FEDERATED INSURANCE SERIES, N-30D/A, 2000-02-28

FEDERATED INSURANCE SERIES
N-30D/A, 2000-02-28

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ANNUAL REPORT

President's Message

Dear Shareholder:

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

This report covers the 12-month reporting period from January 1, 1999 through
December 31, 1999. 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
financial statements.

As a shareholder, your money has been at work in a diversified portfolio of
leading American corporations. At the end of the 12-month reporting period, the
fund's stock holdings were diversified across 11 key business and industrial
sectors. Many of the holdings-including Anheuser-Busch, AT&T, Boeing, CBS,
Deere, Exxon, Ford, General Motors, K-Mart, Merck, Nabisco, Union Pacific, and
Wal-Mart-are household names.

In a positive, yet highly volatile stock market, the fund's portfolio produced a
total return of 6.67%. 1 Contributing to the total return were income
distributions of $0.20 per share and capital gains distributions of $2.04 per
share. Fund assets reached $477 million at the end of the reporting period.

Thank you for choosing Federated American Leaders Fund II as a diversified,
professionally managed way to participate in the long-term growth potential of
leading American companies. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

1 Performance quoted represents past performance and is no guarantee 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 great bull market of the 1990s rolled on in 1999 as the Standard & Poor's
500 Index (S&P 500) returned 21.0%. 1 1999 represented an unprecedented fifth
consecutive year of 20+% returns for the S&P 500. However, like 1998, the
market's advance was narrow as a handful of Technology stocks led the market
increases. 1999 was an extremely difficult year for value managers. Across the
entire capitalization spectrum, growth stocks ruled on the strength of the
Technology sector. The Russell 1000 Growth Index returned 33.1% while the
Russell 1000 Value Index returned 7.3%. The Russell Midcap Growth Index returned
51.2% while the Russell Midcap Value Index returned (0.1%). The Russell 2000
Growth Index returned 43.1% while the Russell 2000 Value Index returned (1.5%).2
Eleven stocks, nine of which were Technology-related, provided two-thirds of the
S&P 500's return of 21.0%. The year-end run up by the Technology sector was awe-
inspiring. During the last 52 trading days of the year, the NASDAQ 100 Index
returned 57% and the Goldman Sachs Internet Index returned 63%.3 The market's
obsession with the Internet and the build-out of the Internet infrastructure has
created one of the most challenging market environments of the century. For
those companies which appear to be positioned correctly for the "new" economy,
valuation does not matter and no price is high enough to pay to participate. On
the other side of the ledger, there appears in the market no price low enough to
own those stocks which are out of favor. Over one-third of the stocks in the
fund's portfolio are now trading at less than 11 times next year's earnings. The
S&P 500 currently trades at 30 times next year's earnings.

1 The S&P 500 is a capitalization-weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries. This
index is unmanaged, and investments cannot be made in an index.

2 The Russell 1000 Growth Index measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell Midcap Growth Index measures the performance of those Russell Midcap
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell Midcap Value Index measures the performance of those Russell Midcap
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 2000 Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
These indexes are unmanaged, and investments cannot be made in an index.

3 The NASDAQ-100 Index is a capitalization-weighted index and includes 100 of
the largest non-financial companies, domestic and foreign, in the NASDAQ
National Market. The Goldman Sachs Internet Index is an index of leading
internet stocks. These indexes are unmanaged, and investments cannot be made in
an index.

The fund returned 6.67% 4 for the fiscal year ended December 31, 1999,
underperforming our peer Lipper Multi-Cap Value Funds which returned 7.78%.5 The
fund's performance was impacted by an underweight in the Technology sector as
well as disappointing performances from a number of our Capital Goods and
Financial holdings. In those sectors our value disciplines led us to some of the
attractively valued second tier names, which did not perform as well as the
ultra-large but less attractively valued leaders. We are obviously not pleased
with this year's performance, but we maintain faith in the value disciplines
which have served us well over the long term-identifying leading companies which
are temporarily out of favor and which appear inexpensive compared to their
history relative to the market, as well as to their expected growth.

Our stock market outlook remains basically unchanged-the market appears
overvalued by all traditional measures, but no visible catalyst is positioned to
change this. The recent parabolic run-up in the Technology and Internet areas of
the market definitely makes us nervous, as the speculation present in a large
portion of these names is unprecedented in our lifetimes. However, valuations
and fundamentals outside this area of the market seem reasonable and sustainable
given the healthy global economic environment, as well as the muted inflationary
pressures in our own economy. In the Financial and Cyclical segments of the
market, valuations are extremely compelling, with many names trading between 7
and 11 times next year's earnings. Given the valuation disparities between the
"haves" and "have nots," combined with the speculative bubble which continues to
grow in the areas of the market mentioned above, we believe that there is a high
probability of the market rotating back towards more reasonably valued stocks,
despite what happens to the market directionally. We believe that the fund's
portfolio is well positioned if such a market rotation were to occur.

4 Performance quoted represents past performance and in no guarantee 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.

5 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.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 22,306,099 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1-all portfolios of Federated Insurance Series voting
together.

<TABLE>

WITHHELD
AUTHORITY
FOR TO VOTE
<S> <C> <C>
Thomas G. Bigley 240,211,548 7,152,692
Nicholas P. Constantakis 239,928,312 7,435,928
John F. Cunningham 240,226,307 7,137,933
Charles F. Mansfield, Jr. 240,298,855 7,065,386
John E. Murray, Jr., J.D., S.J.D. 240,016,672 7,347,569
John S. Walsh 240,224,615 7,139,625

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,770,812 768,517 1,169,537

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,717,902 821,426 1,169,537

</TABLE>

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,760,400 778,928 1,169,537

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,704,803 834,526 1,169,537

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,783,728 755,601 1,169,537

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,711,941 827,388 1,169,537

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,736,313 803,016 1,169,537

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,701,884 837,444 1,169,537

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,710,697 828,631 1,169,537

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,044,370 1,105,055 1,559,441

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED AMERICAN LEADERS FUND II

"Graphic representation "A" omitted. See Appendix."

<TABLE>

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED DECEMBER 31, 1999
<S> <C>
1 Year 6.67%
5 Years 21.97%
Start of Performance (2/10/94) 18.22%

</TABLE>

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated American Leaders Fund II (the "Fund") from February 10, 1994 (start of
performance) to December 31, 1999, compared to the Standard & Poor's 500 Index
(S&P 500)2 and the Lipper Growth and Income Funds Average (LGIFA).3

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. YOUR INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGIFA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.

2 The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.

3 The LGIFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

SHARES VALUE
<C> <S> <C>
COMMON STOCKS-97.4%
BASIC MATERIALS-4.7%
265,876 Archer-Daniels-Midland Co. $ 3,240,364
156,500 Corn Products
International, Inc. 5,125,375
127,000 Nucor Corp. 6,961,188
79,200 PPG Industries, Inc. 4,954,950
199,500 1 Pactiv Corp. 2,119,688
TOTAL 22,401,565
CAPITAL GOODS-10.8%
156,400 Boeing Co. 6,500,375
110,900 Deere & Co. 4,810,287
101,000 Honeywell International, Inc. 5,826,437
93,400 Ingersoll-Rand Co. 5,142,837
67,700 Johnson Controls, Inc. 3,850,437
54,576 Koninklijke (Royal)
Philips Electronics NV, ADR 7,367,760
116,200 Parker-Hannifin Corp. 5,962,513
59,700 Textron, Inc. 4,578,244
135,682 Tyco International Ltd. 5,274,638
125,900 Waste Management, Inc. 2,163,906
TOTAL 51,477,434
COMMUNICATION SERVICES-7.1%
150,350 AT&T Corp. 7,630,262
110,500 BellSouth Corp. 5,172,781
121,500 GTE Corp. 8,573,344
103,700 SBC Communications, Inc. 5,055,375
105,200 U.S. West, Inc. 7,574,400
TOTAL 34,006,162
CONSUMER CYCLICALS-11.8%
101,900 Block (H&R), Inc. 4,458,125
125,400 Brunswick Corp. 2,790,150
114,800 Cooper Tire & Rubber Co. 1,786,575
106,539 Delphi Auto Systems Corp. 1,677,989
75,400 1 Federated Department

Stores, Inc. 3,812,412
93,600 Ford Motor Co. 5,001,750
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-CONTINUED
75,600 General Motors Corp. $ 5,495,175
256,800 1 K Mart Corp. 2,584,050
75,400 Knight-Ridder, Inc. 4,486,300
95,400 Liz Claiborne, Inc. 3,589,425
225,000 News Corp. Ltd., ADR 7,523,437
161,600 Sherwin-Williams Co. 3,393,600
282,200 1 Toys 'R' Us, Inc. 4,038,988
80,900 Wal-Mart Stores, Inc. 5,592,213
TOTAL 56,230,189
CONSUMER STAPLES-9.8%
58,600 Anheuser-Busch Cos., Inc. 4,153,275
113,805 CBS Corp. 7,276,407
129,900 Kimberly-Clark Corp. 8,475,975
202,200 Nabisco Group Holdings Corp. 2,148,375
143,300 Philip Morris Cos., Inc. 3,322,769
220,700 Sara Lee Corp. 4,869,194
86,500 1 Tricon Global Restaurants, Inc. 3,341,063
212,400 UST, Inc. 5,349,825
131,800 1 Viacom, Inc., Class A 7,965,663
TOTAL 46,902,546
ENERGY-6.5%
151,400 Ashland, Inc. 4,986,737
103,500 Diamond Offshore Drilling, Inc. 3,163,219
88,618 Exxon Mobil Corp. 7,139,288
90,900 Royal Dutch Petroleum Co., ADR 5,493,769
77,900 Schlumberger Ltd. 4,381,875
104,100 Sunoco, Inc. 2,446,350
15,081 Transocean Sedco Forex, Inc. 508,056
110,300 USX-Marathon Group 2,723,031
TOTAL 30,842,325
FINANCIALS-14.1%
66,371 2 ABB AB, ADR 7,603,395
166,500 Allstate Corp. 3,996,000
90,700 Bank of America Corp. 4,552,006
132,594 Bear Stearns Cos., Inc. 5,668,393
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
FINANCIALS-CONTINUED
56,600 CIGNA Corp. $ 4,559,837
309,400 CIT Group, Inc., Class A 6,536,075
391,221 Conseco, Inc. 6,993,075
119,200 First Union Corp. 3,911,250
113,200 Lincoln National Corp. 4,528,000
74,900 Loews Corp. 4,545,494
90,500 MBIA, Inc. 4,779,531
57,500 Marsh & McLennan Cos., Inc. 5,502,031
168,100 Washington Mutual, Inc. 4,370,600
TOTAL 67,545,687
HEALTH CARE-7.6%
115,000 Abbott Laboratories 4,175,937
77,500 Baxter International, Inc. 4,867,969
67,600 Bristol-Myers Squibb Co. 4,339,075
481,800 1 Healthsouth, Corp. 2,589,675
70,100 Merck & Co., Inc. 4,701,081
244,200 1 Oxford Health Plans, Inc. 3,098,288
138,000 Pharmacia & Upjohn, Inc. 6,210,000
118,700 United Healthcare Corp. 6,305,938
TOTAL 36,287,963
TECHNOLOGY-19.2%
77,300 1 Computer Sciences Corp. 7,314,512
49,300 Eastman Kodak Co. 3,266,125
123,100 Electronic Data Systems Corp. 8,240,006
153,900 First Data Corp. 7,589,194
136,900 Galileo International, Inc. 4,098,444
56,200 International Business

Machines Corp. 6,069,600
79,700 1 Lexmark International
Group, Class A 7,212,850
63,500 Motorola, Inc. 9,350,375
225,500 1 Novell, Inc. 9,005,906
124,200 1 Seagate Technology, Inc. 5,783,063
243,000 1 Storage Technology Corp. 4,480,313
192,400 1 Sun Microsystems, Inc. 14,898,975
137,000 1 Unisys Corp. 4,375,438
TOTAL 91,684,801
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS-continued
TRANSPORTATION-0.9%
100,600 Union Pacific Corp. $ 4,388,675
UTILITIES-4.9%
157,400 Entergy Corp. 4,053,050
82,200 FPL Group, Inc. 3,519,187
145,700 P G & E Corp. 2,986,850
142,100 PECO Energy Co. 4,937,975
115,300 Public Service Enterprises
Group, Inc. 4,013,881
178,900 Reliant Energy, Inc. 4,092,338
TOTAL 23,603,281
TOTAL COMMON STOCKS
(IDENTIFIED COST
$387,555,173) 465,370,628
REPURCHASE AGREEMENT-2.6% 3
$ 12,585,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized cost) 12,585,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$400,140,172) 4 $ 477,955,628

</TABLE>

1 Non-income producing security.

2 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's Board of Trustees. At December 31, 1999, these
securities amounted to $7,603,395 which represents 1.6% of net assets.

3 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 joint
accounts with other Federated funds.

4 The cost of investments for federal tax purposes amounts to $400,518,354. The
net unrealized appreciation of investments on a federal tax basis amounts to
$77,437,274, which is comprised of $121,150,225 appreciation and $43,712,951
depreciation at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($477,426,042) at December 31, 1999.

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

DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$400,140,172 and tax
cost $400,518,354) $ 477,955,628
Cash 540
Income receivable 672,760
Receivable for investments
sold 283,520
Receivable for shares sold 990,170
TOTAL ASSETS 479,902,618
LIABILITIES:
Payable for investments
purchased $ 2,430,188
Accrued expenses 46,388
TOTAL LIABILITIES 2,476,576
Net assets for 22,931,011
shares outstanding $ 477,426,042
NET ASSETS CONSIST OF:
Paid in capital $ 382,634,562
Net unrealized
appreciation of
investments 77,815,456
Accumulated net realized
gain on investments 12,657,352
Undistributed net
investment income 4,318,672
TOTAL NET ASSETS $ 477,426,042
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$477,426,042 / 22,931,011
shares outstanding $20.82

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $58,108) $ 7,911,333
Interest 401,817
TOTAL INCOME 8,313,150
EXPENSES:
Investment adviser fee $ 3,393,514
Administrative personnel
and services fee 341,128
Custodian fees 28,608
Transfer and dividend
disbursing agent fees and
expenses 48,419
Directors'/Trustees' fees 4,600
Auditing fees 12,243
Legal fees 7,999
Portfolio accounting fees 92,312
Share registration costs 26,876
Printing and postage 32,964
Insurance premiums 1,632
Miscellaneous 3,034
TOTAL EXPENSES 3,993,329
EXPENSE REDUCTION:
Fees paid indirectly from
broker arrangements (10,910)
Net investment income 4,330,731
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 13,177,434
Net change in unrealized
appreciation of
investments 10,004,857
Net realized and
unrealized gain on
investments 23,182,291
Change in net assets
resulting from operations $ 27,513,022

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 4,330,731 $ 3,898,554
Net realized gain on
investments ($13,064,865
and $39,177,380,
respectively, as computed
for federal tax purposes) 13,177,434 38,726,749
Net change in unrealized
appreciation on
investments 10,004,857 14,436,779
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 27,513,022 57,062,082
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net

investment income (3,909,272) (1,591,758)
Distributions from net
realized gain on

investments (39,204,562) (20,469,565)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS

TO SHAREHOLDERS (43,113,834) (22,061,323)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 139,737,593 115,497,228
Net asset value of shares
issued to shareholders in
payment of
distributions declared 43,113,823 22,060,601
Cost of shares redeemed (108,036,281) (60,142,932)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 74,815,135 77,414,897
Change in net assets 59,214,323 112,415,656
NET ASSETS:
Beginning of period 418,211,719 305,796,063
End of period (including
undistributed net
investment income of
$4,318,672 and $3,897,213,
respectively) $ 477,426,042 $ 418,211,719

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR END DECEMBER 31 1999 1998
1997 1996 1995
<S> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $21.68 $19.63
$15.26 $12.80 $ 9.74
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.19 0.20
0.19 0.19 0.20
Net realized and unrealized gain on investments 1.19 3.20
4.64 2.54 3.06
TOTAL FROM INVESTMENT OPERATIONS 1.38 3.40
4.83 2.73 3.26
LESS DISTRIBUTIONS:
Distributions from net investment income (0.20) (0.10)
(0.10) (0.18) (0.19)
Distributions in excess of net investment income 1 -
- - - - (0.01)
Distributions from net realized gain on investments (2.04) (1.25)
(0.36) (0.09) -
TOTAL DISTRIBUTIONS (2.24) (1.35)
(0.46) (0.27) (0.20)
NET ASSET VALUE, END OF PERIOD $20.82 $21.68
$19.63 $15.26 $12.80
TOTAL RETURN 2 6.67% 17.62%
32.34% 21.58% 33.71%

RATIOS TO AVERAGE NET ASSETS:
Expenses 0.88% 0.88%
0.85% 0.85% 0.85%
Net investment income 0.95% 1.06%
1.18% 1.54% 2.03%
Expense waiver/reimbursement 3 - 0.01%
0.09% 0.22% 1.36%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $477,426 $418,212
$305,796 $142,216 $48,514
Portfolio turnover 29%
58% 56% 90% 43%

</TABLE>

1 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.

2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

3 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

DECEMBER 31, 1999

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 11 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
transactions.

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 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. The Fund, along with other affiliated
investment companies, may utilize a joint trading account for the purpose of
entering into one or more 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"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at fair value.

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 provision for federal tax is
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. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.

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 a trade basis.

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>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
Shares sold 6,640,732 5,676,003
Shares issued to
shareholders in payment of
distributions declared 2,130,129 1,061,627
Shares redeemed (5,132,532) (3,023,452)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 3,638,329 3,714,178

</TABLE>

MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER 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 a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholders
Services Company ("FSSC"), the Fund may pay FSSC up to 0.25% of the average
daily net assets of the Fund for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
For the year ended December 31, 1999, the Fund did not incur a shareholder
services fee.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary 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.

EXPENSE REDUCTION

The Trust directs certain portfolio trades to a broker, that in turn, pays a
portion of the Trust's operating expenses. For the year ended December 31, 1999,
the Trust's expenses were reduced by $10,910 under these arrangements.

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1999 were as follows:

<TABLE>

<S> <C>
Purchases $155,503,722
Sales $126,691,638

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES

AND SHAREHOLDERS OF FEDERATED AMERICAN LEADERS FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated American Leaders Fund II (the "Fund")
(a portfolio of Federated Insurance Series) (the "Trust"), as of December 31,
1999, the related statement of operations for the year then ended, the statement
of changes in net assets for the years ended December 31, 1999 and 1998, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 1999, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated American
Leaders Fund II as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

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.

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated American Leaders Fund II

Federated Insurance Series

ANNUAL REPORT

TO SHAREHOLDER

DECEMBER 31, 1999

[Graphic]
Federated

Federated American Leaders Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916405

G00843-01 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

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

Federated Equity Income Fund II is managed to help your money earn income and
grow in value by investing primarily in a diversified portfolio of
dividend-paying stocks. At the end of the reporting period, the fund's 88 common
and convertible preferred stock holdings were diversified across key business
and industrial sectors. Many of the holdings--such as Allstate, AT&T,
BankAmerica, Bristol-Myers Squibb, Disney, DuPont, Mobil, Ford, General
Electric, Home Depot, Intel, IBM, PepsiCo, and Sprint-- are household names.

Over the 12-month reporting period, the fund produced a total return of 18.39%
through income distributions totaling $0.23 per share, capital gains
distributions totaling $0.18 per share, and a $2.13 increase in net asset value.
1 By the end of the reporting period, the fund's net assets reached $88 million.

Thank you for choosing Federated Equity Income Fund II as a diversified,
professionally managed way to participate in the income and growth potential of
American companies. We trust you were pleased with the positive performance of
your investment. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

1 Past performance is no guarantee 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
contract.

Investment Review

The Standard & Poor's 500 Index ("S&P 500") has just completed its fifth
consecutive year of 20%+ gains. Much like last year, however, this remarkable
performance was attributed to a relatively small number of stocks. Merrill Lynch
reports that just 15 companies provided 100% of the S&P 500's return in 1999.
Nearly 60% of the stocks in the S&P 500 had negative returns for the year. It
was also the second consecutive year in which "growth" stocks dramatically
outperformed "value" stocks. According to Ned Davis Research, Inc.,
large-capitalization growth stocks outperformed large-capitalization value
stocks by 25.9% in 1999.

Federated Equity Income Fund II had an outstanding year, returning 18.39% 2
compared to the 3.34% return of the average equity income fund, as reported by
Lipper Analytical Services, Inc.3 This performance places the fund solidly in
the top decile among all equity income funds for the one-year and three-year
periods ending December 31, 1999.

This performance has been achieved by consistently choosing market-leading
companies within a strategy of sector weightings similar to that of the S&P 500.
During the late summer/early fall stock market correction, the fund outperformed
the S&P 500 with its conservative strategy. Income is achieved through the use
of convertible bonds and preferred stocks. Further, approximately 71% of the
fund's holdings is in common stocks which have raised their dividends in each of
the last ten years.

The U.S. economy continues to be very strong and international economies are
improving. Such strength has led to inflation fears, as reflected in the rising
yield on the 30-year treasury bond. The Federal Reserve Board is expected to
increase short term interest rates early in the new year, in an effort to cool
the economy and prevent inflation. A "soft landing" with continued low inflation
could allow this longest bull market on record to continue into the new
millennium.

As always, we thank you for your continued support.

1 The S&P 500 Index is a 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. This index is unmanaged, and investments cannot be made in an
index.

2 Past performance and is no guarantee 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.

3 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.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 4,831,383 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1--all portfolios of Federated Insurance Series voting
together.

<TABLE>

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,389,194 194,962 245,475

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,397,912 186,245 245,475

</TABLE>

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,403,682 180,475 245,475

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,383,985 200,171 245,475

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,407,121 177,035 245,475

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,394,181 189,975 245,475

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,401,560 182,596 245,475

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,383,813 190,343 245,475

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,404,572 179,585 245,475

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
4,260,398 280,352 288,883

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED EQUITY INCOME FUND II

"Graphic representation "B" omitted. See Appendix."

<TABLE>

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED DECEMBER 31, 1999
<S> <C>
1 Year 18.39%
Start of Performance (1/30/97) 18.23%

</TABLE>

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated Equity Income Fund II (the "Fund") from January 30, 1997 (start of
performance) to December 31, 1999 compared to the Standard & Poor's 500 Index
(S&P 500)2 and the Lipper Equity Income Fund Index (LEIFI).2

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LEIFI have been adjusted to reflect
reinvestment of dividends on securities in the indices.

