,197,833
Cash 35,089
Income receivable 379,367
Prepaid expenses 3,641
Total assets 78,615,930
Liabilities:
Income distribution payable 326,580
Accrued expenses 22,177
Total liabilities 348,757
Net Assets for 78,267,173 shares outstanding $78,267,173
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$78,267,173 / 78,267,173 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF OPERATIONS

Federated Prime Money Fund II

Six Months Ended June 30, 1998 (unaudited)

<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Interest $2,057,370
Expenses:
Investment advisory fee $ 180,118
Administrative personnel and services fee 61,987
Custodian fees 4,701
Transfer and dividend disbursing agent fees and expenses 8,688
Directors'/Trustees' fees 1,267
Auditing fees 6,516
Legal fees 2,534
Portfolio accounting fees 17,374
Share registration costs 2,534
Printing and postage 25,702
Insurance premiums 2,258
Miscellaneous 3,802
Total expenses 317,481
Waivers --
Waiver of investment advisory fee (27,707)
Net expenses 289,774
Net investment income $1,767,596
</TABLE>
(See Notes which are an integral part of the Financial Statements)

STATEMENT OF CHANGES IN NET ASSETS

Federated Prime Money Fund II

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 1,767,596 $ 2,970,896
Distributions to Shareholders--
Distributions from net investment income (1,767,596) (2,970,896)
Share Transactions--
Proceeds from sale of shares 146,696,237 247,591,033
Net asset value of shares issued to shareholders in payment of distributions declared 1,442,263 2,968,806
Cost of shares redeemed (129,530,670) (236,555,828)
Change in net assets resulting from share transactions 18,607,830 14,004,011
Change in net assets 18,607,830 14,004,011
Net Assets:
Beginning of period 59,659,343 45,655,332
End of period $ 78,267,173 $ 59,659,343
</TABLE>
(See Notes which are an integral part of the Financial Statements)

FINANCIAL HIGHLIGHTS

Federated Prime Money Fund II

(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.01
Less distributions
Distributions from net investment income (0.02) (0.05) (0.05) (0.05) (0.01)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(b) 2.46% 4.93% 4.75% 5.20% 0.50%
Ratios to average net assets
Expenses 0.80%* 0.80% 0.80% 0.80% 0.80%*
Net investment income 4.91%* 4.84% 4.68% 5.12% 4.26%*
Expense waiver(c) 0.08%* 0.20% 0.57% 2.69% 71.84%*
Supplemental data
Net assets, end of period (000 omitted) $78,267 $59,659 $45,655 $17,838 $ 552
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 18, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 10,
1993 (start of business) to November 17, 1994, the Fund had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)

NOTES TO FINANCIAL STATEMENTS

Federated Prime Money Fund II

June 30, 1998 (unaudited)

Organization

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Prime Money Fund II (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to provide current income
consistent with stability of principal and liquidity.

Significant Accounting Policies

Investment Valuations

The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.

Repurchase Agreements

Investment Income, Expenses and Distributions

Federal Taxes

When-Issued and Delayed Delivery Transactions

Restricted Securities

Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule 2a-7
under the Act.

Additional information on the restricted securities held at June 30, 1998 are as
follows:

Acquisition Acquisition
Security Date Cost

Liquid Asset Backed Securities Trust, Series 1997-1 2/19/1997 $1,679,114
Liquid Asset Backed Securities Trust, Series 1997-3 6/27/1997 670,645
Rabobank Optional Redemption Trust, Series 1997-101 4/17/1997 608,093
Triangle Funding Ltd. 11/4/1997 1,000,000

Use of Estimates

Other
Investment transactions are accounted for on the trade date.

Shares of Beneficial Interest

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At June
30, 1998, capital paid-in aggregated $78,267,173.

<TABLE>
<CAPTION>
Transactions in shares were as follows:
Six Months
Ended
(unaudited) Year Ended
June 30, December 31,
1998 1997
<S> <C> <C>
Shares sold 146,696,237 247,591,033
Shares issued to shareholders in payment of distributions declared 1,442,263 2,968,806
Shares redeemed (129,530,670) (236,555,828)
Net change resulting from share transactions 18,607,830 14,004,011
</TABLE>

Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee

Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

Transfer and Dividend Disbursing Agent Fees and Expenses

Organizational Expenses

Organizational expenses of $22,431 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five-year period following the Fund's effective
date. For the period ended June 30, 1998, the Fund was fully amortized.

Portfolio Accounting Fees

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

Year 2000

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

TRUSTEES

John F. Donahue

Thomas G. Bigley

John T. Conroy, Jr.

Nicholas P. Constantakis

William J. Copeland

J. Christopher Donahue

James E. Dowd, Esq.

Lawrence D. Ellis, M.D.

Edward L. Flaherty, Jr., Esq.

Peter E. Madden

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

Wesley W. Posvar

Marjorie P. Smuts

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle

Executive Vice President, Treasurer,

and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

[LOGO]
Federated
Prime Money
Fund II

Federated Insurance Series

Federated Securities Corp., Distributor

Federated Investors, Inc.
Federated Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

1-800-341-7400

www.federatedinvestors.com

Semi-Annual Report
to Shareholders
June 30, 1998

Cusip 313916504
G00433-05 (8/98)