2 The S&P 500 and the LEIFI are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indices are unmanaged.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

SHARES VALUE
<C> <S> <C>
COMMON STOCKS--70.6%
BASIC MATERIALS--1.6%
21,686 Du Pont (E.I.) de Nemours &
Co. $ 1,428,565
CAPITAL GOODS--5.8%
12,900 Emerson Electric Co. 740,137
12,600 General Electric Co. 1,949,850
8,100 Ingersoll-Rand Co. 446,006
23,000 Pitney Bowes, Inc. 1,111,188
10,900 Textron, Inc. 835,894
TOTAL 5,083,075
COMMUNICATION SERVICES--6.1%
17,700 AT&T Corp. 898,275
18,000 GTE Corp. 1,270,125
25,269 1 MCI Worldcom, Inc. 1,340,836
21,714 SBC Communications, Inc. 1,058,558
11,300 Sprint Corp. 760,631
TOTAL 5,328,425
CONSUMER CYCLICALS--7.1%
30,000 Cooper Tire & Rubber Co. 466,875
25,000 Ford Motor Co. 1,335,938
24,086 Home Depot, Inc. 1,651,362
26,400 New York Times Co., Class A 1,296,900
40,500 TJX Cos., Inc. 827,719
9,400 Whirlpool Corp. 611,588
TOTAL 6,190,382
CONSUMER STAPLES--8.2%
9,000 1 AT&T Corp. - Liberty Media
Group, Inc., Class A 510,750
33,400 General Mills, Inc. 1,194,050
22,800 Heinz (H.J.) Co. 907,725
22,100 Kimberly-Clark Corp. 1,442,025
28,400 PepsiCo, Inc. 1,001,100
9,100 Procter & Gamble Co. 997,019
39,000 Walt Disney Co. 1,140,750
TOTAL 7,193,419
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued

ENERGY--5.5%

15,800 BP Amoco PLC, ADR $ 937,137
8,800 Chevron Corp. 762,300
34,896 Conoco, Inc., Class B 868,038
27,781 Mobil Corp. 2,238,107
TOTAL 4,805,582
FINANCIALS--12.0%
17,000 Allstate Corp. 408,000
11,781 BankAmerica Corp 591,259
11,700 Chase Manhattan Corp. 908,944
5,100 Chubb Corp. 287,194
35,900 Citigroup, Inc. 1,994,694
17,400 Federal Home Loan Mortgage
Corp. 818,887
19,600 First Union Corp. 643,125
7,800 Lincoln National Corp. 312,000
10,100 Marsh & McLennan Cos., Inc. 966,444
26,400 Mellon Bank Corp. 899,250
10,200 Merrill Lynch & Co., Inc. 851,700
10,300 Morgan Stanley, Dean
Witter & Co. 1,470,325
9,400 Post Properties, Inc. 359,550
TOTAL 10,511,372
HEALTH CARE--9.3%
27,600 Abbott Laboratories 1,002,225
14,900 Baxter International, Inc. 935,906
22,800 Bristol-Myers Squibb Co. 1,463,475
13,500 Johnson & Johnson 1,257,188
20,200 Pharmacia & Upjohn, Inc. 909,000
30,500 Schering Plough Corp. 1,286,719
16,300 Warner-Lambert Co. 1,335,581
TOTAL 8,190,094
TECHNOLOGY--13.4%
12,553 1 Apple Computer, Inc. 1,290,605
8,300 1 Cisco Systems, Inc. 889,137
9,700 Intel Corp. 798,431
15,100 International Business

Machines Corp. 1,630,800
9,100 1 Lexmark International
Group, Inc., Class A 823,550
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued

TECHNOLOGY--CONTINUED

17,500 Motorola, Inc. $ 2,576,875
30,300 1 Sun Microsystems, Inc. 2,346,356
22,000 1 Tellabs, Inc. 1,412,125
TOTAL 11,767,879
UTILITIES--1.6%
30,726 Enron Corp. 1,363,466
TOTAL COMMON STOCKS
(IDENTIFIED COST $48,255,947) 61,862,259
CONVERTIBLE PREFERRED
STOCKS--12.4%
BASIC MATERIALS--1.2%

32,000 Monsanto Co., Conv. Pfd.,
$2.60 1,060,000
CAPITAL GOODS--1.6%
31,000 Crown Cork & Seal Co.,
Inc., Conv. Pfd., $1.89 643,250
30,300 Ingersoll-Rand Co., DECS,
6.75% 772,650
TOTAL 1,415,900
COMMUNICATION SERVICES--1.3%
560,000 Comcast Corp., Conv. Pfd.,
$1.42 546,000
2,800 NEXTLINK Communications,
Inc., Conv. Pfd., $.81 537,250
TOTAL 1,083,250
CONSUMER STAPLES--2.2%
7,100 Cox Communications, Inc.,
PRIDES, $.88 482,800
4,000 Cox Communications, Inc.,
PRIDES, $1.71, Series

Sprint PCS Group 389,000
11,800 Ralston Purina Co., SAILS,
$1.08 431,438
10,300 2 Suiza Foods Corp., Conv.
Pfd., $2.75 356,802
8,500 Suiza Foods Corp., Conv.
Pfd., $2.75 294,449
TOTAL 1,954,489
FINANCIALS--1.3%

30,800 Conseco, Inc., Cumulative
PRIDES, Series F, $3.50 719,950
800 Jefferson-Pilot Corp.,
Conv. Pfd., $5.26 67,000
17,100 Lincoln National Corp.,
Cumulative PRIDES, $1.94 376,200
TOTAL 1,163,150
TECHNOLOGY--3.0%

16,400 Amdocs Automatic Com
Exchange Ltd., Conv. Pfd.,
$.38 526,850
16,600 Metromedia Fiber Network

DECS Trust VI, Inc., $.62 771,900
11,500 PsiNet, Inc., Conv. Pfd.,
$.84 671,313
11,000 2 Verio, Inc., Conv. Pfd.,
$.84 621,500
TOTAL 2,591,563
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED
STOCKS--continued

TRANSPORTATION--0.8%
16,000 Union Pacific CapTrust.,
Conv. Pfd. $ 666,032
UTILITIES--1.0%
20,650 Texas Utilities Co.,
Cumulative PRIDES, $4.63 900,856
TOTAL PREFERRED STOCKS
(IDENTIFIED COST
$11,756,056) 10,835,240
CONVERTIBLE CORPORATE
BONDS--14.4%
COMMUNICATION SERVICES--0.7%

500,000 2 Liberty Media Group, Conv.
Bond, 4.00%, 11/15/2029,
Series Sprint PCS Group 628,060
CONSUMER CYCLICALS--0.7%
100,000 Omnicom Group, Inc., Conv.
Bond, 4.25%, 1/3/2007 318,960
150,000 Omnicom Group, Inc., Sub.
Deb., 2.25%, 1/6/2013 306,273
TOTAL 625,233
TECHNOLOGY--13.0%

350,000 2 ASM Lithography Holding
NV, Conv. Bond, 4.25%,
11/30/2004 423,398
120,000 America Online, Inc.,
Conv. Pfd., 4.00%,
11/15/2002 1,390,716
1,000,000 Citrix Systems, Inc.,
Conv. Bond, 3/22/2019,
Registered 894,760
1,500,000 2 Citrix Systems, Inc.,
Conv. Bond, 3/22/2019 1,342,140
305,000 EMC Corp. Mass, Conv. Bond,
3.25%, 3/15/2002 2,944,650
130,000 Exodus Communications,
Inc., Conv. Bond, 5.00%,
3/15/2006 1,012,350
130,000 LSI Logic Corp., Conv.
Bond, 4.25%, 3/15/2004,
Registered 296,319
300,000 2 LSI Logic Corp., Conv.
Bond, 4.25%, 3/15/2004 683,814
880,000 Veritas Software Corp.,
Conv. Bond, 1.856%,
8/13/2006 2,387,713
TOTAL 11,375,860
TOTAL CONVERTIBLE
CORPORATE BONDS
(IDENTIFIED COST $5,650,059) 12,629,153
REPURCHASE AGREEMENT--3.6% 3
$ 3,195,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized cost) 3,195,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$68,857,062) 4 $ 88,521,652

</TABLE>

1 Non-income producing security.

4 The cost of investments for federal tax purposes amounts to $68,902,254. The
net unrealized appreciation of investments on a federal tax basis amounts to
$19,613,398 which is comprised of $23,555,492 appreciation and $3,936,094
depreciation at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($87,618,171) at December 31, 1999.

The following acronyms are used throughout this portfolio:

ADR --American Depositary Receipt
DECS --Dividend Enhanced Convertible Stock
PLC --Public Limited Company

PRIDES --Preferred Redeemable Increased Dividend Equity Securities
SAILS --Stock Appreciation Income Linked Security
STRYPES --Structured Yield Product Exchangeable for Stock

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

ASSETS:
Total investments in
securities, at value
(identified cost
$68,857,062 and tax
cost $68,902,254) $ 88,521,652
Cash 2,210
Income receivable 86,472
Receivable for investments
sold 2,082
Receivable for shares sold 84,382
TOTAL ASSETS 88,696,798
LIABILITIES:
Payable for investments
purchased $ 1,033,903
Payable for shares
redeemed 3,460
Accrued expenses 40,255
TOTAL LIABILITIES 1,077,618
Net assets for 5,381,787
shares outstanding $ 87,619,180
NET ASSETS CONSIST OF:
Paid in capital $ 68,717,939
Net unrealized
appreciation of
investments 19,664,590
Accumulated net realized
loss on investments (1,764,782)
Undistributed net
investment income 1,001,433
TOTAL NET ASSETS $ 87,619,180
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$87,619,180 / 5,381,787
shares outstanding $16.28

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED DECEMBER 31, 1999

INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $1,907) $ 1,407,568
Interest 234,885
TOTAL INCOME 1,642,453
EXPENSES:
Investment adviser fee $ 508,829
Administrative personnel
and services fee 125,000
Custodian fees 7,825
Transfer and dividend
disbursing agent fees and
expenses 32,491
Directors'/Trustees' fees 2,069
Auditing fees 12,859
Legal fees 7,639
Portfolio accounting fees 47,714
Share registration costs 6,865
Printing and postage 16,688
Insurance premiums 1,292
Miscellaneous 7,434
TOTAL EXPENSES 776,705
WAIVER AND EXPENSE
REDUCTION:
Waiver of investment

adviser fee $ (136,005)
Fees paid directly from
directed brokerage
arrangements (1,009)
TOTAL WAIVER AND EXPENSE
REDUCTION (137,014)
Net expenses 639,691
Net investment income 1,002,762
REALIZED AND UNREALIZED
GAIN(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on
investments and foreign
currency (1,715,760)
Net change in unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 12,941,056
Net realized and
unrealized gain (loss) on
investments and
foreign currency 11,225,296
Change in net assets
resulting from operations $ 12,228,058

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 1,002,762 $ 939,160
Net realized gain (loss) on
investments and foreign
currency transactions
($(1,719,590) and
$759,986, respectively, as
computed for federal tax
purposes) (1,715,760) 785,704
Net change in unrealized
appreciation 12,941,056 5,149,795
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 12,228,058 6,874,659
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net

investment income (939,566) (211,620)
Distributions from net

realized gains (760,548) (9,563)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS

TO SHAREHOLDERS (1,700,114) (221,183)
SHARE TRANSACTIONS:
Proceeds from sale of shares 26,465,248 21,185,637
Net asset value of shares
issued to shareholders in
payment of
distributions declared 1,700,112 221,183
Cost of shares redeemed (8,573,130) (3,436,527)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 19,592,230 17,970,293
Change in net assets 30,120,174 24,623,769
NET ASSETS:
Beginning of period 57,499,006 32,875,237
End of period (including
undistributed net
investment income of
$1,001,433 and $938,787,
respectively) $ 87,619,180 $ 57,499,006

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1997 1
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.15 $12.31 $10.47
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.22 2 0.22 0.23
Net realized and
unrealized gain (loss) on
investments and
foreign currency 2.32 1.69 1.76
TOTAL FROM INVESTMENT
OPERATIONS 2.54 1.91 1.99
LESS DISTRIBUTIONS:
Net investment income (0.23) (0.07) (0.15)
Realized gain on
investments (0.18) - -
TOTAL DISTRIBUTIONS (0.41) (0.07) (0.15)
NET ASSET VALUE, END OF
PERIOD $16.28 $14.15 $12.31
TOTAL RETURN 3 18.39% 15.57% 19.19%

RATIOS TO AVERAGE NET
ASSETS:

Expenses 0.94% 0.93% 0.85% 4
Net investment income 1.48% 2.04% 2.41% 4
Expense
waiver/reimbursement 5 0.20% 0.43% 1.44% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $87,618 $57,499 $32,875
Portfolio turnover 49% 59% 68%

</TABLE>

1 Reflects operations for the period from January 30, 1997 (date of initial
public investment) to December 31, 1997.

2 Calculated using the average shares method.

3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

4 Computed on an annualized basis.

5 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

DECEMBER 31, 1999

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 11 portfolios. The financial
statements included herein are only those of Federated Equity Income 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 Fund's investment objective is to provide above average income and
capital appreciation.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

U.S. government securities, listed 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 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 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to redesignation of distributions. The
following reclassifications have been made to the financial statements.

<TABLE>

INCREASE/(DECREASE)
UNDISTRIBUTED
NET INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
<S> <C> <C>
($2) $276 ($274)

</TABLE>

FEDERAL TAXES

At December 31, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $1,719,590 which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire in
2007.

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. Losses may occur in these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.

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 Board of 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.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

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>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
Shares sold 1,773,765 1,639,612
Shares issued to
shareholders in payment of
distributions declared 119,642 16,731
Shares redeemed (574,863) (264,192)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 1,318,544 1,392,151

</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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 for certain operating expenses, 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 a scale that ranges from 0.15% to 0.075% of the
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per
each additional class.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund may pay FSSC up to 0.25% of the average
daily net assets of the Fund for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
For the year ended December 31, 1999, the Fund did not incur a shareholder
services fee.

DISTRIBUTION SERVICES FEE

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's shares.
The Plan provides that the Fund may incur distribution expenses up to 0.25% of
the average daily net assets of the Fund shares, annually, to compensate FSC.
For the period ended December 31. 1999. the Fund did not incur a distribution
services 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.

EXPENSE REDUCTION

The Fund directs certain portfolio trades to a broker that, in turn, pays a
portion of the Fund's operating expenses. For the year ended December 31, 1999,
the Fund's expenses were reduced by $1,009 under these arrangements.

GENERAL

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

INTERFUND TRANSACTIONS

During the period ended December 31, 1999, the Fund engaged in purchase and sale
transactions with funds that have a common investment adviser (or affiliated
investment advisers), common Directors/Trustees, and/or common Officers. These
purchase and sales transactions complied with Rule 17a-7 under the Act and
amounted to $157,463 and $501,319, respectively.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the period ended December 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $50,755,656
Sales $31,971,475

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES AND

SHAREHOLDERS OF FEDERATED EQUITY INCOME FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Equity Income Fund II (a portfolio of
Federated Insurance Series) (the "Trust") as of December 31, 1999, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended December 31, 1999 and 1998, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Equity
Income Fund II as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated Equity Income Fund II

Federated Insurance Series

ANNUAL REPORT

TO SHAREHOLDERS

DECEMBER 31, 1999

[Graphic]
Federated

Federated Equity Income Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916801

G00433-09 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

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

The fund is managed to help shareholders pursue long-term growth through a
highly diversified portfolio of mid- and large-capitalization stocks selected
for their strong price and earnings momentum. At the end of the 12-month
reporting period, the fund's stock holdings were diversified across 11 key
business and industrial sectors. Many of the holdings-- including Amazon.com,
Anheuser-Busch, America Online, General Electric, Home Depot, Johnson & Johnson,
Merrill Lynch, Procter & Gamble, Sprint, and Wal-Mart--are household names.

In a positive and highly volatile year for stocks, this diversified stock
portfolio produced an outstanding total return of 72.42% through an increase in
the value of its holdings. 1 During the reporting period, net assets of the fund
more than doubled, reaching $132.6 million on December 31, 1999.

Thank you for choosing Federated Growth Strategies Fund II as a diversified,
professionally managed way to participate in the long-term growth potential of
American companies. We trust you were pleased with the performance of your
investment. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

Investment Review

Federated Growth Strategies Fund II had a very good year, gaining 72.42%. 1 The
average fund within the Lipper2 Multi-Cap Growth Fund universe was up 52.34%,
the Standard & Poor's 500 Index (S&P 500)3 produced a return of 21.05%, while
the mid cap stocks as represented by the S&P 400 Midcap Index3 returned 14.72%
in the year. The fund outperformed its peers through relative sector weightings
and stock selection. Overweighted sectors included Technology, Communication
Services (mainly wireless and new competitive carrier stocks) and Consumer
Cyclicals. Successful underweighting occurred within most economically sensitive
sectors, such as Utilities, Energy and Finance. The fund was underweight in
Health Care, the third strongest sector (driven by several volatile biotechs
late in the year), and consequently, failed to capture most of that sector's
performance. Exceptionally strong stocks were primarily in the Technology and
included Qualcomm, Oracle, Citrix, Nokia and EMC.

The fund made very modest strategic changes within the portfolio during the
year. The largest change in sector weighting occurred in Technology, which
mostly by virtue of its strong performance went from 32% of the fund to 39%.
Relative to the S&P 500, however, this was a modest decline in weight. The
median market capitalization of the fund crept up to $15.7 billion, due to the
strong performance of some of our larger cap names.

The stock market was up strongly for the year, and the main catalyst was, not
surprisingly, Technology. The U.S. market clamored to get at technology-related
and, to a lesser but still large degree, communications-related stocks. The
market was enamored with Technology's prospects for strong earnings growth,
driven in no small part by Internet developments. Higher interest rates did not
hinder this enthusiasm. The market took all Federal Reserve Board (the "Fed")
announcements as constructive, whether the Fed was tightening, biased to tighten
or even neutral. Also inconsequential were signs that economies across both
oceans were generally improving and that inflation, albeit still at low levels,
was picking up. Breadth improved throughout the year as Year 2000 fears
generated no discernible flight to liquidity.

The fund's strategy is to provide shareholders with diversified exposure to
growth equities. Growth stocks have tended to do well in environments where
economic growth is decelerating and interest rates are declining. That was not
the case this year, however. The economy proved strong, interest rates moved up
and yet, growth did well. In hindsight, it appears that the strong growth of
technology stocks was so compelling that investors bought them (and shunned
cyclicals) despite an environment ideal for "value" stocks. We believe that more
modest economic growth is ahead and that interest rates should remain moderate.
These factors will probably be required for growth stocks to do well into the
next year.

2 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.

3 S&P 500 and S&P 400 Midcap Index are composite indexes of common stocks in
industry, transportation, and financial and public utility companies. These
indexes are unmanaged, and investments cannot be made in an index.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 3,877,702 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1--all portfolios of Federated Insurance Series voting
together.

<TABLE>

WITHHELD
AUTHORITY

FOR TO VOTE
<S> <C> <C>
Thomas G. Bigley 240,211,548 7,152,692
Nicholas P. Constantakis 239,928,312 7,435,928
John F. Cunningham 240,226,307 7,137,933
Charles F. Mansfield, Jr. 240,298,855 7,065,386
John E. Murray, Jr., J.D., S.J.D. 240,016,672 7,347,569
John S. Walsh 240,224,615 7,139,625

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,608,487 118,309 148,364

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,618,883 107,913 148,364

</TABLE>

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,627,708 99,088 148,364

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,618,335 108,461 148,364

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,629,570 97,226 148,364

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,621,172 105,624 148,364

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,622,646 104,150 148,364

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,618,565 108,231 148,364

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,623,700 103,096 148,364

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
3,564,685 116,179 194,296

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED GROWTH STRATEGIES FUND II

"Graphic representation "C" omitted. See Appendix."

<TABLE>

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED
DECEMBER 31, 1999
<S> <C>
1 Year 72.42%
Start of Performance (11/9/95) 33.32%

</TABLE>

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated Growth Strategies Fund II (the "Fund") from November 9, 1995 (start of
performance) to December 31, 1999 compared to the Standard & Poor's 500 Index
(S&P 500)2 and the Lipper Growth Fund Index (LGFI).3

Past performance is no guarantee of future performance. Your investment return
and principal value will fluctuate, so when shares are redeemed, they may be
worth more or less than their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGFI have been adjusted to reflect
reinvestment of dividends on securities in the indices.

2 The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.

3 The LGFI represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

SHARES VALUE
<C> <S> <C>
COMMON STOCKS--98.0%
BASIC MATERIALS--1.4%
12,100 Alcoa, Inc. $ 1,004,300
16,400 De Beers Cons Mines, ADR 474,575
5,700 Weyerhaeuser Co. 409,331
TOTAL 1,888,206
CAPITAL GOODS--4.6%
8,300 CTS Corp. 625,613
6,500 Corning, Inc. 838,094
7,000 General Electric Co. 1,083,250
12,900 Molex, Inc. 731,269
8,300 1 Sanmina Corp. 828,963
9,100 1 Solectron Corp. 865,638
19,300 Tyco International Ltd. 750,288
5,600 United Technologies Corp. 364,000
TOTAL 6,087,115
COMMUNICATION SERVICES--
9.5%

27,000 1 AT&T Canada, Inc. 1,086,750
18,500 1 Adelphia Business
Solutions, Inc. 888,000
8,300 Alltel Corp. 686,306
19,700 Comcast Corp., Class A 996,081
8,400 1 Covad Communications
Group, Inc. 469,875
33,753 1 MCI Worldcom, Inc. 1,791,019
28,900 1 McLeodUSA, Inc., Class A 1,701,487
17,700 1 NEXTEL Communications,
Inc., Class A 1,825,312
6,500 1 Sprint PCS Group 666,250
8,500 Telephone and Data System,
Inc. 1,071,000
9,700 1 VoiceStream Wireless Corp. 1,380,431
TOTAL 12,562,511
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued

CONSUMER CYCLICALS--9.0%
900 1 AGENCY.COM, Inc. $ 45,900
5,400 1 Amazon.com, Inc. 411,075
31,400 1 BJ's Wholesale Club, Inc. 1,146,100
17,800 Circuit City Stores, Inc. 802,113
4,200 1 DoubleClick, Inc. 1,062,862
1,100 1 FreeMarkets, Inc. 375,444
38,600 1 Gemstar International

Group Ltd. 2,750,250
23,850 Home Depot, Inc. 1,635,215
19,100 1 MIPS Technologies, Inc. 993,200
11,200 Omnicom Group, Inc. 1,120,000
4,800 1 Rambus, Inc. 323,700
18,300 Wal-Mart Stores, Inc. 1,264,988
TOTAL 11,930,847
CONSUMER STAPLES--12.8%
42,900 1 AT&T Corp. - Liberty Media
Group, Inc., Class A 2,434,575
7,500 Anheuser-Busch Cos., Inc. 531,563
10,900 1 Cablevision SA, Class A 822,950
18,900 1 Charter Communications,
Inc. 413,438
7,100 1 Clear Channel
Communications, Inc. 633,675
9,400 Colgate-Palmolive Co. 611,000
20,600 1 Echostar Communications

Corp., Class A 2,008,500
11,700 Kimberly-Clark Corp. 763,425
10,800 Manpower, Inc. 406,350
32,500 News Corp. Ltd., ADR 1,243,125
10,800 Procter & Gamble Co. 1,183,275
9,700 Quaker Oats Co. 636,563
15,500 1 RCN Corp. 751,750
6,200 1 Spanish Broadcasting

System, Inc. 249,550
17,700 1 UnitedGlobalCom, Inc.,
Class A 1,250,063
9,900 1 Univision Communications,
Inc., Class A 1,011,656
14,000 1 Valassis Communications,
Inc. 591,500
12,800 1 Viacom, Inc., Class A 773,600
8,800 1 Westwood One, Inc. 668,800
TOTAL 16,985,358
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued

ENERGY--5.3%

12,400 1 Calpine Corp. $ 793,600
26,500 Diamond Offshore Drilling,
Inc. 809,906
39,700 ENSCO International, Inc. 908,138
14,700 Murphy Oil Corp. 843,413
33,200 1 Nabors Industries, Inc. 1,027,125
26,700 1 Noble Drilling Corp. 874,425
64,100 1 R&B Falcon Corp. 849,325
22,200 Weatherford International,
Inc. 886,613
TOTAL 6,992,545
FINANCE--7.3%

14,900 AFLAC, Inc. 703,093
5,400 American Express Co. 897,750
26,000 Citigroup, Inc. 1,444,625
11,700 Golden West Financial
Corp. 391,950
10,100 1 Knight/Trimark Group, Inc. 464,600
44,430 MBNA Corp. 1,210,717
5,500 Merrill Lynch & Co., Inc. 459,250
7,300 Morgan Stanley, Dean
Witter & Co. 1,042,075
10,100 PMI Group, Inc. 493,006
13,450 Providian Financial Corp. 1,224,790
16,100 1 Reckson Service
Industries, Inc. 1,004,237
9,400 Wells Fargo Co. 380,113
TOTAL 9,716,206
HEALTH CARE--7.0%
20,200 Allergan, Inc. 1,004,950
10,900 American Home Products
Corp. 429,869
11,500 1 Biogen, Inc. 971,750
13,200 Bristol-Myers Squibb Co. 847,275
11,900 1 Forest Labratories, Inc.,
Class A 731,106
9,400 Genentech, Inc. 1,264,300
20,504 Johnson & Johnson 1,909,435
11,500 Schering Plough Corp. 485,156
14,534 Warner-Lambert Co. 1,190,880
6,900 1 Wellpoint Health Networks,
Inc. 454,969
TOTAL 9,289,690
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued

TECHNOLOGY--39.4%

5,100 1 ASM Lithography Holding

NV, ADR $ 580,125
10,800 1 Alteon Websystems, Inc. 947,700
25,200 1 America Online, Inc. 1,901,025
1,900 1 Ariba, Inc. 337,013
4,000 1 Broadcom Corp. 1,089,500
19,600 1 Cisco Systems, Inc. 2,099,650
22,300 1 Citrix Systems, Inc. 2,742,900
1,600 1 Commerce One, Inc. 314,400
9,200 1 Conexant Systems, Inc. 610,650
10,200 1 Cree Research, Inc. 870,825
9,000 1 Cybersource Corp. 465,750
26,600 1 EMC Corp. Mass 2,906,050
22,700 1 Electronics for Imaging,
Inc. 1,319,437
18,400 1 Exodus Communications,
Inc. 1,634,150
4,700 1 F5 Networks, Inc. 535,800
200 1 Foundry Networks, Inc. 60,338
7,100 1 HNC Software 750,825
1,100 1 I2 Technologies, Inc. 214,500
16,800 1 Inktomi Corp. 1,491,000
2,000 1 Internap Network Services
Corp. 346,000
7,800 1 JDS Uniphase Corp. 1,258,237
1,700 1 Juniper Networks, Inc. 578,000
5,200 1 Lexmark International
Group, Class A 470,600
8,600 Lucent Technologies, Inc. 643,388
48,900 1 Mastech Corp. 1,210,275
22,000 1 Microsoft Corp. 2,568,500
10,400 Nokia Oyj, Class A, ADR 1,976,000
18,800 1 Oracle Corp. 2,106,775
7,500 1 PMC-Sierra, Inc. 1,202,343
11,300 1 PsiNet, Inc. 697,775
9,200 1 Qlogic Corp. 1,470,850
22,000 1 Qualcomm, Inc. 3,874,750
22,400 1 RF Micro Devices, Inc. 1,533,000
2,900 1 Satyam Infoway Ltd., ADR 449,500
8,800 1 Siebel Systems, Inc. 739,200
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS--continued

TECHNOLOGY--CONTINUED

33,000 1 Sun Microsystems, Inc. $ 2,555,438
4,400 Telefonaktiebolaget LM
Ericsson, Class B, ADR 289,025
20,100 1 Tellabs, Inc. 1,290,168
7,800 1 Verisign, Inc. 1,489,312
6,900 1 Visual Networks, Inc. 546,825
38,700 1 Vitesse Semiconductor

Corp. 2,029,331
29,600 1 Xilinx, Inc. 1,345,875
1,600 1 Yahoo!, Inc. 692,300
TOTAL 52,235,105
TRANSPORTATION--0.7%

20,100 Expeditors International

Washington, Inc. 880,631
UTILITIES--1.0%

30,500 Enron Corp. 1,353,437
TOTAL COMMON STOCKS
(IDENTIFIED COST
$74,817,852) 129,921,651
REPURCHASE AGREEMENT--3.4%
$ 4,500,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized
cost) 4,500,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$79,317,852) 2 $ 134,421,651

</TABLE>

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $79,501,015. The
net unrealized appreciation of investments on a federal tax basis amounts to
$54,920,636 which is comprised of $55,785,451 appreciation and $864,815
depreciation at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($132,563,308) at December 31, 1999.

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

DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$79,317,852 and tax cost
$79,501,015) $ 134,421,651
Cash 2,571
Income receivable 25,995
Receivable for investments
sold 423,895
Receivable for shares sold 100,833
TOTAL ASSETS 134,974,945
LIABILITIES:
Payable for investments
purchased $ 2,255,091
Payable for shares
redeemed 153,052
Accrued expenses 3,494
TOTAL LIABILITIES 2,411,637
Net assets for 4,292,241
shares outstanding $ 132,563,308
NET ASSETS CONSIST OF:
Paid in capital $ 67,030,450
Net unrealized
appreciation of
investments 55,103,799
Accumulated net realized
gain on investments 10,429,059
TOTAL NET ASSETS $ 132,563,308
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$132,563,308 / 4,292,241
shares outstanding $30.88

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $1,236) $ 266,245
Interest 119,662
TOTAL INCOME 385,907
EXPENSES:
Investment adviser fee $ 614,994
Administrative personnel
and services fee 125,000
Custodian fees 12,773
Transfer and dividend
disbursing agent fees and
expenses 20,465
Directors'/Trustees' fees 2,024
Auditing fees 12,866
Legal fees 3,142
Portfolio accounting fees 42,693
Share registration costs 2,336
Printing and postage 22,076
Insurance premiums 1,584
Miscellaneous 2,348
TOTAL EXPENSES 862,301
WAIVER AND EXPENSE
REDUCTION:
Waiver of investment

adviser fee (161,699)
Fees paid indirectly from
direct broker arrangements (3,103)
TOTAL WAIVER AND EXPENSE
REDUCTION (164,802)
Net expenses 697,499
Net operating loss (311,592)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 14,437,134
Net change in unrealized
appreciation of
investments 37,434,197
Net realized and
unrealized gain on
investments 51,871,331
Change in net assets
resulting from operations $ 51,559,739

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net operating loss $ (311,592) $ (132,611)
Net realized gain (loss) on
investments ($14,421,532
and ($3,497,705),
respectively, as computed
for federal tax purposes) 14,437,134 (3,589,862)
Net change in unrealized
appreciation on
investments 37,434,197 12,326,113
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 51,559,739 8,603,640
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net

investment income -- (47,544)
Distributions from net
realized gain on

investments -- (3,039,172)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS

TO SHAREHOLDERS -- (3,086,716)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 26,190,499 11,516,169
Net asset value of shares
issued to shareholders in
payment of
distributions declared -- 3,086,711
Cost of shares redeemed (7,933,607) (4,653,483)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 18,256,892 9,949,397
Change in net assets 69,816,631 15,466,321
NET ASSETS:
Beginning of period 62,746,677 47,280,356
End of period $ 132,563,308 $ 62,746,677

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998 1997 1996 1995 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.91 $16.14 $12.80 $10.30 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (net operating loss) (0.07) (0.04) 2 0.02 2 0.05 0.03
Net realized and unrealized gain on investments 13.04 2.83 3.41 2.45 0.27
TOTAL FROM INVESTMENT OPERATIONS 12.97 2.79 3.43 2.50 0.30
LESS DISTRIBUTIONS:
Distributions from net investment income -- (0.02) (0.02) (0.00) 3 --
Distributions from net realized gain on investments -- (1.00) (0.07) -- --
TOTAL DISTRIBUTIONS -- (1.02) (0.09) -- --
NET ASSET VALUE, END OF PERIOD $30.88 $17.91 $16.14 $12.80 $10.30
TOTAL RETURN 4 72.42% 17.44% 27.03% 24.32% 3.00%

RATIOS TO AVERAGE NET ASSETS:
Expenses 0.85% 0.86% 0.85% 0.85% 0.85% 5
Net investment income (0.38%) (0.25%) 0.14% 0.55% 1.91% 5
Expense waiver/reimbursement 6 0.20% 0.31% 0.67% 3.87% 76.95% 5
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $132,563 $62,747 $47,280 $16,985 $368
Portfolio turnover 117% 104% 148% 96% 4%

</TABLE>

1 Reflects operations for the period from November 9, 1995 (date of initial
public investment) to December 31, 1995.

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

3 Less than $0.01 per share.

4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

5 Computed on an annualized basis.

6 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

DECEMBER 31, 1999

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 11 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

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for net operating
losses. The following reclassifications have been made to the financial
statements.

<TABLE>

INCREASE (DECREASE)
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT
GAIN/LOSS INCOME
<S> <C>
($311,592) $311,592

</TABLE>

Net investment income, net realized gain/losses, and net assets were not
affected by this reclassification.

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
Shares sold 1,155,396 697,066
Shares issued to
shareholders in payment of
distributions declared -- 178,629
Shares redeemed (366,754) (300,599)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 788,642 575,096

</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary, 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.

EXPENSE REDUCTION

The Fund directs certain portfolio trades to a broker that in turn pays a
portion of the Fund's operating expenses. For the year ended December 31, 1999,
the Fund's expenses were reduced by $3,103 under these arrangements.

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
year ended December 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 110,999,468
Sales $ 94,620,516

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES AND SHAREHOLDERS OF
FEDERATED GROWTH STRATEGIES FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated Growth Strategies Fund II (the "Fund")
(a portfolio of Federated Insurance Series) (the "Trust") as of December 31,
1999, the related statement of operations for the year then ended, the statement
of changes in net assets for the year ended December 31, 1999 and 1998, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Growth
Strategies Fund II as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated Growth Strategies Fund II

Federated Insurance Series

ANNUAL REPORT TO SHAREHOLDERS

DECEMBER 31, 1999

[Graphic]
Federated

Federated Growth Strategies Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916702

G00433-07 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

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

It has been a difficult time for bond investors in general, as rising interest
rates have caused bond prices to decline. While the total return of the fund
reflected the weakness in bond prices, the fund continued to pay a strong income
stream.

Over the 12-month reporting period, the fund produced a total return of 2.31% 1
through income distributions totaling $0.86 per share and capital gains totaling
$0.07 per share. The fund's net asset value decreased by $0.68. At the end of
the reporting period, net assets of the fund totaled $239 million.

Thank you for choosing Federated High Income Bond Fund II as a diversified,
professionally managed way to participate in the income opportunities of
high-yield corporate bonds. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue
President
February 15, 2000

Investment Review

High yield bonds generated attractive relative returns in 1999 although absolute
returns were tempered by the general rise in interest rates and increasing
default rates. The spread between the First Boston High Yield Index 1 and U.S.
Treasury securities narrowed approximately 75 basis points, as 1998's emerging
market problems did not dampen domestic economic growth in 1999. In fact, strong
economic growth and the resilience of emerging market economies were the primary
drivers in the roughly 175 basis point rise in the yield on 10-year Treasuries,
which dampened the performance of most fixed income securities. Default rates,
which reached their highest level since 1991, also negatively impacted returns
for high yield securities. The rise in default rates despite a strong economy,
was the result of 1998's decline in energy prices. This decline impacted many
energy companies in early 1999 and the high level of issuance in the 1996- 1998
time period. Historically, there is a correlation between periods of heavy
issuance and defaults on a lagged basis. For the year as a whole, spread
tightening, coupled with the higher coupon returns available on high yield
securities, more than offset the increase in default losses. The Lehman Brothers
High Yield Bond Index1 returned 2.39%, outperforming the Lehman Brothers
Aggregate Bond Index,1 a measure of high quality bond performance, which
returned (0.82%).

The fund returned 2.31% for the 12-month reporting period ended December 31,
1999. 2 The fund's overweight in the telecommunication sector positively
impacted performance. Strong performers included Telesystem International,
Triton PCS, Nextel, Teligent and Millicom. The fund's overweight in cable TV and
broadcasting also aided performance. The fund also had a much lower default rate
than the approximately 4% rate for the market as a whole. Merger and acquisition
activity positively impacted total returns as companies such as Fox Liberty
Media, Alliance Imaging, Metronet and Statia Terminals engaged in transactions
which benefited bondholders. On the negative side, the fund's underweight in
energy hurt performance given the strong rebound in oil prices. Also, positions
in Paging Network, Ameriserve, Pillowtex, Dialog and Revlon negatively impacted
the fund's performance to disappointing financial results.

1 First Boston High Yield Bond Index is an index that serves as a benchmark to
evaluate the performance of low-quality bonds, which are defined as BBB to CCC
and defaults. Morningstar receives and publishes this figure as a monthly total
return. Lehman Brothers High Yield Bond Index is an index which includes fixed
rate, public nonconvertible, non-investment grade issues that are rated Ba1 or
lower by Moody's Investors Service, Inc. Lehman Brothers Aggregate Bond Index is
a total return index measuring both the capital price changes and income
provided by the underlying universe of securities, weighted by market value
outstanding. These indexes are unmanaged, and investments cannot be made in an
index.

2 Performance quoted represents past performance and is no guarantee 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.

Looking into 2000, we believe that strong economic growth worldwide, coupled
with attractive yield spreads, will lead to good relative performance for high
yield bonds. However, possible Federal Reserve Board rate increases to slow the
domestic economy, may temper absolute returns. We believe default rates, which
increased in 1999 to their highest level in eight years, will remain above
average for the next few quarters. However, given the high percentage of
securities currently trading at distressed levels, the performance impact of
these defaults have, to some degree, already been felt.

From a portfolio perspective, we continue to like the telecommunications sector,
as strong operating gains and consolidation activity provide opportunities for
strong relative returns. We also think that cable TV plant upgrades in both the
U.S. and western Europe will lead to strong performance by fund holdings in
companies such as UPC/United Pan European, NTL and Charter Communications. We
also believe that specific fund holdings in healthcare and chemicals, which
underperformed in 1999, are poised to rebound in 2000.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 22,446,137 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1-all portfolios of Federated Insurance Series voting
together.

<TABLE>
<CAPTION>
WITHHELD
AUTHORITY

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,245,984 755,913 1,428,257
</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,249,076 752,821 1,428,257
</TABLE>

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,237,380 764,518 1,428,257
</TABLE>

(d) To approve amending the fund's funda-mental investment policy regarding
investments in commodities.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,198,968 802,929 1,428,257
</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,248,655 753,243 1,428,257
</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,237,880 764,018 1,428,257
</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,224,208 777,690 1,428,257
</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,202,038 799,859 1,428,257
</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
20,233,067 768,830 1,428,257
</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
19,639,585 1,224,826 1,565,743
</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED HIGH INCOME BOND FUND II

"Graphic representation "D" omitted. See Appendix."

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999
1 Year 2.31%
5 Year 10.48%
Start of Performance (3/1/94) 8.22%

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated High Income Bond Fund II (the "Fund") from March 1, 1994 (start of
performance) to December 31, 1999, compared to the Lehman Brothers Single B
Rated Index (LBSBRI)2, and the Lipper High Current Yield Funds Average
(LHCYFA).3

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBSBRI and the LHCYFA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.

2 The LBSBRI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.

3 The LHCYFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-90.6%
AEROSPACE & DEFENSE-0.4%
$ 750,000 Anteon Corp., Sr. Sub.
Note, 12.00%, 5/15/2009 $ 701,250
325,000 1 Condor Systems, Inc., Sr.
Sub. Note, 11.875%,
5/1/2009 245,375
TOTAL 946,625
AUTO/TRUCK-0.5%
525,000 HDA Parts System, Inc., Sr.
Sub. Note, 12.00%,
8/1/2005 480,375
700,000 1 J.L. French Automotive
Castings, Inc., Sr. Sub.
Note, 11.50%, 6/1/2009 719,250
TOTAL 1,199,625
AUTOMOBILE-2.3%
675,000 Accuride Corp., Sr. Sub.
Note, 9.25%, 2/1/2008 624,375
425,000 Aftermarket Technology
Co., Sr. Sub. Note, 12.00%,
8/1/2004 428,187
350,000 Aftermarket Technology
Co., Sr. Sub. Note, Series
D, 12.00%, 8/1/2004 352,625
1,050,000 Collins & Aikman Products
Co., Sr. Sub. Note, 11.50%,
4/15/2006 1,044,750
1,600,000 1 Lear Corp., Sr. Note,
8.11%, 5/15/2009 1,517,008
850,000 Lear Corp., Sub. Note,
9.50%, 7/15/2006 862,750
750,000 Oxford Automotive, Inc.,
Sr. Sub. Note, 10.125%,
6/15/2007 697,500
TOTAL 5,527,195
AUTOMOTIVE-0.8%
1,000,000 American Axle &
Manufacturing, Inc.,
Company Guarantee, 9.75%,
3/1/2009 1,012,500
825,000 Motor Coach Industries
International, Inc.,
Company Guarantee, 11.25%,
5/1/2009 849,750
TOTAL 1,862,250
BANKING-0.8%
2,200,000 GS Escrow Corp., Sr. Note,
7.125%, 8/1/2005 1,996,918
BEVERAGE & TOBACCO-0.4%
400,000 Dimon, Inc., Sr. Note,
8.875%, 6/1/2006 350,000
500,000 National Wine & Spirits,
Inc., Sr. Note, 10.125%,
1/15/2009 510,000
TOTAL 860,000
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
BROADCAST RADIO & TV-5.8%
$ 1,150,000 ACME Television, LLC, Sr.
Disc. Note, 0/10.875%,
9/30/2004 $ 1,040,750
255,300 AMFM, Inc., Sr. Sub. Deb.,
12.625%, 10/31/2006 306,998
1,100,000 Big City Radio, Inc.,
Company Guarantee,
0/11.25%, 3/15/2005 715,000
450,000 Capstar Broadcasting
Partners, Inc., Sr. Sub.
Note, 9.25%, 7/1/2007 465,750
600,000 Chancellor Media Corp.,
Company Guarantee, 10.50%,
1/15/2007 657,000
2,675,000 Chancellor Media Corp.,
Sr. Sub. Note, 8.125%,
12/15/2007 2,691,719
800,000 Chancellor Media Corp.,
Sr. Sub. Note, 8.75%,
6/15/2007 812,000
250,000 Chancellor Media Corp.,
Sr. Sub. Note, 9.375%,
10/1/2004 257,500
900,000 Cumulus Media, Inc., Sr.
Sub. Note, 10.375%,
7/1/2008 945,000
2,475,000 Fox/Liberty Networks, LLC,
Sr. Disc. Note, 0/9.75%,
8/15/2007 2,004,750
250,000 Lamar Media Corp., Sr. Sub.
Note, 8.625%, 9/15/2007 246,250
550,000 Lamar Media Corp., Sr. Sub.
Note, 9.625%, 12/1/2006 570,625
1,000,000 Orion Network Systems, Sr.
Note, 11.25%, 1/15/2007 755,000
1,425,000 Sinclair Broadcast Group,
Inc., Sr. Sub. Note, 9.00%,
7/15/2007 1,346,625
650,000 Sinclair Broadcast Group,
Inc., Sr. Sub. Note,
10.00%, 9/30/2005 650,000
475,000 Young Broadcasting, Inc.,
Sr. Sub. Note, 10.125%,
2/15/2005 490,438
TOTAL 13,955,405
BUILDING & DEVELOPMENT-
1.5%
700,000 American Builders &
Contractors Supply Co.,
Inc., Sr. Sub. Note,
10.625%, 5/15/2007 647,500
475,000 Building Materials Corp.
of America, Sr. Note,
8.00%, Series B,
10/15/2007 431,062
450,000 Building Materials Corp.
of America, Sr. Note,
8.625%, Series B,
12/15/2006 429,750
975,000 Falcon Building Products,
Inc., Sr. Sub. Disc. Note,
0/10.50%, 6/15/2007 736,125
150,000 Falcon Building Products,
Inc., Sr. Sub. Note, 9.50%,
6/15/2007 146,250
925,000 Formica Corp., Sr. Sub.
Note, 10.875%, 3/1/2009 851,000
325,000 Juno Lighting, Inc., Sr.
Sub. Note, 11.875%,
7/1/2009 303,875
TOTAL 3,545,562
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
BUSINESS EQUIPMENT &
SERVICES-2.4%
$ 600,000 Avis Rent A Car, Inc., Sr.
Sub. Note, 11.00%,
5/1/2009 $ 633,000
975,000 1 Buhrmann US, Inc., Company
Guarantee, Sr. Sub. Note,
12.25%, 11/1/2009 1,018,875
1,100,000 Dialog Corp., Sr. Sub.
Note, Series A, 11.00%,
11/15/2007 533,500
300,000 Electronic Retailing
Systems International,
Inc., Sr. Disc. Note,
0/13.25%, 2/1/2004 67,500
1,875,000 Fisher Scientific
International, Inc., Sr.
Sub. Note, 9.00%, 2/1/2008 1,804,687
325,000 Fisher Scientific
International, Inc., Sr.
Sub. Note, 9.00%, 2/1/2008 312,812
1,750,000 U.S. Office Products Co.,
Sr. Sub. Note, 9.75%,
6/15/2008 918,750
400,000 United Stationers Supply
Co., Sr. Sub. Note, 12.75%,
5/1/2005 433,000
TOTAL 5,722,124
CABLE TELEVISION-10.5%
4,703 2 Australis Media Ltd., Sr.
Disc. Note, 5/15/2003 47
275,000 2 Australis Media Ltd.,
Unit, 0/15.75%, 5/15/2003 2,750
500,000 CSC Holdings, Inc., Sr.
Note, 7.875%, 12/15/2007 493,275
875,000 CSC Holdings, Inc., Sr.
Sub. Note, 9.25%,
11/1/2005 899,062
650,000 CSC Holdings, Inc., Sr.
Sub. Note, 9.875%,
5/15/2006 687,375
350,000 CSC Holdings, Inc., Sr.
Sub. Deb., 9.875%,
2/15/2013 370,125
2,000,000 Charter Communications
Holdings Capital Corp.,
Sr. Disc. Note, 0/9.92%,
4/1/2011 1,182,500
1,175,000 Diamond Cable
Communications PLC, Sr.
Disc. Note, 0/10.75%,
2/15/2007 969,375
525,000 Diamond Cable
Communications PLC, Sr.
Note, 9.125%, 2/1/2008 522,375
550,000 Diva Systems Corp., Sr.
Disc. Note, 0/12.625%,
3/1/2008 211,750
2,500,000 Echostar Communication
Corp., Sr. Note, 9.375%,
2/1/2009 2,531,250
2,325,000 International Cabletel,
Inc., Sr. Defd. Cpn. Note,
Series B, 0/11.50%,
2/1/2006 2,139,000
725,000 Lenfest Communications,
Inc., Sr. Sub. Note, 8.25%,
2/15/2008 728,625
1,050,000 NTL, Inc., Sr. Defd. Note,
Series B, 0/12.375%,
10/1/2008 742,875
3,875,000 NTL, Inc., Sr. Defd. Note,
0/9.75%, 4/1/2008 2,731,875
500,000 NTL, Inc., Sr. Note,
11.50%, 10/1/2008 545,000
825,000 Pegasus Communications
Corp., Sr. Note, 9.625%,
10/15/2005 837,375
525,000 Pegasus Communications
Corp., Sr. Note, 9.75%,
12/1/2006 536,812
300,000 Pegasus Media, Note,
12.50%, 7/1/2005 325,500
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
CABLE TELEVISION-CONTINUED
$ 1,150,000 RCN Corp., Sr. Disc. Note,
0/11.125%, 10/15/2007 $ 822,250
475,000 RCN Corp., Sr. Disc. Note,
0/9.80%, 2/15/2008 312,312
400,000 Rogers Cablesystems Ltd.,
Sr. Sub. Gtd. Note, 11.00%,
12/1/2015 452,000
2,325,000 TeleWest PLC, Sr. Disc.
Deb., 0/11.00%, 10/1/2007 2,185,500
400,000 TeleWest PLC, Sr. Note,
11.25%, 11/1/2008 439,000
1,175,000 UIH Australia/Pacific, Sr.
Disc. Note, 0/14.00%,
5/15/2006 998,750
4,325,000 United International
Holdings, Inc., Sr. Secd.
Disc. Note, 0/10.75%,
2/15/2008 2,789,625
1,300,000 1 United Pan-Europe
Communications NV, Sr.
Disc. Note, 0/13.375%,
11/1/2009 734,500
TOTAL 25,190,883
CHEMICALS & PLASTICS-5.0%
500,000 Buckeye Cellulose Corp.,
Sr. Sub. Note, 8.50%,
12/15/2005 491,250
900,000 Buckeye Cellulose Corp.,
Sr. Sub. Note, 9.25%,
9/15/2008 913,500
200,000 Foamex L.P., Sr. Sub. Note,
13.50%, 8/15/2005 189,000
700,000 General Chemical
Industrial Products, Inc.,
Sr. Sub. Note, 10.625%,
5/1/2009 696,500
550,000 1 Georgia Gulf Corp., Sr.
Sub. Note, 10.375%,
11/1/2007 576,812
1,250,000 1 Huntsman Corp., Sr. Sub.
Note, 9.50%, 7/1/2007 1,193,750
900,000 1 Huntsman ICI Chemicals
LLC, Sr. Sub. Note,
10.125%, 7/1/2009 927,000
475,000 ISP Holding, Inc., Sr.
Note, 9.75%, 2/15/2002 478,562
250,000 1 Lyondell Chemical Co., Sr.
Secd. Note, Series A,
9.625%, 5/1/2007 257,500
2,050,000 Lyondell Chemical Co., Sr.
Sub. Note, 10.875%,
5/1/2009 2,173,000
650,000 Polymer Group, Inc., Sr.
Sub. Note, 8.75%, 3/1/2008 627,250
2,075,000 Polymer Group, Inc., Sr.
Sub. Note, 9.00%, 7/1/2007 2,023,125
875,000 Sterling Chemicals
Holdings, Inc., Sr. Disc.
Note, 0/13.50%, 8/15/2008 258,125
675,000 Sterling Chemicals
Holdings, Inc., Sr. Sub.
Note, 11.75%, 8/15/2006 509,625
750,000 Texas Petrochemicals
Corp., Sr. Sub. Note,
11.125%, 7/1/2006 656,250
TOTAL 11,971,249
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
CLOTHING & TEXTILES-0.8%
$ 350,000 Collins & Aikman
Floorcoverings, Inc., Sr.
Sub. Note, 10.00%,
1/15/2007 $ 344,750
625,000 Dyersburg Corp., Sr. Sub.
Note, 9.75%, 9/1/2007 253,125
650,000 GFSI, Inc., Sr. Sub. Note,
9.625%, 3/1/2007 406,250
575,000 Glenoit Corp., Sr. Sub.
Note, 11.00%, 4/15/2007 146,625
150,000 Pillowtex Corp., Sr. Sub.
Note, 9.00%, 12/15/2007 65,250
1,350,000 Pillowtex Corp., Sr. Sub.
Note, 10.00%, 11/15/2006 627,750
TOTAL 1,843,750
CONGLOMERATES-0.4%
1,150,000 Eagle Picher Industries,
Inc., Sr. Sub. Note,
9.375%, 3/1/2008 1,012,000
CONSUMER PRODUCTS-3.8%
1,350,000 Albecca, Inc., Company
Guarantee, 10.75%,
8/15/2008 924,750
700,000 Amscan Holdings, Inc., Sr.
Sub. Note, 9.875%,
12/15/2007 595,000
1,150,000 Chattem, Inc., Sr. Sub.
Note, 8.875%, 4/1/2008 1,081,000
200,000 Diamond Brands Operating
Corp., Sr. Sub. Note,
10.125%, 4/15/2008 155,000
250,000 Diamond Brands, Inc., Sr.
Disc. Deb., 0/12.875%,
4/15/2009 51,250
750,000 NBTY, Inc., Sr. Sub. Note,
8.625%, 9/15/2007 701,250
1,025,000 Playtex Family Products
Corp., Sr. Sub. Note,
9.00%, 12/15/2003 1,022,437
625,000 Revlon Consumer Products
Corp., Sr. Note, 8.125%,
2/1/2006 462,500
2,250,000 Revlon Consumer Products
Corp., Sr. Sub. Note,
8.625%, 2/1/2008 1,158,750
450,000 Sealy Mattress Co.,
Company Guarantee,
0/10.875%, 12/15/2007 317,250
200,000 Sealy Mattress Co., Sr.
Sub. Note, 9.875%,
12/15/2007 199,000
250,000 1 Sleepmaster LLC, Sr. Sub.
Note, 11.00%, 5/15/2009 251,562
329,000 The Boyds Collection,
Ltd., Sr. Sub. Note, 9.00%,
5/15/2008 309,260
650,000 True Temper Sports, Inc.,
Sr. Sub. Note, 10.875%,
12/1/2008 624,000
500,000 United Industries Corp.,
Sr. Sub. Note, 9.875%,
4/1/2009 460,000
725,000 Volume Services America,
Inc., Sr. Sub. Note,
11.25%, 3/1/2009 717,750
TOTAL 9,030,759
CONTAINER & GLASS
PRODUCTS-0.4%
450,000 Owens-Illinois, Inc., Sr.
Note, 8.10%, 5/15/2007 432,000
725,000 Russell Stanley Holdings,
Inc., Sr. Sub. Note,
10.875%, 2/15/2009 634,375
TOTAL 1,066,375
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
ECOLOGICAL SERVICES &
EQUIPMENT-2.4%
$ 6,400,000 1 Allied Waste North
America, Inc., Sr. Sub.
Note, 10.00%, 8/1/2009 $ 5,728,000
ELECTRONICS-1.2%
300,000 1 Fairchild Semiconductor
Corp., Sr. Sub. Note,
10.375%, 10/1/2007 307,500
400,000 1 SCG Holding
Corp./Semiconductor
Components Industries,
LLC, Sr. Sub. Note, 12.00%,
8/1/2009 427,000
2,025,000 Telecommunications
Techniques Co., LLC, Sr.
Sub. Note, 9.75%,
5/15/2008 1,852,875
350,000 Viasystems, Inc., Sr. Sub.
Note, 9.75%, 6/1/2007 194,250
TOTAL 2,781,625
FARMING & AGRICULTURE-0.1%
225,000 1 Royster-Clark, Inc., 1st
Mtg. Note, 10.25%,
4/1/2009 205,875
FOOD & DRUG RETAILERS-0.1%
350,000 Community Distributors,
Inc., Sr. Note, 10.25%,
10/15/2004 299,250
750,000 2 Jitney-Jungle Stores of
America, Inc., Sr. Sub.
Note, 10.375%, 9/15/2007 9,375
TOTAL 308,625
FOOD PRODUCTS-1.8%
1,050,000 Agrilink Foods, Inc.,
Company Guarantee,
11.875%, 11/1/2008 1,060,500
500,000 Aurora Foods, Inc., Sr.
Sub. Note, 9.875%,
2/15/2007 508,750
550,000 Eagle Family Foods, Inc.,
Sr. Sub. Note, 8.75%,
1/15/2008 420,750
1,200,000 International Home Foods,
Inc., Sr. Sub. Note,
10.375%, 11/1/2006 1,251,000
1,100,000 1 Triarc Consumer Products
Group, LLC, Sr. Sub. Note,
10.75%, 2/15/2009 1,058,750
TOTAL 4,299,750
FOOD SERVICES-1.3%
700,000 Advantica Restaurant
Group, Sr. Note, 11.25%,
1/15/2008 532,000
225,000 AmeriServe Food
Distribution, Inc., Sr.
Note, 8.875%, 10/15/2006 131,625
2,000,000 AmeriServe Food
Distribution, Inc., Sr.
Sub. Note, 10.125%,
7/15/2007 690,000
800,000 Carrols Corp., 9.50%,
12/1/2008 732,000
925,000 Domino's, Inc., Company
Guarantee, 10.375%,
1/15/2009 894,937
TOTAL 2,980,562
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
FOREST PRODUCTS-0.7%
$ 50,000 Container Corp. of
America, Sr. Note, 11.25%,
5/1/2004 $ 52,375
525,000 Packaging Corp. of
America, Sr. Sub. Note,
9.625%, 4/1/2009 540,750
100,000 Stone Container Corp., Sr.
Note, 11.50%, 10/1/2004 103,875
800,000 Stone Container Corp., Sr.
Note, 12.58%, 8/1/2016 856,000
TOTAL 1,553,000
HEALTH CARE-3.9%
900,000 CONMED Corp., Sr. Sub.
Note, 9.00%, 3/15/2008 846,000
1,200,000 Columbia/HCA Healthcare
Corp., Sr. Note, 6.91%,
6/15/2005 1,092,336
1,175,000 Dade International, Inc.,
Sr. Sub. Note, 11.125%,
5/1/2006 1,157,375
525,000 Everest Healthcare
Services Corp., Sr. Sub.
Note, 9.75%, 5/1/2008 490,875
525,000 Genesis Health Ventures,
Inc., Sr. Sub. Note, 9.25%,
10/1/2006 217,875
350,000 Genesis Health Ventures,
Inc., Sr. Sub. Note,
9.875%, 1/15/2009 141,750
450,000 Hanger Orthopedic Group,
Inc., Sr. Sub. Note,
11.25%, 6/15/2009 464,625
275,000 Hudson Respiratory Care,
Inc., Sr. Sub. Note,
9.125%, 4/15/2008 221,375
1,275,000 Kinetic Concepts, Inc.,
Company Guarantee, Sr.
Sub. Note, Series B,
9.625%, 11/1/2007 949,875
200,000 Tenet Healthcare Corp.,
Sr. Note, 7.625%, 6/1/2008 186,500
1,700,000 Tenet Healthcare Corp.,
Sr. Note, 8.00%, 1/15/2005 1,644,750
200,000 Tenet Healthcare Corp.,
Sr. Sub. Note, 8.125%,
12/1/2008 190,500
1,550,000 Tenet Healthcare Corp.,
Sr. Sub. Note, 8.625%,
1/15/2007 1,499,625
225,000 1 Unilab Corp., Sr. Sub.
Note, 12.75%, 10/1/2009 235,125
TOTAL 9,338,586
HOTELS, MOTELS, INNS &
CASINOS-1.9%
350,000 Courtyard by Marriott II
LP, Sr. Note, 10.75%,
2/1/2008 345,625
1,625,000 Florida Panthers Holdings,
Inc., Company Guarantee,
9.875%, 4/15/2009 1,584,375
2,000,000 HMH Properties, Inc., Sr.
Note, Series B, 7.875%,
8/1/2008 1,810,000
900,000 HMH Properties, Inc., Sr.
Note, Series C, 8.45%,
12/1/2008 841,500
TOTAL 4,581,500
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
INDUSTRIAL PRODUCTS &
EQUIPMENT-3.8%
$ 800,000 Amphenol Corp., Sr. Sub.
Note, 9.875%, 5/15/2007 $ 836,000
400,000 1 Blount, Inc., Sr. Sub.
Note, 13.00%, 8/1/2009 424,000
400,000 Cabot Safety Acquisition
Corp., Sr. Sub. Note,
12.50%, 7/15/2005 410,000
750,000 Continental Global Group,
Inc., Sr. Note, 11.00%,
4/1/2007 393,750
800,000 Euramax International PLC,
Sr. Sub. Note, 11.25%,
10/1/2006 824,000
400,000 Hexcel Corporation, Sr.
Sub. Note, 9.75%,
1/15/2009 342,000
600,000 ISG Resources, Inc., Sr.
Sub. Note, 10.00%,
4/15/2008 513,000
225,000 International Utility
Structures, Inc., Sr. Sub.
Note, 10.75%, 2/1/2008 185,625
350,000 Johnstown America
Industries, Inc., Sr. Sub.
Note, 11.75%, 8/15/2005 357,875
375,000 Johnstown America
Industries, Inc., Sr. Sub.
Note, 11.75%, 8/15/2005 383,437
1,075,000 MMI Products, Inc., Sr.
Sub. Note, 11.25%,
4/15/2007 1,112,625
850,000 Neenah Corp., Sr. Sub.
Note, 11.125%, 5/1/2007 790,500
400,000 Neenah Corp., Sr. Sub.
Note, 11.125%, 5/1/2007 372,000
500,000 Unifrax Investment Corp.,
Sr. Note, 10.50%,
11/1/2003 505,000
1,775,000 WESCO Distribution, Inc.,
Sr. Sub. Note, 9.125%,
6/1/2008 1,677,375
TOTAL 9,127,187
LEISURE & ENTERTAINMENT-
2.2%

1,164,000 AMF Group, Inc., Sr. Sub.
Disc. Note, 0/12.25%,
3/15/2006 389,940
1,850,000 Premier Parks, Inc., Sr.
Disc. Note, 0/10.00%,
4/1/2008 1,285,750
250,000 Premier Parks, Inc., Sr.
Note, 9.25%, 4/1/2006 246,875
1,500,000 Premier Parks, Inc., Sr.
Note, 9.75%, 6/15/2007 1,509,375
2,475,000 Regal Cinemas, Inc., Sr.
Sub. Note, 9.50%, 6/1/2008 1,930,500
TOTAL 5,362,440
MACHINERY & EQUIPMENT-2.8%
348,000 Alvey Systems, Inc., Sr.
Sub. Note, 11.375%,
1/31/2003 363,660
900,000 Clark Material Handling
Corp., Sr. Note, 10.75%,
11/15/2006 283,500
300,000 Columbus McKinnon Corp.,
Sr. Sub. Note, 8.50%,
4/1/2008 259,500
875,000 Fairchild Corp., Sr. Sub.
Note, 10.75%, 4/15/2009 748,125
500,000 National Equipment
Services, Inc., Sr. Sub.
Note, 10.00%, 11/30/2004 503,750
775,000 National Equipment
Services, Inc., Sr. Sub.
Note, Series C, 10.00%,
11/30/2004 780,813
1,000,000 NationsRent, Inc., Company
Guarantee, 10.375%,
12/15/2008 982,500
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
MACHINERY & EQUIPMENT-
CONTINUED
$ 1,575,000 United Rentals, Inc.,
Company Guarantee, 9.25%,
1/15/2009 $ 1,515,938
850,000 United Rentals, Inc., Sr.
Sub. Note, 9.00%, 4/1/2009 803,250
525,000 WEC Co., Sr. Note, 12.00%,
7/15/2009 490,875
TOTAL 6,731,911
METALS & MINING-0.6%
1,025,000 1 AEI Holding Co., Inc., Sr.
Note, 10.50%, 12/15/2005 773,875
1,000,000 1 AEI Resources, Inc., Sr.
Sub. Note, 11.50%,
12/15/2006 655,000
TOTAL 1,428,875
OIL & GAS-2.6%
1,000,000 Continental Resources,
Inc., Sr. Sub. Note,
10.25%, 8/1/2008 885,000
300,000 DI Industries, Inc., Sr.
Note, 8.875%, 7/1/2007 277,500
700,000 Forest Oil Corp., Sr. Sub.
Note, 10.50%, 1/15/2006 719,250
900,000 Pogo Producing Co., Sr.
Sub. Note, Series B,
10.375%, 2/15/2009 931,500
1,300,000 R&B Falcon Corp., Sr. Note,
12.25%, 3/15/2006 1,443,000
500,000 R&B Falcon Corp., Sr. Note,
Series B, 6.75%, 4/15/2005 447,500
450,000 RBF Finance Co., Sr. Secd.
Note, 11.375%, 3/15/2009 486,000
600,000 Triton Energy Corp., Sr.
Note, 8.75%, 4/15/2002 604,500
750,000 Universal Compression
Holdings, Inc., Sr. Disc.
Note, 0/9.875%, 2/15/2008 465,938
TOTAL 6,260,188
PRINTING & PUBLISHING-0.3%
725,000 Garden State Newspapers,
Inc., Sr. Sub. Note, 8.75%,
10/1/2009 685,125
RETAILERS-0.2%
525,000 Leslie's Poolmart, Inc.,
Sr. Note, 10.375%,
7/15/2004 448,875
SERVICES-1.6%
625,000 Coinmach Corp., Sr. Note,
11.75%, 11/15/2005 646,875
3,050,000 Crown Castle International
Corp., Sr. Disc. Note,
0/10.375%, 5/15/2011 1,921,500
500,000 Crown Castle International
Corp., Sr. Disc. Note,
0/11.25%, 8/1/2011 315,000
425,000 SITEL Corp., Sr. Sub. Note,
9.25%, 3/15/2006 402,156
550,000 1 URS Corp., Sr. Sub. Note,
12.25%, 5/1/2009 578,875
TOTAL 3,864,406
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
STEEL-0.9%
$ 600,000 Metals USA, Inc., Sr. Sub.
Note, 8.625%, 2/15/2008 $ 567,000
500,000 National Steel Corp., 1st
Mtg. Bond, 9.875%,
3/1/2009 516,250
550,000 1 Republic Technologies
International, Inc., Unit,
13.75%, 7/15/2009 365,750
450,000 Ryerson Tull, Inc., Note,
8.50%, 7/15/2001 450,909
325,000 Ryerson Tull, Inc., Sr.
Note, 9.125%, 7/15/2006 323,811
TOTAL 2,223,720
SURFACE TRANSPORTATION-
2.1%

650,000 Allied Holdings, Inc., Sr.
Note, 8.625%, 10/1/2007 578,500
700,000 2 AmeriTruck Distribution
Corp., Sr. Sub. Note,
12.25%, 11/15/2005 38,500
1,000,000 Gearbulk Holding Ltd., Sr.
Note, 11.25%, 12/1/2004 1,032,500
750,000 Railworks Corp., Sr. Sub.
Note, 11.50%, 4/15/2009 763,125
750,000 Stena AB, Sr. Note, 8.75%,
6/15/2007 618,750
1,500,000 Stena AB, Sr. Note, 10.50%,
12/15/2005 1,380,000
300,000 Stena Line AB, Sr. Note,
10.625%, 6/1/2008 181,500
725,000 The Holt Group, Inc., Sr.
Note, 9.75%, 1/15/2006 474,875
TOTAL 5,067,750
TELECOMMUNICATIONS &
CELLULAR-24.2%
1,000,000 American Cellular Corp.,
Sr. Note, 10.50%,
5/15/2008 1,107,500
500,000 Arch Communications, Inc.,
Sr. Note, Series B, 12.75%,
7/1/2007 397,500
1,850,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/8.94%, 8/15/2008 920,375
1,600,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/9.27%, 8/15/2007 892,000
1,150,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/10.80%, 5/15/2009 557,750
900,000 Centennial Cellular Corp.,
Sr. Sub. Note, 10.75%,
12/15/2008 969,750
900,000 Dolphin Telecom PLC, Sr.
Disc. Note, 0/14.00%,
5/15/2009 418,500
700,000 E.Spire Communications,
Inc., Sr. Disc. Note,
0/12.75%, 4/1/2006 339,500
4,800,000 1 Global Crossing Holdings
Ltd., Sr. Note, 9.50%,
11/15/2009 4,770,000
900,000 Hermes Europe Railtel
B.V., Sr. Note, 10.375%,
1/15/2009 893,250
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
TELECOMMUNICATIONS &
CELLULAR-CONTINUED
$ 1,375,000 Hermes Europe Railtel
B.V., Sr. Note, 11.50%,
8/15/2007 $ 1,419,688
375,000 ICG Holdings, Inc., Sr.
Disc. Note, 0/12.50%,
5/1/2006 290,936
1,625,000 Intermedia Communications,
Inc., Sr. Disc. Note,
0/11.25%, 7/15/2007 1,210,625
1,400,000 Intermedia Communications,
Inc., Sr. Disc. Note,
0/12.50%, 5/15/2006 1,232,000
1,250,000 Intermedia Communications,
Inc., Series B, Sr. Disc.
Note, 0/12.25%, 3/1/2009 756,250
650,000 Intermedia Communications,
Inc., Sr. Note, 8.60%,
6/1/2008 602,875
450,000 Intermedia Communications,
Inc., Sr. Note, 8.875%,
11/1/2007 423,000
3,250,000 Level 3 Communications,
Inc., Sr. Disc. Note,
0/10.50%, 12/1/2008 1,990,625
2,775,000 Level 3 Communications,
Inc., Sr. Note, 9.125%,
5/1/2008 2,639,719
1,900,000 McLeod, Inc., Sr. Disc.
Note, 0/10.50%, 3/1/2007 1,567,500
250,000 McLeod, Inc., Sr. Note,
8.125%, 2/15/2009 233,125
375,000 McLeod, Inc., Sr. Note,
8.375%, 3/15/2008 354,375
400,000 McLeod, Inc., Sr. Note,
9.25%, 7/15/2007 402,000
375,000 McLeod, Inc., Sr. Note,
9.50%, 11/1/2008 379,688
550,000 Metromedia Fiber Network,
Inc., Sr. Note, 10.00%,
12/15/2009 563,750
2,100,000 Millicom International
Cellular SA, Sr. Disc.
Note, 0/13.50%, 6/1/2006 1,743,000
3,500,000 NEXTEL Communications,
Inc., Sr. Disc. Note,
0/10.65%, 9/15/2007 2,660,000
2,625,000 1 NEXTEL Communications,
Inc., Sr. Note, 9.375%,
11/15/2009 2,592,188
600,000 NEXTEL International,
Inc., Sr. Disc. Note,
0/12.125%, 4/15/2008 356,766
600,000 NEXTEL Partners, Inc., Sr.
Disc. Note, 0/14.00%,
2/1/2009 405,000
1,200,000 NEXTLINK Communications,
Inc., Sr. Disc. Note,
0/9.45%, 4/15/2008 762,000
1,875,000 1 NEXTLINK Communications,
Inc., Sr. Disc. Note,
0/12.125%, 12/1/2009 1,101,563
2,875,000 NEXTLINK Communications,
Inc., Sr. Disc. Note,
0/12.25%, 6/1/2009 1,782,500
1,000,000 NEXTLINK Communications,
Inc., Sr. Note, 9.00%,
3/15/2008 957,500
300,000 NEXTLINK Communications,
Inc., Sr. Note, 10.75%,
6/1/2009 312,750
975,000 Paging Network, Inc., Sr.
Sub. Note, 10.00%,
10/15/2008 307,125
300,000 Pathnet, Inc., Unit,
12.25%, 4/15/2008 187,500
900,000 PSINet, Inc., Sr. Note,
10.00%, 2/15/2005 895,500
1,100,000 PSINet, Inc., Sr. Note,
11.00%, 8/1/2009 1,133,000
<CAPTION>
PRINCIPAL
AMOUNT

OR SHARES VALUE
<C> <S> <C>
CORPORATE BONDS-continued
TELECOMMUNICATIONS &
CELLULAR-CONTINUED
$ 750,000 PSINet, Inc., Sr. Note,
11.50%, 11/1/2008 $ 787,500
1,375,000 Qwest Communications
International, Inc., Sr.
Disc. Note, 0/9.47%,
10/15/2007 1,113,750
1,750,000 Rogers Cantel Mobile,
Inc., Sr. Sub. Note, 8.80%,
10/1/2007 1,776,250
650,000 Telesystem International
Wireless, Inc., Sr. Disc.
Note, 0/10.50%, 11/1/2007 360,750
1,525,000 Telesystem International
Wireless, Inc., Sr. Disc.
Note, 0/13.25%, 6/30/2007 983,625
1,650,000 Teligent AB, Sr. Disc.
Note, 0/11.50%, 3/1/2008 998,250
1,000,000 Teligent AB, Sr. Note,
11.50%, 12/1/2007 985,000
1,575,000 Triton PCS, Inc., Sr. Disc.
Note, 0/11.00%, 5/1/2008 1,126,125
1,025,000 1 US Unwired, Inc., Sr. Disc.
Note, 0/13.375%, 11/1/2009 599,625
725,000 US Xchange, LLC, Sr. Note,
15.00%, 7/1/2008 697,813
250,000 USA Mobile Communications,
Inc., Sr. Note, 9.50%,
2/1/2004 205,313
650,000 1 Verio, Inc., Sr. Note,
10.625%, 11/15/2009 666,250
475,000 Verio, Inc., Sr. Note,
11.25%, 12/1/2008 501,125
500,000 Viatel, Inc., Sr. Note,
11.50%, 3/15/2009 510,000
850,000 Viatel, Inc., Unit,
0/12.50%, 4/15/2008 539,750
825,000 Viatel, Inc., Unit,
11.25%, 4/15/2008 833,250
2,900,000 1 Voicestream Wireless
Holding Corp., Sr. Disc.
Note, 0/11.875%,
11/15/2009 1,761,750
200,000 1 Voicestream Wireless
Holding Corp., Sr. Note,
10.375%, 11/15/2009 207,000
1,250,000 Williams Communications
Group, Inc., Sr. Note,
10.875%, 10/1/2009 1,315,625
1,250,000 WinStar Communications,
Inc., Sr. Sub. Defd. Deb.,
0/11.00%, 3/15/2008 1,281,250
TOTAL 57,778,674
UTILITIES-0.1%
150,000 CMS Energy Corp., Sr. Note,
7.50%, 1/15/2009 138,818
TOTAL CORPORATE BONDS
(IDENTIFIED COST
$237,324,759) 216,626,212
PREFERRED STOCKS-3.6%
BANKING-0.1%
10,000 California Federal
Preferred Capital Corp.,
REIT Perpetual Pfd. Stock,
Series A, $2.28 225,625
<CAPTION>
SHARES VALUE
<C> <S> <C>
PREFERRED STOCKS-continued
BROADCAST RADIO & TV-1.0%
600 Benedek Communications
Corp., Sr. Exchangeable

PIK $ 483,000
6,655 Capstar Broadcasting
Partners, Inc., Sr. Pfd.,
$12.00 780,299
381 Cumulus Media, Inc.,
Cumulative Sr. Red. Pfd.
Stk., Series A, $3.44 428,229
7,300 Sinclair Broadcast Group,
Inc., Cumulative Pfd.,
$11.63 744,600
TOTAL 2,436,128
CABLE TELEVISION-0.4%
947 Pegasus Communications
Corp., Cumulative PIK

Pfd., Series A, 12.75% 1,046,435
FOOD SERVICES-0.0%
4,238 Nebco Evans Holding Co.,
Exchangeable Pfd. Stock 23,309
FOREST PRODUCTS-0.1%
1,851 Packaging Corp. of
America, Sr. Exchangeable

PIK 203,610
HEALTH CARE-0.1%
2,073 River Holding Corp., Sr.
Exchangeable PIK 129,923
INDUSTRIAL PRODUCTS &
EQUIPMENT-0.1%
150 Fairfield Manufacturing
Co., Inc., Cumulative

Exchangeable Pfd. Stock 149,250
18 1 International Utility
Structures, Inc., Unit 14,985
100 1 International Utility
Structures, Inc., Unit,
$13.00 85,500
TOTAL 249,735
OIL & GAS-0.2%
544 R&B Falcon Corp., PIK Pfd.,
13.875% 576,640
PRINTING & PUBLISHING-1.2%
13,250 Primedia, Inc., Cumulative
Pfd., Series D, $10.00 1,308,438
2,000 Primedia, Inc.,
Exchangeable Pfd. Stock,
Series H, $2.16 175,000
14,400 Primedia, Inc., Pfd.,
$9.20 1,350,000
TOTAL 2,833,438
TELECOMMUNICATIONS &
CELLULAR-0.4%
626 NEXTEL Communications,
Inc., Cumulative PIK Pfd.,
Series D, 13.00% 679,210
145 NEXTEL Communications,
Inc., Exchangeable Pfd.
Stock, Series E 147,464
TOTAL 826,674
TOTAL PREFERRED STOCKS
(IDENTIFIED COST
$8,897,635) 8,551,517
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS-0.1%
BUSINESS EQUIPMENT &
SERVICES-0.0%
300 1, 2 Electronic Retailing
Systems International,
Inc., Warrants $ 300
CABLE TELEVISION-0.0%
200 1, 2 Australis Holdings

Property Ltd., Warrants 0
1,650 2 Diva Systems Corp.,
Warrants 13,200
1,175 2 UIH Australia/Pacific,
Warrants 35,250
TOTAL 48,450
CHEMICALS & PLASTICS-0.0%
425 2 Sterling Chemicals

Holdings, Inc., Warrants 6,800
METALS & MINING-0.0%
23,013 2 Royal Oak Mines, Inc. 0
OIL & GAS-0.0%
275 1, 2 R&B Falcon Corp., Warrants 34,356
PRINTING & PUBLISHING-0.0%
50 2 Affiliated Newspaper

Investments, Inc. 8,000
STEEL-0.0% 100 1, 2 Bar Technologies, Inc.,

Warrants 2,000
TELECOMMUNICATIONS &
CELLULAR-0.1%
800 1, 2 MetroNet Communications

Corp., Warrants 68,000
300 1, 2 Pathnet, Inc., Warrants 3,037
TOTAL 71,037
TOTAL COMMON STOCKS
(IDENTIFIED COST $87,435) 170,943
REPURCHASE AGREEMENT-3.9%
3

$ 9,440,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized
cost) 9,440,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$255,749,829) 4 $ 234,788,672
</TABLE>

1 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's Board of Trustees. At December 31, 1999, these
securities amounted to $30,107,936 which represents 12.6% of net assets.

2 Non-income producing security.

4 The cost of investments for federal tax purposes amounts to $255,752,354. The
net unrealized depreciation of investments on a federal tax basis amounts to
$20,963,682 which is comprised of $2,539,046 appreciation and $23,502,728
depreciation at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($239,088,466) at December 31, 1999.

The following acronyms are used throughout this portfolio:

GTD -Guaranteed
HDA -Hospital Development Authority
PIK -Payment in Kind
REIT -Real Estate Investment Trust

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$255,749,829 and tax
cost $255,752,354) $ 234,788,672
Cash 2,032
Income receivable 4,380,908
Receivable for shares sold 177,986
Prepaid expenses 681
TOTAL ASSETS 239,350,279
LIABILITIES:
Payable for shares

redeemed $ 200,675
Accrued expenses 61,138
TOTAL LIABILITIES 261,813
Net assets for 23,338,453
shares outstanding $ 239,088,466
NET ASSETS CONSIST OF:
Paid-in capital $ 241,198,154
Net unrealized
depreciation of
investments (20,961,157)
Accumulated net realized
loss on investments (1,871,314)
Undistributed net
investment income 20,722,783
TOTAL NET ASSETS $ 239,088,466
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$239,088,466 / 23,338,453
shares outstanding $10.24
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 892,330
Interest 21,883,223
TOTAL INCOME 22,775,553
EXPENSES:
Investment adviser fee $ 1,369,582
Administrative personnel
and services fee 171,886
Custodian fees 15,469
Transfer and dividend
disbursing agent fees and
expenses 91,865
Directors'/Trustees' fees 3,126
Auditing fees 14,162
Legal fees 8,666
Portfolio accounting fees 70,771
Share registration costs 9,733
Printing and postage 33,818
Insurance premiums 1,555
Miscellaneous 10,223
TOTAL EXPENSES 1,800,856
Net investment income 20,974,697
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on
investments (1,765,588)
Net change in unrealized
depreciation of
investments (13,913,922)
Net realized and
unrealized loss on
investments (15,679,510)
Change in net assets
resulting from operations $ 5,295,187
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 20,974,697 $ 16,803,523
Net realized gain (loss) on
investments ($(1,810,599)
and $1,457,218,
respectively, as computed
for federal tax purposes) (1,765,588) 1,535,155
Net change in unrealized
depreciation of
investments (13,913,922) (13,361,235)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 5,295,187 4,977,443
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net

investment income (17,123,350) (4,060,123)
Distributions from net
realized gains on
investments (1,456,394) (1,101,291)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS

TO SHAREHOLDERS (18,579,744) (5,161,414)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 194,221,449 140,016,075
Net asset value of shares
issued to shareholders in
payment of
distributions declared 18,579,744 5,161,412
Cost of shares redeemed (172,718,406) (88,866,908)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 40,082,787 56,310,579
Change in net assets 26,798,230 56,126,608
NET ASSETS:
Beginning of period 212,290,236 156,163,628
End of period (including
undistributed net
investment income of
$20,722,783 and
$16,871,436, respectively) $ 239,088,466 $ 212,290,236
</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1999 1998
1997 1996 1995
<S> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.92 $10.95
$10.24 $ 9.79 $ 8.87
INCOME FROM INVESTMENT
OPERATIONS

Net investment income 0.88 0.87
0.88 0.88 0.85
Net realized and
unrealized gain (loss) on
investments (0.63) (0.57)
0.48 0.45 0.89
TOTAL FROM INVESTMENT
OPERATIONS 0.25 0.30
1.36 1.33 1.74
LESS DISTRIBUTIONS:
Distributions from net

investment income (0.86) (0.26)
(0.61) (0.88) (0.82)
Distributions from net
realized gain on
investments (0.07) (0.07)
(0.04) - -
TOTAL DISTRIBUTIONS (0.93) (0.33)
(0.65) (0.88) (0.82)
NET ASSET VALUE, END OF
PERIOD $10.24 $10.92
$10.95 $10.24 $ 9.79
TOTAL RETURN 1 2.31% 2.70%
13.83% 14.31% 20.38%

RATIOS TO AVERAGE NET
ASSETS:

Expenses 0.79% 0.78%
0.80% 0.80% 0.80%
Net investment income 9.20% 9.01%
8.70% 9.23% 9.27%
Expenses
waiver/reimbursement 2 - -
0.09% 0.59% 3.40%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $239,088 $212,290
$156,164 $66,043 $20,165
Portfolio turnover 34% 27%
52% 51% 48%
</TABLE>

1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

2 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

DECEMBER 31, 1999

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 11 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 60 days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value. Securities for which there are no
market quotations are valued at fair value according to procedures adopted by
the Board of Trustees (the "Trustees").

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

At December 31, 1999, The Fund, for federal tax purposes, had a capital loss
carryforward of $1,810,599, which will reduce the Fund's taxable income arising
from future net realized gains on investments, if any, to the extent permitted
by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code, such capital loss carryforward
will expire in 2007.

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.
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.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

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>
YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
Shares sold 18,623,857 12,858,666
Shares issued to
shareholders in payment of
distributions declared 1,803,983 469,646
Shares redeemed (16,532,486) (8,146,880)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 3,895,354 5,181,432
</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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

SHAREHOLDER SERVICES FEE

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the year ended December 31, 1999, were as follows:

Purchases $ 101,413,988
Sales $ 72,934,095

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES AND SHAREHOLDERS OF
FEDERATED HIGH INCOME BOND FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated High Income Bond Fund II (a portfolio
of Federated Insurance Series) (the "Trust"), as of December 31, 1999, the
related statement of operations for the year then ended, the statement of
changes in net assets for the years ended December 31, 1999 and 1998, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated High
Income Bond Fund II as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts
February 11, 2000

Trustees 1

JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager

Federated High Income Bond Fund II

Federated Insurance Series

ANNUAL REPORT
TO SHAREHOLDERS

ANNUAL REPORT

DECEMBER 31, 1999

[Graphic]
Federated
Federated High Income Bond Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916306

G00844-01 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

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

The fund brings you long-term growth opportunities through a broadly diversified
portfolio of stocks issued by companies throughout the world. 1 Investing in
international stocks can smooth out periodic ups and downs in U.S. stock
performance, because international markets respond to different influences than
U.S. markets.

It was a strong, much improved year for international stocks. The fund's
positions in key countries and strong security selection produced an outstanding
total return of 84.88%. 2 Contributing to the total return was a net asset value
increase from $15.39 to $27.64 and capital gains distributions totaling $0.45
per share. At the end of the 12-month reporting period, total net assets doubled
to reach $105 million.

Thank you for choosing Federated International Equity Fund II as a diversified,
professionally managed way to participate in the long-term growth opportunities
of international stocks. We hope you are pleased with your progress and look
forward to keeping you informed.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

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

Investment Review

WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE?

The growth of the international equity markets for most of 1999 was driven by
technology, media and telecommunication stocks. This growth was seen throughout
Western Europe, while in Asia, countries such as Hong Kong, Korea and Japan were
the primary beneficiaries of the technology boom.

In Western Europe, large blue-chip names like Alcatel and Siemens were both
turnaround stories and technology plays. In telecommunications, new entrants
such as Energis and Colt continued to rally, while incumbent telecom carriers
reversed the prior year of underperformance. At the same time, investors
realized that many had hidden assets such as Internet and wireless subsidiaries.
We also saw more mergers and acquisitions activity in the telecommunications
sector, as Vodafone made a hostile bid for Mannesman. Finally, the wireless
handset theme continued to gain momentum through not only Nokia and Ericcson,
but also through many of their component suppliers such as ST Microelectronics
and Perlos.

The Asia Pacific markets, as measured by the Morgan Stanley Capital
International Combined Asia Pacific Index, 1 continued to rally. This rally was
attributable to three factors: 1) The technology theme which has been so
prevalent in the U.S. and Europe; 2) The continued evidence of economic
turnaround and corporate restructuring in Japan; and 3) Continued focus on "New
Japan" names like Softbank and Sony.

1 The Morgan Stanley Capital International Combined Asia Pacific Index is a
market value-weighted average of the performance of securities listed on the
stock exchange of 13 countries in the Pacific and Asian regions. 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 the European, Australian, New Zealand, and Far Eastern stock
markets. These indexes are unmanaged, and investments cannot be made in an
index.

INVESTMENT REVIEW

International equity markets, as measured by the Morgan Stanley Capital
International Europe, Australia and Far East Index (EAFE Index) 1 showed good
appreciation. Markets in Europe were driven by the technology, telecommunication
and media sectors, while anecdotal evidence of economic bottoming in Japan
helped that market recover strongly. Japan also benefited from the expectation
of company restructuring, mergers and acquisitions and the emergence of "New
Japan" companies, with western- style goals and business practices. In Western
Europe, the economies throughout Euro-land showed signs of economic improvement,
while the currency weakened against the U.S. dollar, due to expected growing
pains. In Eastern Europe, Greece was the big winner, given the convergence theme
in front of acceptance into the European Community. In Asia, economic recovery,
plus fund flow into technology in Hong Kong, Singapore and Korea helped drive
those markets higher.

PERFORMANCE OF THE FUND

For the fiscal year ended December 31, 1999, the fund produced a total return of
84.88%. 2 This return was far higher than the 26.96% return of the fund's
benchmark, the EAFE Index, for the same period. Additionally, the fund's return
was 44.08% higher than the average return of the 501 international equity funds
tracked by Lipper Analytical Services, Inc.,

40.81%.3

The fund's performance was due primarily to being overweight technology, media
and telecommunication names while underweight financials and pharmaceuticals. In
addition, our overweight exposure to Japan also helped establish solid returns
for the fund. Finally, in the fourth quarter, we found good growth opportunities
in Korea, Singapore and Hong Kong in the same sectors.

3 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 take sales charges into account.

NOTABLE BUYS

Recent purchases in the fund include:

ALCATEL (1.08%) manufactures and distributes telecommunication equipment
globally. The growth for the business is its leading share in ADSL technology,
which increases the bandwidth of copper phone lines.

SONY (2.74%)-Electronics conglomerate with content, distribution and electronic
equipment expertise. The launch of Playstation 2 in March 2000 in Japan should
also be a big winner for the company.

ASM LITHOGRAPHY (0.96%)-Leading maker of semiconductor production equipment. The
company is well positioned to capitalize on the increased capital expenditure
trend seen in the U.S. and Asia.

OUTLOOK

We continue to stress that stock selection remains a critical part of our
investment process. With that, we continue to remain bullish on technology,
telecommunications and media on a global basis.

Key themes within technology include finding situations which are leveraged to
the growth in mobile handsets, growth in bandwidth capital expenditures, and a
new round of information technology spending as the Year 2000 overhang is behind
us.

We also continue to remain bullish regarding the economic recovery in Asia and
Japan. However, the early part of the year could see the Asian markets of Hong
Kong, Korea and Japan correct themselves, given outperformance in 1999 and
interest rate fears in the U.S. Nonetheless, we remain bullish over the longer
term due to progress in corporate restructuring, economic rebound and
accelerating earnings growth in these markets.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 3,616,683 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1-all portfolios of Federated Insurance Series voting
together.

<TABLE>

SHARES
SHARES WITHHELD
VOTED FOR AUTHORITY
<S> <C> <C>
Thomas G. Bigley 240,211,548 7,152,692
Nicholas P. Constantakis 239,928,312 7,435,928
John F. Cunningham 240,226,307 7,137,933
Charles F. Mansfield, Jr. 240,298,855 7,065,386
John E. Murray, Jr., J.D., S.J.D. 240,016,672 7,347,569
John S. Walsh 240,224,615 7,139,625

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,294,754 132,171 189,589

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,286,091 140,833 189,589

</TABLE>

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,293,331 133,594 189,589

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,286,091 140,833 189,589

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,294,754 132,171 189,589

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,286,091 140,833 189,589

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,279,087 147,838 189,589

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,288,852 138,073 189,589

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,283,539 143,385 189,589

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

SHARES SHARES VOTED SHARES
VOTED FOR AGAINST ABSTAINING
<S> <C> <C>
3,177,308 218,067 221,139

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL EQUITY FUND II

"Graphic representation "E" omitted. See Appendix."

<TABLE>

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999
<S> <C>
1 Year 84.88%
Start of Performance (5/8/95) 25.39%

</TABLE>

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated International Equity Fund II (the "Fund") from May 8, 1995 (start of
performance) to December 31, 1999, compared to the Morgan Stanley Capital
International Europe Australia Far-East Index (EAFE).2

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The EAFE has been adjusted to reflect reinvestment of dividends
on securities in the index.

2 The EAFE is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. The index is unmanaged.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-92.2%
AUSTRALIA-1.6%
BUSINESS & PUBLIC
SERVICES-0.1%
150,100 1 LibertyOne Ltd. $ 165,548
ELECTRICAL & ELECTRONICS-
0.4%

76,800 ERG Ltd. 431,084
HEALTH & PERSONAL CARE-
0.3%

65,000 Sonic Healthcare Ltd. 305,108
TELECOMMUNICATIONS-0.8%
402,500 1 Davnet Ltd. 607,755
381,900 1 Westel Group Ltd. 205,588
TOTAL 813,343
TOTAL AUSTRALIA 1,715,083
BELGIUM-0.4%
TELECOMMUNICATIONS-0.4%
13,350 1 Global TeleSystems Group,
Inc. 462,244
196 1 Telinfo SA 2
TOTAL BELGIUM 462,246
CANADA-8.7%
BUSINESS & PUBLIC
SERVICES-3.3%
19,850 1 CYBERplex, Inc. 250,961
85,600 1 Descartes Systems Group
Inc. 1,882,785
63,200 1 Mosaic Group Inc. 490,364
13,600 Onex Corp. 492,276
14,500 1 Zi Corporation 304,500
TOTAL 3,420,886
ELECTRICAL & ELECTRONICS-
1.4%

10,300 Nortel Networks Corp. 1,040,703
9,000 1 Research in Motion Ltd. 415,864
TOTAL 1,456,567
ELECTRONIC COMPONENTS,
INSTRUMENTS-1.1%
5,100 1 Certicom Corp. 303,845
5,360 1 JDS Uniphase Corp. 864,635
TOTAL 1,168,480
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
CANADA-continued
FOREST PRODUCTS & PAPER-
0.2%

16,400 Canfor Corp. $ 192,006
25,400 1 International Forest
Products Ltd., Class A 69,505
TOTAL 261,511
OIL & NATURAL GAS-0.1%
12,100 1 Ulster Petroleums Ltd. 107,714
TELECOMMUNICATIONS-2.6%
28,700 1 CGI Group, Inc., Class A 1,227,728
42,000 1 Telesystem International
Wireless, Inc. 1,544,995
TOTAL 2,772,723
TOTAL CANADA 9,187,881
DENMARK-0.6%
HEALTH & PERSONAL CARE-
0.6%

4,950 Novo-Nordisk, Class B 656,525
FINLAND-1.2%
BUSINESS & PUBLIC
SERVICES-0.1%
1,500 1 Comptel Oyj 105,530
ELECTRICAL & ELECTRONICS-
0.4%

2,600 Nokia Oyj 471,440
ELECTRONIC COMPONENTS,
INSTRUMENTS-0.7%
22,200 1 Perlos Oyj 782,711
TOTAL FINLAND 1,359,681
FRANCE-5.7%
AEROSPACE & MILITARY
TECHNOLOGY-0.5%
15,500 Thomson CSF 511,980
BROADCASTING & PUBLISHING-
1.8%

2,400 Canal Plus 349,349
400 M6 Metropole Television 198,246
2,640 Tf1 - Tv Francaise 1,382,890
TOTAL 1,930,485
BUILDING MATERIALS &
COMPONENTS-0.3%
4,200 Ciments Francais, Class A 285,372
ELECTRICAL & ELECTRONICS-
1.1%

4,925 Alcatel 1,131,153
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
FRANCE-continued
ELECTRONIC COMPONENTS,
INSTRUMENTS-1.6%
18,888 1 Wavecom SA $ 1,664,847
MULTI-INDUSTRY-0.4%
7,000 Lagardere S.C.A. 380,778
TOTAL FRANCE 5,904,615
GERMANY-7.3%
BANKING-0.6%
18,495 Baader

Wertpapierhandelsbank AG 590,601
BUSINESS & PUBLIC
SERVICES-1.7%
2,860 1 GfK AG 115,241
6,050 Intershop Communications
AG 1,706,450
TOTAL 1,821,691
ELECTRICAL & ELECTRONICS-
0.8%

6,900 Siemens AG 877,875
ELECTRONIC COMPONENTS,
INSTRUMENTS-0.8%
6,100 1 Epcos AG 457,790
6,850 1 Singulus Technologies AG 420,921
TOTAL 878,711
FINANCIAL SERVICES-0.7%
6,430 1 Consors Discount Broker AG 537,612
1,650 DIS Deutsche Industrie
Service 136,294
TOTAL 673,906
MACHINERY & ENGINEERING-
0.7%

4,800 Aixtron AG 675,972
TELECOMMUNICATIONS-1.4%
3,429 Mannesmann AG 827,281
11,750 1 Telegate AG 681,774
TOTAL 1,509,055
WHOLESALE & INTERNATIONAL
TRADE-0.6%
6,800 Medion AG 609,648
TOTAL GERMANY 7,637,459
GREECE-0.1%
TELECOMMUNICATIONS-0.1%
4,038 Tiletypos SA 101,042
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
HONG KONG-4.3%
BROADCASTING & PUBLISHING-
0.4%

58,500 Television Broadcasting $ 398,855
BUSINESS & PUBLIC
SERVICES-0.7%
732,000 Hanny Holdings 692,121
MULTI-INDUSTRY-1.3%
2,904,000 E-New Media Co. Ltd. 1,410,252
TECHNOLOGY-0.4%
168,000 1 Pacific Century CyberWorks
Ltd. 390,094
TELECOMMUNICATIONS-1.5%
1,402,000 CCT Telecom Holdings Ltd. 1,046,066
92,000 1 China Telecom (Hong Kong)
Ltd. 574,001
TOTAL 1,620,067
TOTAL HONG KONG 4,511,389
INDIA-1.0%
BUSINESS & PUBLIC
SERVICES-0.7%
24,800 Pentafour Software &
Export Ltd. 761,388
TELECOMMUNICATIONS-0.3%
12,500 Global Tele-Systems Ltd. 275,862
TOTAL INDIA 1,037,250
IRELAND-0.2%
TRANSPORTATION - AIRLINES-
0.2%

2,900 1 Ryanair Holdings PLC, ADR 159,863
ISRAEL-0.7%
ELECTRICAL & ELECTRONICS-
0.7%
22,700 1 Orckit Communications,
Ltd. 778,894
ITALY-0.9%
AUTOMOBILES-0.5%
22,500 Pininfarina SPA 546,235
RECREATION, OTHER CONSUMER
GOODS-0.4%
41,950 Bulgari SPA 376,944
TOTAL ITALY 923,179
JAPAN-32.9%
APPLIANCES & HOUSEHOLD
DURABLES-4.6%
75,000 Sharp Corp. 1,919,595
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
JAPAN-continued
APPLIANCES & HOUSEHOLD
DURABLES-CONTINUED
9,700 Sony Corp. $ 2,876,676
TOTAL 4,796,271
BANKING-0.5%
24,000 Suruga Bank, Ltd. 334,736
52,000 Toyo Trust & Banking 213,761
TOTAL 548,497
BROADCASTING & PUBLISHING-
1.2%

6,000 Nippon Broadcasting System 522,658
630 Nippon TV Network 739,943
TOTAL 1,262,601
BUSINESS & PUBLIC
SERVICES-4.2%
14,600 Capcom Co. Ltd. 778,800
4,400 Csk Corp. 714,887
18,500 Daiwabo Information System
Co., Ltd. 415,557
6,000 ISB Corp. 204,072
1,000 1 InterQ Inc. 577,469
3,000 Konami Co. Ltd. 535,872
1,200 Softbank Corp. 1,148,674
TOTAL 4,375,331
DATA PROCESSING &
REPRODUCTION-1.3%
13,000 Canon, Inc. 516,590
19,000 Fujitsu Ltd. 866,595
TOTAL 1,383,185
ELECTRICAL & ELECTRONICS-
4.4%

3,000 Alpha Systems Inc. 631,301
7,100 Komatsu Electronic Metals
Co., Ltd. 56,983
5,000 Matsushita Communication 1,321,327
55,000 NEC Corp. 1,310,806
900 Obic Co. Ltd. 637,761
26,000 Yokowo, Co. Ltd. 648,918
TOTAL 4,607,096
ELECTRONIC COMPONENTS,
INSTRUMENTS-5.0%
9,000 Kinseki 95,576
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
JAPAN-continued
ELECTRONIC COMPONENTS,
INSTRUMENTS-CONTINUED
3,100 Kyocera Corp. $ 804,052
12,000 Megachips Corp. 768,132
6,000 Murata Manufacturing Co.
Ltd. 1,409,416
37,000 Nikon Corp. 1,086,425
18,000 Taiyo Yuden Co. 1,067,632
TOTAL 5,231,233
FINANCIAL SERVICES-3.3%
69,000 Daiwa Securities Group,
Inc. 1,079,877
202,000 1 New Japan Securities Co. 504,160
96,000 Nikko Securities Co. Ltd. 1,214,916
84,000 Toho Bank Ltd. 387,237
112,000 Wako Securities Co. Ltd. 297,074
TOTAL 3,483,264
INDUSTRIAL COMPONENTS-2.6%
115,000 Furukawa Electric 1,744,641
12,000 Hosiden Corp. 770,481
22,000 Sumitomo Electric
Industries 254,302
TOTAL 2,769,424
LEISURE & TOURISM-0.2%
22,000 Japan Airport Terminal 204,561
MACHINERY & ENGINEERING-
0.8%

6,400 Fuji Machine Manufacturing
Co. 516,159
30,000 Fujitec Co. 300,969
TOTAL 817,128
MERCHANDISING-0.4%
6,100 Paris Miki, Inc. 438,230
RECREATION, OTHER CONSUMER
GOODS-1.8%
15,000 Bandai Co. Ltd. 477,146
3,000 Nintendo Co., Ltd. 498,581
27,300 Sega Enterprises 868,406
TOTAL 1,844,133
TELECOMMUNICATIONS-1.7%
14 Japan Telecom Co., Ltd. 561,809
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
JAPAN-continued
TELECOMMUNICATIONS-
CONTINUED

3,300 Kokusai Den (Kdd) $ 457,355
21 NTT Mobile Communication
Network, Inc. 807,771
TOTAL 1,826,935
WHOLESALE & INTERNATIONAL
TRADE-0.9%
230,000 Marubeni Corp. 965,743
TOTAL JAPAN 34,553,632
KOREA -4.2%
APPLIANCES & HOUSEHOLD
DURABLES-0.5%
2,100 Samsung Electronics Co. 491,942
BUSINESS & PUBLIC
SERVICES-0.6%
100 1 HandySoft Corp. 81,990
18,700 1 Turbo Tek Co. Ltd. 587,103
TOTAL 669,093
ENERGY EQUIPMENT &
SERVICES-0.4%
12,800 SK Corp. 387,776
SOFTWARE-1.8%
41,100 1 Haansoft, Inc. 1,903,884
TELECOMMUNICATIONS-0.9%
1,300 1 Korea Thrunet Co. Ltd.,
Class A 88,238
225 SK Telecom Co. Ltd. 806,473
TOTAL 894,711
TOTAL KOREA 4,347,406
NETHERLANDS-6.7%
BROADCASTING & PUBLISHING-
1.1%

21,800 VNU - Verenigde
Nederlandse
Uitgeversbedrijven

Verenigd Bezit 1,145,994
BUSINESS & PUBLIC
SERVICES-1.0%
6,463 1 Equant NV, ADR 723,856
5,750 1 KPNQwest NV 366,562
TOTAL 1,090,418
ELECTRICAL & ELECTRONICS-
3.1%

8,900 1 ASM Lithography Holding

NV, ADR 1,012,375
11,650 1 BE Semiconductor

Industries NV 167,233
3,050 Koninklijke (Royal)
Philips Electronics NV 414,776
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
NETHERLANDS-continued
ELECTRICAL & ELECTRONICS-
CONTINUED

9,080 STMicroelectronics NV $ 1,397,621
18,500 1 Toolex International NV 307,493
TOTAL 3,299,498
TELECOMMUNICATIONS-1.5%
1,200 OpenTV Corp. ADR 96,300
4,000 1 United Pan-Europe
Communications NV 511,734
7,367 1 United Pan-Europe
Communications NV, ADR 939,293
TOTAL 1,547,327
TOTAL NETHERLANDS 7,083,237
NORWAY-0.2%
TELECOMMUNICATIONS-0.2%
13,200 1 Tandberg Television 182,978
SINGAPORE-2.2%
ELECTRONIC COMPONENTS,
INSTRUMENTS-1.0%
399,000 GES International Ltd. 431,222
119,000 Natsteel Electronics Ltd. 628,760
TOTAL 1,059,982
MACHINERY & ENGINEERING-
0.5%

278,000 OMNI Industries 504,089
REAL ESTATE-0.7%
366,000 DBS Land Ltd. 720,792
TOTAL SINGAPORE 2,284,863
SPAIN-0.4%
BROADCASTING & PUBLISHING-
0.4%

7,090 1 Sogecable SA 452,810
INDUSTRIAL COMPONENTS-0.0%
500 1 Jazztel PLC, ADR 32,563
TOTAL SPAIN 485,373
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
SWEDEN-2.6%
DATA PROCESSING &
REPRODUCTION-0.3%
6,800 1 Modern Times Group MTG AB,
Class B $ 337,243
ELECTRICAL & ELECTRONICS-
0.8%

12,300 Telefonaktiebolaget LM

Ericsson 790,704
ELECTRONIC COMPONENTS,
INSTRUMENTS-0.9%
7,900 1 HiQ International AB 505,994
26,550 1 Readsoft AB 483,635
TOTAL 989,629
INDUSTRIAL COMPONENTS-0.6%
30,300 Allgon AB, Class B 601,798
TOTAL SWEDEN 2,719,374
SWITZERLAND-0.8%
BUSINESS & PUBLIC
SERVICES-0.6%
110 1 Agefi Groupe SA 42,140
555 Publigroupe SA 548,970
TOTAL 591,110
WHOLESALE & INTERNATIONAL
TRADE-0.2%
1,215 1 Charles Voegele Holding AG 218,231
TOTAL SWITZERLAND 809,341
TAIWAN -1.4%
ELECTRICAL & ELECTRONICS-
0.3%

14,700 1 Advanced Semiconductor

Engineering Inc., GDR 287,753
ELECTRONIC COMPONENTS,
INSTRUMENTS-1.1%
1,950 1 Macronix International Co.
Ltd., ADR 37,294
24,723 1 Taiwan Semiconductor
Manufacturing Co. ADR 1,112,535
TOTAL 1,149,829
TOTAL TAIWAN 1,437,582
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
THAILAND-0.3%
ELECTRONIC COMPONENTS,
INSTRUMENTS-0.3%
69,600 Hana Microelectronics Co.
Ltd. $ 334,464
UNITED KINGDOM-7.3%
BROADCASTING & PUBLISHING-
0.5%

32,000 British Sky Broadcasting

Group PLC 516,896
DATA PROCESSING &
REPRODUCTION-1.2%
145,300 1 Imagination Technologies

Group PLC 955,242
7,300 Psion PLC 306,584
TOTAL 1,261,826
ELECTRICAL & ELECTRONICS-
0.1%

4,250 Filtronic PLC 144,166
ELECTRONIC COMPONENTS,
INSTRUMENTS-2.0%
9,300 1 ARM Holdings PLC, ADR 1,780,950
58,800 Invensys PLC 310,878
TOTAL 2,091,828
ENERGY SOURCES-0.3%
39,100 Enterprise Oil 265,265
FOOD & HOUSEHOLD PRODUCTS-
0.4%

47,700 Reckitt Benckiser PLC 451,512
HEALTH & PERSONAL CARE-
0.5%

57,325 1 Shire Pharmaceuticals

Group PLC 569,472
3 Smithkline Beecham
Holdings, Corp. 38
TOTAL 569,510
INSURANCE-0.6%
34,462 Prudential PLC 672,451
RECREATION, OTHER CONSUMER
GOODS-0.7%
8,800 1 Eidos PLC 772,566
<CAPTION>
SHARES OR

PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-continued
UNITED KINGDOM-continued
TELECOMMUNICATIONS-1.0%
21,050 1 Energis PLC, ADR $ 1,011,561
TOTAL UNITED KINGDOM 7,757,581
UNITED STATES-0.5%
DATA PROCESSING-0.1%
2,450 1 Infonet Services Corp.,
Class B 64,313
TELECOMMUNICATIONS-0.4%
8,800 1 Global Crossing Ltd. 440,000
TOTAL UNITED STATES 504,313
TOTAL COMMON STOCKS
(IDENTIFIED COST
$57,506,905) 96,935,251
PREFERRED STOCKS-0.1%
BRAZIL-0.1%
METALS - STEEL-0.1%
12,300 Usinas Siderurgicas de
Minas Gerais SA,
Preference (identified

cost $37,073) 66,726
REPURCHASE AGREEMENT-5.6%
2

$ 5,900,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized
cost) 5,900,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$63,443,978) 3 $ 102,901,977

</TABLE>

1 Non-income producing security.

2 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.

3 The cost of investments for federal tax purposes amounts to $63,709,030. The
net unrealized appreciation of investments on a federal tax basis amounts to
$39,192,947 which is comprised of $40,160,149 appreciation and $967,202
depreciation at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($105,100,302) at December 31, 1999.

The following acronyms are used throughout this portfolio:

ADR -American Depositary Receipt
GDR -Global Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$63,443,978 and tax
cost $63,709,030) $ 102,901,977
Cash 4,774
Cash denominated in
foreign currencies
(identified cost $356,980) 350,563
Income receivable 47,329
Receivable for investments
sold 2,608,537
Receivable for shares sold 731,837
Deferred organizational
costs 1,147
TOTAL ASSETS 106,646,164
LIABILITIES:
Payable for investments
purchased $ 1,418,206
Payable for shares
redeemed 1,270
Payable for taxes 58,317
Net payable for foreign
currency exchange
contracts 20
Accrued expenses 68,049
TOTAL LIABILITIES 1,545,862
Net assets for 3,802,920
shares outstanding $ 105,100,302
NET ASSETS CONSIST OF:
Paid-in capital $ 48,248,918
Net unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 39,446,765
Accumulated net realized
gain on investments and
foreign currency
transactions 17,609,548
Accumulated net operating
loss (204,929)
TOTAL NET ASSETS $ 105,100,302
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$105,100,302 / 3,802,920
shares outstanding $27.64

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $70,481) $ 493,047
Interest 74,314
TOTAL INCOME 567,361
EXPENSES:
Investment adviser fee $ 617,878
Administrative personnel
and services fee 125,000
Custodian fees 147,783
Transfer and dividend
disbursing agent fees and
expenses 39,351
Directors'/Trustees' fees 2,010
Auditing fees 15,113
Legal fees 9,574
Portfolio accounting fees 60,765
Share registration costs 3,317
Printing and postage 31,083
Insurance premiums 783
Miscellaneous 6,513
TOTAL EXPENSES 1,059,170
WAIVER:
Waiver of investment

adviser fee (284,107)
Net expenses 775,063
Net operating loss (207,702)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS AND
FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on
investments and foreign
currency transactions (net
of foreign taxes withheld
$58,307) 17,756,256
Net change in unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 28,576,156
Net realized and
unrealized gain on
investments and foreign
currency transactions 46,332,412
Change in net assets
resulting from operations $ 46,124,710

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income (Net

operating loss) $ (207,702) $ 88,913
Net realized gain on
investments and foreign
currency transactions
($17,728,885 and
$1,540,107, respectively,
as computed for federal tax
purposes) 17,756,256 1,278,750
Net change in unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 28,576,156 7,701,983
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 46,124,710 9,069,646
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
realized gains on
investments and foreign
currency transactions (1,537,970) (52,079)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS

TO SHAREHOLDERS (1,537,970) (52,079)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 17,658,414 12,872,900
Net asset value of shares
issued to shareholders in
payment of
distributions declared 1,537,970 52,079
Cost of shares redeemed (10,991,180) (6,209,145)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 8,205,204 6,715,834
Change in net assets 52,791,944 15,733,401
NET ASSETS:
Beginning of period 52,308,358 36,574,957
End of period $ 105,100,302 $ 52,308,358

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998
1997 1996 1995 1
<S> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.39 $12.27
$11.16 $10.35 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income (net
operating loss) (0.02) 0.03 2
0.07 0.11 2 0.07
Net realized and
unrealized gain on
investments and foreign
currency transactions 12.72 3.11
1.05 0.75 0.28
TOTAL FROM INVESTMENT
OPERATIONS 12.70 3.14
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 (0.45) (0.02)
- - - -
TOTAL DISTRIBUTIONS (0.45) (0.02)
(0.01) (0.05) -
NET ASSET VALUE, END OF
PERIOD $27.64 $15.39
$12.27 $11.16 $10.35
TOTAL RETURN 3 84.88% 25.57%
10.08% 8.32% 3.50%

RATIOS TO AVERAGE NET
ASSETS:

Expenses 1.25% 1.25%
1.23% 1.25% 1.22% 4
Net investment income (net
operating loss) (0.34%) 0.19%
0.76% 0.89% 1.63% 4
Expense
waiver/reimbursement 5 0.46% 0.47%
0.98% 3.05% 11.42% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $105,100 $52,308 $36,575
$17,752 $4,760
Portfolio turnover 304% 247%
179% 103% 34%

</TABLE>

1 Reflects operations for the period from May 8, 1995 (date of initial public
investment) to December 31, 1995.

2 Per share information is based on average shares outstanding.

3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and net
investment income (loss) ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

DECEMBER 31, 1999

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 11 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 60 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

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
and net operating loss. The following reclassifications have been made to the
financial statements.

<TABLE>

INCREASE (DECREASE)
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT
GAIN (LOSS) INCOME
<S> <C>
$(105,562) $105,562

</TABLE>

Net investment income, net realized gains (losses), and net assets were not
affected by this reclassification.

FEDERAL TAXES

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

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. 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 December 31, 1999, the Fund had outstanding foreign currency commitment as
set forth below:

<TABLE>

UNREALIZED

SETTLEMENT IN EXCHANGE
CONTRACTS AT APPRECIATION
DATE CONTRACTS TO DELIVER/RECEIVE FOR
VALUE (DEPRECIATION)
<S> <C> <C>
<C> <C>
Contract Purchased: 1/6/00 15,801,757 Japanese Yen 154,261
154,661 $ 400
Contracts Sold: 1/3/00 124,798,966 Greek Drachma 379,444
380,833 $ (1,389)
1/4/00 585,660 Japanese Yen 5,748
5,732 16
1/4/00 20,706,000 Japanese Yen 202,940
202,662 278
1/5/00 42,377,410 Japanese Yen 415,449
414,774 675
NET UNREALIZED DEPRECIATION ON FOREIGN CURRENCY EXCHANGE
CONTRACTS $ (20)

</TABLE>

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 rates 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. 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 a trade date basis.

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>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
Shares sold 925,916 852,526
Shares issued to
shareholders in payment of
distributions declared 99,868 3,497
Shares redeemed (620,753) (438,984)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 405,031 417,039

</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Global Investment Management Corp., the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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 a scale that the ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class.

SHAREHOLDER SERVICES FEE

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
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 year ended December 31, 1999, the Fund amortized $4,452 of
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 (and in-kind
contributions), for the year ended December 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 184,589,376
Sales $ 185,885,204

</TABLE>

RISKS OF FOREIGN INVESTING

The Fund invests in securities of non-U.S. issuers. 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.

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES

AND SHAREHOLDERS OF FEDERATED INTERNATIONAL EQUITY FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated International Equity Fund II (a
portfolio of Federated Insurance Series) (the "Trust"), as of December 31, 1999,
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years ended December 31, 1999 and
1998, and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated
International Equity Fund II as of December 31, 1999, the results of its
operations, the changes in its net assets and its financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated International Equity Fund II

Federated Insurance Series

ANNUAL REPORT TO SHAREHOLDERS

DECEMBER 31, 1999

[Graphic]
Federated

Federated International Equity Fund II
Federated Investors Funds
5800 Corporate Drive

Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916603

G01077-01 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the first Annual Report to Shareholders for Federated
Quality Bond Fund II, a portfolio of Federated Insurance Series.

This report covers the period from April 28, 1999, when the fund began
operation, through December 31, 1999. It begins with a commentary by the fund's
portfolio manager, which is followed by a complete listing of the fund's quality
bond holdings and the financial statements.

As its name implies, this new fund pursues income from a portfolio of high-
quality securities that include U.S. Treasury and agency bonds as well as
investment-grade corporate bonds. It has been a difficult time for bond
investors in general, as rising interest rates have caused bond prices to
decline. However, high-quality bonds remain a traditional investment for
income--and serve as a relatively conservative complement to more aggressive
stock holdings.

In this rising rate environment, Federated Quality Bond Fund II produced a total
return of (2.00%) 1 over its initial period of operation. The slightly negative
return was due to a decline in the value of the fund's portfolio. At the end of
the reporting period, the fund's net assets totaled $18.6 million.

Thank you for choosing Federated Quality Bond Fund II as a diversified,
professionally managed way to participate in the income opportunities of
high-quality bonds.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

1 Past performance is no guarantee 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
contract.

Investment Review

The initial reporting period for Federated Quality Bond Fund II began with the
fund start-up date on April 28, 1999 and ended on December 31, 1999. This
reporting period was, in retrospect, a very difficult and challenging
environment for the high quality debt markets. The Federal Reserve Board (the
"Fed"), in response to continuous economic growth and signs of potentially
rising inflation, increased the Fed funds target rate on three occasions over
the latter half of 1999. Interest rate levels in the U.S. Treasury market rose
more than the Fed funds increase, with short to intermediate maturities (i.e.,
2-5 years) rising approximately 120 basis points and the 30-year treasury yield
rising 90 basis points. As a result, price declines occurred in the majority of
high quality fixed income securities.

In terms of relative performance within the various fixed income sectors, the
reporting period demonstrated significant volatility. The third quarter of 1999
experienced underperformance for most "spread" product sectors--agencies,
mortgages and corporates. This was due, in large part, to a supply/demand
imbalance with unusually large new issue supply over the summer months along
with the lack of investor demand. Thus, U.S. Treasuries were among the best
relative bond performers. During the fourth quarter of 1999, new issue bond
supply was far less as higher interest rates reduced mortgage security
origination. In addition, corporate bond supply was less due to the large
issuance over the summer months, as corporations sought to avoid the potential
effect of Year 2000 concerns. In this way, all the high quality "spread"
products significantly outperformed comparable maturity treasury securities
during the fourth quarter.

Federated Quality Bond Fund II maintained a majority position in corporate bonds
throughout the reporting period, gradually adding to the corporate position,
especially during the late summer and early fall months. Thus, the fund
performance reflected the interest rate environment and the corporate bond
relative outperformance in the fourth quarter. Duration was maintained slightly
short of a neutral target for much of the period, with a move toward a neutral
target at year-end. Over the coming months, duration will be managed at a
neutral to slightly longer target, with the corporate bond component largely
within a 60-70% range, in terms of total assets.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 767,482 total outstanding shares. The following items were considered
by shareholders of the fund and the results of their voting were as follows:

AGENDA ITEM 1

To elect six Trustees 1--all portfolios of Federated Insurance Series voting
together.

<TABLE>

WITHHELD
AUTHORITY

FOR TO VOTE
<S> <C> <C>
Thomas G. Bigley 240,211,548 7,152,692
Nicholas P. Constantakis 239,928,312 7,435,928
John F. Cunningham 240,226,307 7,137,933
Charles F. Mansfield 240,298,855 7,065,386
John E. Murray, Jr., J.D., S.J.D. 240,016,672 7,347,569
John S. Walsh 240,224,615 7,139,625

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,018 448,815 19,613

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,018 448,815 19,613

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
299,177 448,656 19,613

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
292,756 457,039 17,652

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED QUALITY BOND FUND II

"Graphic representation "F" omitted. See Appendix."

<TABLE>

AVERAGE ANNUAL TOTAL RETURN FOR THE PERIOD ENDED DECEMBER 31, 1999
<S> <C>
Start of Performance (4/28/99) (2.00%)

</TABLE>

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated Quality Bond Fund II (the "Fund") from April 28, 1999 (start of
performance) to December 31, 1999 compared to the Lehman Brothers Corporate Bond
Index/Lehman Brothers Government/Corporate Bond Index (LBCBI/LBGCBI),2 the
Lehman Brothers Corporate Bond Index (LBCBI),2 and the Lehman Brothers
Government/Corporate Bond Index (LBGCBI). 2

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBCBI/LBGCBI, the LBCBI and the LBGCBI have been adjusted to
reflect reinvestment of dividends on securities in the indices.

2 The LBCBI/LBGCBI is a weighted index that combines components of the LBCBI and
the LBGCBI. Figures shown for the index assume a constant weighting of 50% LBCBI
and 50% LBGCBI throughout the period. The LBCBI/LBGCBI, the LBCBI and the LBGCBI
are not adjusted to reflect sales charges, expenses, or other fees that the
Securities and Exchange Commission requires to be reflected in the Fund's
performance. The indices are unmanaged.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--60.2%
AIR TRANSPORTATION--0.6%
$ 125,000 Continental Airlines,
Inc., Pass Thru Cert.,
Series 1999-2 Class C1,
7.73%, 3/15/2011 $ 118,416
AUTOMOBILE--2.1%
250,000 Dana Corp., Note, 6.25%,
3/1/2004 238,227
160,000 Hertz Corp., Sr. Note,
7.00%, 1/15/2028 142,709
TOTAL 380,936
BANKING--2.7%

250,000 Banco Santander Central
Hispano, SA, Bank
Guarantee, 7.875%,

4/15/2005 252,030
250,000 National Bank of Canada,
Montreal, Sub. Note,
8.125%, 8/15/2004 254,587
TOTAL 506,617
BEVERAGE & TOBACCO--1.3%
250,000 Anheuser-Busch Cos., Inc.,
Sr. Note, 7.10%, 6/15/2007 245,445
CABLE TELEVISION--1.5%
250,000 Continental Cablevision,
Sr. Deb., 9.50%, 8/1/2013 277,187
CONSUMER PRODUCTS--1.3%
250,000 1 International Speedway
Corp., Series 144A,
7.875%, 10/15/2004 246,062
ECOLOGICAL SERVICES &
EQUIPMENT--0.6% 125,000 USA Waste Services, Inc.,

Sr. Note, 7.125%, 10/1/2007 110,242
EDUCATION--1.8%
250,000 Boston University, 7.625%,
7/15/2097 226,370
100,000 Columbia University, MTN,
8.62%, 2/21/2001 102,196
TOTAL 328,566
FINANCE - AUTOMOTIVE--2.7%
500,000 Ford Motor Credit Company,
Note, 7.375%, 10/28/2009 494,385
FINANCIAL INTERMEDIARIES--5.1%
250,000 Amvescap PLC, Sr. Note,
6.60%, 5/15/2005 236,190
100,000 1 FMR Corp., Deb., 7.57%,
6/15/2029 96,494
250,000 Lehman Brothers Holdings,
Inc., MTN, 7.00%, 5/15/2003 245,707
125,000 Marsh & McLennan Cos.,
Inc., Sr. Note, 7.125%,
6/15/2009 121,654
250,000 PaineWebber Group, Inc.,
7.625%, 12/1/2009 244,030
TOTAL 944,075
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--continued

FINANCIAL SERVICES--1.3%
$ 250,000 General Electric Capital

Corp., MTN, 6.65%, 9/3/2002 $ 248,017
FOOD & DRUG RETAILERS--1.3%
250,000 Kroger Co., Inc., 7.25%,
6/1/2009 240,205
FOREST PRODUCTS--2.7%
250,000 Donohue Forest Products,
7.625%, 5/15/2007 244,715
150,000 Fort James Corp., Deb.,
8.375%, 11/15/2001 152,794
100,000 Fort James Corp., MTN,
7.65%, 12/26/2000 100,660
TOTAL 498,169
INSURANCE--4.2%
250,000 Conseco, Inc., Sr. Note,
10.50%, 12/15/2004 271,672
250,000 GEICO Corp., Deb., 9.15%,
9/15/2021 268,490
250,000 1 Union Central Life
Insurance Co., Note,
8.20%, 11/1/2026 241,572
TOTAL 781,734
LEISURE & ENTERTAINMENT--1.3%
250,000 Paramount Communications,
Inc., Sr. Deb., 8.25%,
8/1/2022 245,138
METALS & MINING--2.1%
146,000 Barrick Gold Finance,
Inc., Company Guarantee,
7.50%, 5/1/2007 144,433
125,000 Noranda, Inc., Deb.,
8.125%, 6/15/2004 125,226
125,000 Noranda, Inc., Deb.,
8.625%, 7/15/2002 126,991
TOTAL 396,650
OIL & GAS--3.8%
250,000 Husky Oil Ltd., Deb.,
7.55%, 11/15/2016 222,818
250,000 Sunoco, Inc., Note, 7.75%,
9/1/2009 245,375
250,000 1 Yosemite Securities Trust
I, Bond, 8.25%, 11/15/2004 246,785
TOTAL 714,978
PRINTING & PUBLISHING--1.4%
250,000 News America Holdings,
Inc., Sr. Note, 8.50%,
2/15/2005 257,510
RAIL INDUSTRY--1.3%
250,000 Burlington Northern Santa
Fe, Pass Thru Cert., 7.57%,
1/2/2021 242,278
REAL ESTATE--1.7%
100,000 New Plan Excel Realty
Trust, MTN, 7.40%,
9/15/2009 93,662
250,000 Simon Property Group,
Inc., Note, 7.125%,
2/9/2009 228,473
TOTAL 322,135
<CAPTION>
PRINCIPAL
AMOUNT

OR SHARES VALUE
<C> <S> <C>
CORPORATE BONDS--continued

RETAILERS--10.4%
$ 250,000 Dayton-Hudson Corp., Deb.,
10.00%, 12/1/2000 $ 257,090
250,000 Federated Department
Stores, Inc., Sr. Note,
10.00%, 2/15/2001 257,795
250,000 Harcourt General, Inc.,
Sr. Note, 6.70%, 8/1/2007 231,155
250,000 May Department Stores Co.,
Deb., 9.875%, 6/15/2021 266,763
250,000 Safeway, Inc., Note,
7.25%, 9/15/2004 247,723
250,000 Sears, Roebuck & Co., MTN,
10.00%, 2/3/2012 283,758
250,000 TJX Cos., Inc., 7.45%,
12/15/2009 244,233
150,000 Wal-Mart Stores, Inc., Sr.
Unsecd. Note, 6.875%,
8/10/2009 146,289
TOTAL 1,934,806
SOVEREIGN GOVERNMENT--1.3% 250,000 Quebec, Province of, Deb.,

Series NN, 7.125%, 2/9/2024 233,048
SUPRANATIONAL--0.5%
100,000 Corp Andina De Fomento, Sr.
Note, 7.75%, 3/1/2004 99,796
TECHNOLOGY SERVICES--1.5%
250,000 Unisys Corp., Sr. Note,
11.75%, 10/15/2004 275,000
TELECOMMUNICATIONS &
CELLULAR--3.2%
250,000 Lucent Technologies, Inc.,
Note, 6.90%, 7/15/2001 250,435
200,000 MetroNet Escrow Corp., Sr.
Note, 10.625%, 11/1/2008 229,000
125,000 Telecom de Puerto Rico, Sr.
Note, 6.65%, 5/15/2006 118,646
TOTAL 598,081
UTILITIES--2.5%
250,000 1 Israel Electric Corp.
Ltd., 8.25%, 10/15/2009 249,288
250,000 National Rural Utilities
Cooperative Finance Corp.,
MTN, 5.75%, 12/1/2008 223,070
TOTAL 472,358
TOTAL CORPORATE BONDS
(IDENTIFIED COST
$11,406,357) 11,211,834
MUNICIPAL--1.4%
MUNICIPAL SERVICES--1.4%
250,000 Minneapolis/St. Paul, MN
Airport Commission, UT GO
Taxable Revenue Bonds
Series 9, 8.95%
(Minneapolis/St. Paul,
MN), 1/1/2022 (identified
cost $269,172) 264,740
PREFERRED STOCKS--2.7%
FINANCIAL INTERMEDIARIES--1.3%
5,000 Citigroup, Inc.,
Cumulative Pfd., $3.18 235,000
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS--continued

TELECOMMUNICATIONS &
CELLULAR--1.4%

10,000 TCI Communications

Financing, Pfd., $2.50 $ 258,125
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $503,205) 493,125
U.S. TREASURY OBLIGATIONS--
28.9%
$ 5,475,000 U.S. Treasury Notes,
6.00%, 8/15/2004 -
8/15/2009 (identified

cost $5,469,551) 5,382,053
REPURCHASE AGREEMENT--5.0% 2
930,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized cost) 930,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$18,578,285) 3 $ 18,281,752

</TABLE>

1 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's board of trustees. At December 31, 1999, these
securities amounted to $1,080,201 which represents 5.8% of net assets.

3 The cost of investments for federal tax purposes amounts to $18,579,670. The
net unrealized depreciation of investments on a federal tax basis amounts to
$297,918 which is comprised of $6,460 appreciation and $304,378 depreciation at
December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($18,622,261) at December 31, 1999.

The following acronyms are used throughout this portfolio:

GO --General Obligation
MTN --Medium Term Note
UT --Unlimited Tax

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$18,578,285 and tax
cost $18,579,670) $ 18,281,752
Cash 3,779
Income receivable 344,692
Receivable for shares sold 23,203
TOTAL ASSETS 18,653,426
LIABILITIES:
Payable for shares

redeemed $ 31
Payable for transfer and
dividend disbursing agent
fees and expenses 12,636
Payable for audit expense 10,200
Payable for share
registration costs 4,600
Payable for portfolio
accounting fees 2,974
Accrued expenses 724
TOTAL LIABILITIES 31,165
Net assets for 1,899,687
shares outstanding $ 18,622,261
NET ASSETS CONSIST OF:
Paid-in capital $ 18,644,540
Net unrealized
depreciation of
investments (296,533)
Accumulated net realized
loss on investments (70,853)
Undistributed net
investment income 345,107
TOTAL NET ASSETS $ 18,622,261
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$18,622,261 / 1,899,687
shares outstanding $9.80

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED DECEMBER 31, 1999 1

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 6,250
Interest 376,914
TOTAL INCOME 383,164
EXPENSES:
Investment adviser fee $ 33,575
Administrative personnel
and services fee 82,190
Custodian fees 1,774
Transfer and dividend
disbursing agent fees and
expenses 20,007
Auditing fees 10,200
Legal fees 2,524
Portfolio accounting fees 29,320
Share registration costs 4,600
Printing and postage 11,236
Insurance premiums 1,170
Miscellaneous 502
TOTAL EXPENSES 197,098
WAIVERS AND
REIMBURSEMENTS:
Waiver of investment

adviser fee $ (33,575)
Reimbursement of other
operating expenses (125,466)
TOTAL WAIVERS AND
REIMBURSEMENTS (159,041)
Net expenses 38,057
Net investment income 345,107
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on
investments (70,853)
Net change in unrealized
depreciation of
investments (296,533)
Net realized and
unrealized loss on
investments (367,386)
Change in net assets
resulting from operations $ (22,279)

</TABLE>

1 For the period from April 28, 1999 (date of initial public investment) to
December 31, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 345,107
Net realized loss on
investments ($(69,468) as
computed for federal tax
purposes) (70,853)
Net change in unrealized
depreciation of
investments (296,533)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS (22,279)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 22,863,431
Cost of shares redeemed (4,218,891)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 18,644,540
Change in net assets 18,622,261
NET ASSETS:
Beginning of period --
End of period (including
undistributed net
investment income of
$345,107) $ 18,622,261

</TABLE>

1 For the period from April 28, 1999 (date of initial public investment) to
December 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>

PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.18
Net realized and unrealized loss on investments (0.38)
TOTAL FROM INVESTMENT OPERATIONS (0.20)
NET ASSET VALUE, END OF PERIOD $9.80
TOTAL RETURN 2 (2.00%)

RATIOS TO AVERAGE NET ASSETS:
Expenses 0.68% 3
Net investment income 6.11% 3
Expense waiver/reimbursement 4 2.82% 3
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $18,622
Portfolio turnover 119%

</TABLE>

1 Reflects operations for the period from April 28, 1999 (date of initial public
investment) to December 31, 1999.

2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

3 Computed on an annualized basis.

4 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

DECEMBER 31, 1999

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 11 portfolios. The financial
statements included herein are only those of Federated Quality Bond 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.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

U.S. government securities, listed corporate bonds, other fixed income and
asset-backed securities, 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 60 days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value.

REPURCHASE AGREEMENTS

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

At December 31, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $69,468, which will reduce the Fund's taxable income arising
from future net realized gains on investments, if any, to the extent permitted
by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code, such capital loss carryforward
will expire as follows:

<TABLE>

EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2007 $69,468

</TABLE>

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.
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.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

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>

PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
Shares sold 2,328,653
Shares redeemed (428,966)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 1,899,687

</TABLE>

1 For the period from April 28, 1999 (date of initial public investment) to
December 31, 1999.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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

DISTRIBUTION SERVICES FEE

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's shares.
The Plan provides that the Fund may incur distribution expenses up to 0.25% of
the average daily net assets of the Fund, annually, to compensate FSC. For the
period ended December 31, 1999 the Fund did not incur a distribution services
fee.

SHAREHOLDER SERVICES FEE

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the period ended December 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 27,540,159
Sales $ 9,812,346

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES

AND SHAREHOLDERS OF FEDERATED QUALITY BOND FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated Quality Bond Fund II (a portfolio of
Federated Insurance Series) (the "Trust") as of December 31, 1999, and the
related statement of operations for the period from April 28, 1999 to December
31, 1999, the statement of changes in net assets, and the financial highlights
for the period presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at December 31, 1999,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Quality
Bond Fund II as of December 31, 1999, the results of its operations, the changes
in its net assets and its financial highlights for the stated period, in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

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

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated Quality Bond Fund II

Federated Insurance Series

ANNUAL REPORT

TO SHAREHOLDERS

DECEMBER 31, 1999

[Graphic]
Federated

Federated Quality Bond Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916884

G00433-14 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the first Annual Report to Shareholders for Federated
Small Cap Strategies Fund II, a portfolio of Federated Insurance Series.

This report covers the period from May 28, 1999, when the fund began operation,
through December 31, 1999. 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 financial statements.

Federated Small Cap Strategies Fund II is managed to offer shareholders
significant opportunities for long-term growth by owning a highly diversified
portfolio of small capitalization stocks. 1 These stocks, issued by companies
with a typical market capitalization of less than $1 billion, offer the
potential for high returns over time in exchange for a higher level of risk, as
compared to stocks issued by larger, well- established companies. To help reduce
risk and seek opportunities in this dynamic market, the fund's portfolio is
carefully selected and broadly diversified.

During the reporting period, the small-cap market rebounded while experiencing a
few bumps along the way. In this environment, Federated Small Cap Strategies
Fund II recorded a very strong total return of 39.10% 2 through an increase in
the value of its holdings. By the end of the reporting period, the fund's net
assets reached $2.7 million.

Thank you for choosing Federated Small Cap Strategies Fund II as a diversified,
professionally managed way to participate in the growth potential of dynamic,
small American companies. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

1 Small-cap stocks have historically experienced greater volatility than
average.

2 Past performance is no guarantee 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 or expenses of a variable annuity or variable life contract.

Investment Review

An interview with the fund's portfolio manager, Aash M. Shah, CFA, Vice
President, Federated Investment Management Company.

During the first three quarters of the year, small-cap funds performed modestly,
with the Russell 2000 Index (RUS2) 1 up only +2.32%. Small-cap funds also
experienced negative cash flows. The fourth quarter was strong for small-cap
funds, with the RUS2 closing the year up +21.35% led by the technology sector.
Cash flows also came back in the fourth quarter. Since inception, May 28, 1999,
the fund had strong performance of +39.10%.

The Federated Small Cap Strategies Fund II typically targets smaller companies
with market capitalizations within the range of the Standard & Poor's 600 Small
Cap Index. 2 Our strategy is to remain fully invested in small, fast growing,
attractively valued companies. Federated uses a combination of quantitative
models and fundamental analysis in the process of selecting stocks for the fund.
The management style of the fund can best be described as a blend of value and
growth, also known as a core style. The objective is to seek excellent long-term
performance for our shareholders by investing in the best small companies within
each of 11 economic sectors.

Even with the recent strong performance of small-cap stocks, especially
small-cap growth stocks, the market remains very attractive for long-term
investors. Two powerful longer-term drivers are: (1) valuation levels of small
company stocks are extremely attractive versus larger capitalization stocks; and
(2) earnings growth in the small-cap market is expected to outpace large-cap
stocks over the next 3-5 years. Our analysis of the small-cap market reveals
numerous opportunities to find companies with rapidly growing revenues and
earnings at attractive prices. Companies in the small-cap sector still appear
very reasonably priced relative to large- cap companies.

We currently have overweights in the Basic Materials, Communications Services,
and Consumer Staples sectors and underweights in Health Care, Transportation,
and Utilities. In our two largest sectors-Technology and Consumer Cyclicals-we
are temporarily underweight. Our objective is to remain fully invested in the
best 3% of small companies we can find across a universe of over 5,000 small
companies in the U.S. We are maintaining our cash position below 3%, so that
effectively, the fund is fully invested. Under low inflation and moderate
economic growth conditions, we expect small-cap stocks to do very well.

Characteristics of this fund which make it an ideal investment vehicle for this
market are: (1) sector discipline-we stay invested in all major economic sectors
at all times with appropriate overweights and underweights (one half to two
times sector bands); and (2) small cap discipline-we have kept the median
capitalization of the fund below $1.5 billion, truly a small cap fund. Although
small cap equities may be more volatile than their larger counterparts, history
has shown them to be an excellent long-term investment. Based on monthly
historical data from 1946 to 1998, given a 15-year holding period, small caps
outperformed large caps 79% of the time.

1 The Russell 2000 Small Stock Index is a broadly diversified, unmanaged index
consisting of approximately 2,000 small capitalization common stocks that can be
used to compare total returns of funds whose portfolios are invested primarily
in small capitalization common stocks. Investments cannot be made in an index.

2 The Standard & Poor's 600 Small Cap Index is an unmanaged,
capitalization-weighted index of stocks representing all major industries in the
small-cap range of the U.S. stock market. Investments cannot be made in an
index.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 177,761 total outstanding shares. The following items were considered
by shareholders of the fund and the results of their voting were as follows:

AGENDA ITEM 1

To elect six Trustees 1-all portfolios of Federated Insurance Series voting
together.

<TABLE>

WITHHELD
FOR AUTHORITY TO VOTE
<S> <C> <C>
Thomas G. Bigley 240,211,548 7,152,692
Nicholas P. Constantakis 239,928,312 7,435,928
John F. Cunningham 240,226,307 7,137,933
Charles F. Mansfield 240,298,855 7,065,386
John E. Murray, Jr., J.D., S.J.D. 240,016,672 7,347,569
John S. Walsh 240,224,615 7,139,625

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
173,578 4,183 0

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED SMALL CAP STRATEGIES FUND II

"Graphic representation "G" omitted. See Appendix."

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED DECEMBER 31, 1999

Start of Performance
(5/28/99) 39.10%

The graph above illustrates the hypothetical investment of $10,000 1 in
Federated Small Cap Strategies Fund II (the "Fund") from May 28, 1999 (start of
performance) to December 31, 1999 compared to the Russell 2000 Small Stock Index
(RUS2)2 and the Standard & Poor's 600 Small Cap Index (S&P 600).2

1 The Fund's performance assumes the reinvestment of all dividends and
distributions. The RUS2 and the S&P 600 have been adjusted to reflect
reinvestment of dividends on securities in the indices.

2 The RUS2 and the S&P 600 are not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. The indices are unmanaged.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

SHARES VALUE
<S> <C> <C>
COMMON STOCKS-76.3%
BASIC MATERIALS-3.4%
900 AK Steel Holding Corp. $ 16,987
400 1 ATMI, Inc. 13,225
500 Cambrex Corp. 17,219
400 Corn Products
International, Inc. 13,100
600 1 Daisytek International
Corp. 13,987
200 Ferro Corp. 4,400
1,400 RPM, Inc. 14,263
TOTAL 93,181
CAPITAL GOODS-7.6%
500 Applied Power, Inc., Class
A 18,375
500 Aptargroup, Inc. 12,562
500 C&D Technologies, Inc. 21,250
400 Carlisle Cos., Inc. 14,400
200 1 Cognex Corp. 7,800
200 1 Dycom Industries, Inc. 8,812
400 1 Excel Technology, Inc. 7,175
400 Harman International
Industries, Inc. 22,450
200 1 KEMET Corp. 9,012
200 Manitowoc, Inc. 6,800
300 1 Mueller Industries, Inc. 10,875
200 Pentair, Inc. 7,700
600 1 Shaw Group, Inc. 15,188
800 Spartech Corp. 25,800
600 1 Terex Corp. 16,650
TOTAL 204,849
COMMUNICATION-2.7%
500 1 Adelphia Business

Solutions, Inc. 24,000
500 1 MGC Communications, Inc. 25,375
200 1 Powertel, Inc. 20,075
100 1 TeleCorp PCS, Inc. 3,800
TOTAL 73,250
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-10.8%
700 1 Action Performance Cos.,
Inc. $ 8,050
600 1 Acxiom Corp. 14,400
400 1 American Eagle Outfitters,
Inc. 18,000
600 1 Apollo Group, Inc., Class A 12,037
800 Casey's General Stores,
Inc. 8,350
100 1 Catalina Marketing Corp. 11,575
300 Central Newspapers, Inc.,
Class A 11,812
500 1 DeVRY, Inc. 9,312
400 1 Dura Automotive Systems,
Inc. 6,975
100 1 FreeMarkets, Inc. 34,131
700 1 Gentex Corp. 19,425
700 1 ITT Educational Services,
Inc. 10,806
400 1 Insight Enterprises, Inc. 16,250
200 1 Men's Wearhouse, Inc. 5,875
600 1 O'Reilly Automotive, Inc. 12,900
400 1 Scotts Co. 16,100
500 ShopKo Stores, Inc. 11,500
200 1 Timberland Co., Class A 10,575
300 1 Toll Brothers, Inc. 5,588
400 1 ValueVision International,
Inc., Class A 22,925
900 Wolverine World Wide, Inc. 9,844
300 1 Zale Corp. 14,513
TOTAL 290,943
CONSUMER STAPLES-6.2%
400 1 Charter Communications,
Inc. 8,750
100 1 Emmis Communications,
Corp., Class A 12,464
500 1 Metamor Worldwide, Inc. 14,563
400 1 Mondavi Robert Corp.,
Class A 13,900
600 Ruby Tuesday, Inc. 10,913
500 Ruddick Corp. 7,750
400 1 Smithfield Foods, Inc. 9,600
100 1 Spanish Broadcasting
System, Inc., Class A 4,025
300 1 Suiza Foods Corp. 11,888
1,250 1 Tetra Tech, Inc. 19,219
400 1 TiVo, Inc. 13,500
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
CONSUMER STAPLES-CONTINUED
1,000 1 U.S. Foodservice, Inc. $ 16,750
300 Universal Foods Corp. 6,113
300 1 Valassis Communications,
Inc. 12,675
100 1 Whole Foods Market, Inc. 4,638
TOTAL 166,748
ENERGY MINERALS-1.7%
400 Cross Timbers Oil Co. 3,625
200 Devon Energy Corp. 6,575
500 1 Newfield Exploration Co. 13,375
600 1 Pride International, Inc. 8,775
300 1 Tuboscope, Inc. 4,763
800 Vintage Petroleum, Inc. 9,650
TOTAL 46,763
FINANCE-7.2%
600 1 Affiliated Managers Group 24,262
200 CCBT Financial Companies,
Inc. 8,712
500 Chittenden Corp. 14,813
300 City National Corp. 9,881
800 Community First
Bankshares, Inc. 12,600
612 1 Delphi Financial Group,
Inc., Class A 18,360
600 Enhance Financial Services
Group, Inc. 9,750
700 1 FirstFed Financial Corp. 9,844
354 Heller Financial, Inc. 7,102
400 1 Imperial Bancorp 9,650
400 Jefferies Group, Inc. 8,800
900 North Fork Bancorp, Inc. 15,750
300 1 Official Payments Corp. 15,600
990 Republic Bancorp, Inc. 12,019
525 Sterling Bancorp 8,400
300 Texas Regional Bancshares,
Inc., Class A 8,700
TOTAL 194,243
HEALTH CARE-5.6%
400 Alpharma, Inc., Class A 12,300
600 1 Cephalon, Inc. 20,737
400 1 Express Scripts, Inc.,
Class A 25,600
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-continued
HEALTH CARE-CONTINUED
600 Hooper Holmes, Inc. $ 15,450
300 1 King Pharmaceuticals, Inc. 16,819
600 1 Medicis Pharmaceutical
Corp., Class A 25,537
100 1 Medimmune, Inc. 16,587
700 1 Sybron International Corp. 17,281
TOTAL 150,311
TECHNOLOGY-28.3%
300 1 Accrue Software, Inc. 16,237
200 1 Aether Systems, Inc. 14,325
200 1 Applied Micro Circuits
Corp. 25,450
500 1 Braun Consulting, Inc. 35,750
400 1 CSG Systems International,
Inc. 15,950
200 1 Clarent Corp. 15,550
300 1 CommScope, Inc. 12,094
800 1 Complete Business
Solutions, Inc. 20,100
200 1 Comverse Technology, Inc. 28,950
300 1 Concentric Network Corp. 9,244
200 1 Conexant Systems, Inc. 13,275
300 1 Crossroads Systems, Inc. 25,350
200 1 Emulex Corp. 22,500
300 FactSet Research Systems,
Inc. 23,887
100 1 Gadzoox Networks, Inc. 4,356
500 1 Interactive Pictures Corp. 11,656
200 1 Keynote Systems, Inc. 14,750
200 1 Legato Systems, Inc. 13,762
100 1 Liberate Technologies,
Inc. 25,700
300 1 Macromedia, Inc. 21,937
400 1 Maker Communications, Inc. 17,100
900 1 Mastech Corp. 22,275
600 1 Micrel, Inc. 34,163
800 1 NetIQ Corp. 41,650
400 1 Netro Corp. 20,400
100 1 Next Level Communications,
Inc. 7,488
300 OpenTV Corp., Class A 24,075
300 1 Orbotech, Ltd. 23,250
100 1 Packeteer, Inc. 7,100
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<S> <C> <C>
COMMON STOCKS-continued
TECHNOLOGY-CONTINUED
500 1 Paradyne Networks, Inc. $ 13,625
200 1 Peregrine Systems, Inc. 16,838
200 1 Phone.com, Inc. 23,188
500 1 Photon Dynamics, Inc. 19,375
200 1 Satyam Infoway Ltd., ADR 31,000
400 1 Semtech Corp. 20,850
100 1 Software.com, Inc. 9,600
100 1 TIBCO Software, Inc. 15,300
300 1 Varian Semiconductor
Equipment Associates, Inc. 10,200
300 1 Virata Corp. 8,963
400 1 Vitesse Semiconductor
Corp. 20,975
200 1 Xpedior, Inc. 5,750
TOTAL 763,988
TRANSPORTATION-1.1%
300 Airborne Freight Corp. 6,600
300 1 Pierce Leahy Corp. 12,975
100 USFreightways Corp. 4,788
400 Werner Enterprises, Inc. 5,625
TOTAL 29,988
UTILITIES-1.7%
300 CH Energy Group, Inc. 9,900
300 New Jersey Resources Corp. 11,719
400 Piedmont Natural Gas, Inc. 12,100
400 United Water Resources,
Inc. 13,675
TOTAL 47,394
TOTAL COMMON STOCKS
(IDENTIFIED COST
$1,555,956) 2,061,658
REPURCHASE AGREEMENTS-
24.4%
$ 300,000 ABN AMRO, Inc., 3.00%,
dated 12/31/1999, due
1/3/2000 300,000
360,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 360,000
TOTAL REPURCHASE
AGREEMENTS (AT AMORTIZED
COST) 660,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$2,215,956) 2 $ 2,721,658

</TABLE>

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $2,215,956. The
net unrealized appreciation of investments on a federal tax basis amounts to
$505,702 which is comprised of $614,239 appreciation and $108,537 depreciation
at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($2,702,441) at December 31, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:

Investments in securities $ 2,061,658
Investments in repurchase
agreements 660,000
TOTAL INVESTMENTS IN
SECURITIES, AT VALUE
(IDENTIFIED COST
$2,215,956) 2,721,658
Cash 5,995
Income receivable 665
TOTAL ASSETS 2,728,318
LIABILITIES:
Payable for shares
redeemed $ 501
Payable for auditing fees 12,000
Payable for legal fees 4,174
Payable for portfolio
accounting fees 3,677
Payable for custodian fees 2,227
Payable for transfer and
dividend disbursing agent
fees and expenses 1,630
Payable for insurance
premiums 1,160
Accrued expenses 508
TOTAL LIABILITIES 25,877
Net assets for 194,323
shares outstanding $ 2,702,441
NET ASSETS CONSIST OF:
Paid-in capital $ 2,036,606
Net unrealized
appreciation of
investments 505,702
Accumulated net realized
gain on investments 160,133
TOTAL NET ASSETS $ 2,702,441
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$2,702,441 / 194,323
shares outstanding $13.91

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED DECEMBER 31, 1999 1

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 5,767
Interest 4,252
TOTAL INCOME 10,019
EXPENSES:
Investment adviser fee $ 8,666
Administrative personnel
and services fee 75,000
Custodian fees 2,234
Transfer and dividend
disbursing agent fees and
expenses 9,434
Directors'/Trustees' fees 7
Auditing fees 12,047
Legal fees 6,229
Portfolio accounting fees 22,335
Share registration costs 37
Printing and postage 10,230
Insurance premiums 1,171
Miscellaneous 4,566
TOTAL EXPENSES 151,956
WAIVERS AND
REIMBURSEMENTS:
Waiver of investment

advisory fee $ (8,666)
Reimbursement of other
operating expenses (131,338)
TOTAL WAIVERS AND
REIMBURSEMENTS (140,004)
Net expenses 11,952
Net operating loss (1,933)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 162,066
Net change in unrealized
appreciation of
investments 505,702
Net realized and
unrealized gain on
investments 667,768
Change in net assets
resulting from operations $ 665,835

</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to December 31, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net operating loss $ (1,933)
Net realized gain on
investments ($162,066 as
computed for federal tax
purposes) 162,066
Net change in unrealized
appreciation 505,702
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 665,835
SHARE TRANSACTIONS:
Proceeds from sale of
shares 2,819,216
Cost of shares redeemed (782,610)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 2,036,606
Change in net assets 2,702,441
NET ASSETS:
Beginning of period -
End of period $ 2,702,441

</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to December 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>

PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net operating loss (0.01)
Net realized and unrealized gain on investments 3.92
TOTAL FROM INVESTMENT OPERATIONS 3.91
NET ASSET VALUE, END OF PERIOD $13.91
TOTAL RETURN 2 39.10%

RATIOS TO AVERAGE NET ASSETS:
Expenses 1.03% 3
Net operating loss (0.17)% 3
Expense waiver/reimbursement 4 12.12% 3
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $2,702
Portfolio turnover 77%

</TABLE>

1 Reflect operations for the period from May 28, 1999 (date of initial public
investment) to December 31, 1999.

2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

3 Computed on an annualized basis.

4 This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

DECEMBER 31, 1999

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 11 portfolios. The financial
statements included herein are only those of Federated Small Cap 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 to provide capital appreciation.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for net operating
losses. The following reclassifications were made to the financial statements.

<TABLE>

INCREASE (DECREASE)
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME GAINS (LOSSES)
<S> <C>
$1,933 $(1,933)

</TABLE>

Net investment income, net realized gains (losses), and net assets were not
affected by these reclassifications.

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

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>

PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
Shares sold 265,888
Shares redeemed (71,565)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 194,323

</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to December 31, 1999.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser fee equal to
0.75% of the Fund's average daily net assets. The Adviser may voluntary 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

DISTRIBUTION SERVICES FEE

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's shares.
The Plan provides that the Fund may incur distribution expenses up to 0.25% of
the average daily net assets of the Fund, annually, to compensate FSC. For the
period ended December 31, 1999, the Fund did not incur a distribution services
fee.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund may pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. For the
period ended December 31, 1999, the Fund did not incur a shareholder services
fee.

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the period ended December 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 2,813,319
Sales $ 1,409,929

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES

AND SHAREHOLDERS OF FEDERATED SMALL CAP STRATEGIES FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated Small Cap Strategies Fund II (a
portfolio of Federated Insurance Series) (the "Trust"), as of December 31, 1999,
and the related statement of operations for the period from May 28, 1999 to
December 31, 1999, the statement of changes in net assets, and the financial
highlights for the period presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Small Cap
Strategies Fund II as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the stated period, in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated Small Cap Strategies Fund II

Federated Insurance Series

ANNUAL REPORT TO SHAREHOLDERS

DECEMBER 31, 1999

[Graphic]
Federated

Federated Small Cap Strategies Fund II
Federated Investors Funds
5800 Corporate Drive

Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916876

G00433-12 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the first Annual Report to Shareholders for Federated
Strategic Income Fund II, a portfolio of Federated Insurance Series.

This report covers the period from July 7, 1999, when the fund began operation,
through December 31, 1999. It begins with a commentary by the fund's portfolio
manager, which is followed by a complete listing of the fund's holdings and the
financial statements.

Federated Strategic Income Fund II is managed to offer shareholders generous
monthly income from three distinct bond markets-domestic high- yield bonds, U.S.
corporate bonds, and international corporate and government bonds.

During its initial period of operation, Federated Strategic Income Fund II
recorded a total return of 3.70% 1 through a rise in net asset value. By the end
of the reporting period, the fund's net assets reached $16 million.

Thank you for choosing Federated Strategic Income Fund II as a diversified,
professionally managed way to participate in the income opportunities of three
distinct sectors of the bond market.

Sincerely,

[Graphic]

J. Christopher Donahue
President
February 15, 2000

Investment Review

The initial reporting period for Federated Strategic Income Fund II began with
the fund's start of performance on July 7, 1999 and ended on December 31, 1999.
This reporting period was, in retrospect, a very difficult and challenging
environment for the high quality debt markets. The Federal Reserve Board (the
"Fed"), in response to continuous economic growth and signs of potentially
rising inflation, increased the Fed funds target rate on three occasions over
the latter half of 1999. Interest rate levels in the U.S. Treasury market rose
at a faster rate than the Fed funds increase, with short to intermediate
maturities (i.e., 2-5 years) rising approximately 65-70 basis points and the
30-year treasury yield rising 49 basis points over the reporting period. As a
result, price declines occurred in the majority of high quality fixed income
securities.

In terms of relative performance within the various fixed income sectors, the
reporting period demonstrated significant volatility. The third quarter of 1999
experienced underperformance for most "spread" product sectors-agencies,
mortgages, corporates and emerging markets. This was due, in large part, to a
supply/demand imbalance, with unusually large new issue supply over the summer
months, along with a lack of investor demand. During the fourth quarter of 1999,
new issue bond supply was far less as higher interest rates reduced mortgage
security origination. In addition, corporate bond supply was less due to the
large issuance over the summer months, as corporations sought to avoid the
potential effect of Year 2000 concerns. In addition, continued economic growth
abroad served as a solid fundamental condition, which created strong price
appreciation in the emerging debt markets. Because of these factors, all the
"spread" products significantly outperformed comparable maturity treasury
securities during the fourth quarter.

Federated Strategic Income Fund II represents a diversified bond portfolio, with
an asset allocation roughly equally divided among U.S. mortgage, high yield and
emerging market securities. Given the relative outperformance of both mortgage
and high yield securities relative to treasuries over the final three months of
1999, and the significant price appreciation of emerging market debt, the fund
provided both high income and price appreciation late in 1999.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 1,517,441 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1-all portfolios of Federated Insurance Series voting
together.

<TABLE>
<CAPTION>
WITHHELD
AUTHORITY

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(d) To approve amending the fund's funda-mental investment policy regarding
investments in commodities.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the Fund.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS
<S> <C> <C>
1,500,015 0 0
</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED STRATEGIC INCOME FUND II

"Graphic representation "H" omitted. See Appendix."

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED DECEMBER 31, 1999
Start of Performance
(7/7/99) 3.70%

The graph above illustrates the hypothetical investment of $10,000 in Federated
Strategic Income Fund II (the "Fund") from July 7, 1999 (start of performance)
to December 31, 1999 compared to the Lehman Brothers Government/Corporate Bond
Index (LBG/CBI) 1 and the Lipper Multi-Sector Income Funds Average (LMSIFA).2

1 The LBG/CBI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.

2 The LMSIFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a Fund's performance.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
U.S. CORPORATE BONDS-29.5%
AEROSPACE & DEFENSE-0.3%
$ 50,000 Anteon Corp., Sr. Sub.
Note, 12.00%, 5/15/2009 $ 46,750
AUTOMOTIVE-1.2%
50,000 Aftermarket Technology
Corp., Sr. Sub. Note,
Series D, 12.00%, 8/1/2004 50,375
50,000 American Axle &
Manufacturing, Inc., Sr.
Sub. Note, Company
Guarantee,
9.75%, 3/01/2009 50,625
100,000 Lear Corp., Sr. Note,
8.11%, 5/15/2009 94,813
TOTAL 195,813
BANKING-0.6%
100,000 GS Escrow Corp., Sr. Note,
7.125%, 8/01/2005 90,769
BROADCAST RADIO & TV-0.9%
100,000 Chancellor Media Corp.,
Sr. Sub. Note, Series B,
8.125%, 12/15/2007 100,625
50,000 Sinclair Broadcast Group,
Sr. Sub. Note, 8.75%,
12/15/2007 46,750
TOTAL 147,375
BUILDING & DEVELOPMENT-
0.6%

50,000 Building Materials Corp.,
Sr. Note, 8.00%,
10/15/2007 45,375
50,000 Formica Corp., Sr. Sub.
Note, Series B, 10.875%,
3/01/2009 46,000
TOTAL 91,375
BUSINESS EQUIPMENT &
SERVICES-0.8%
50,000 1 Buhrmann US, Inc., Sr. Sub.
Note, 12.25%, 11/01/2009 52,250
50,000 Fisher Scientific
International, Inc., Sr.
Sub. Note, 9.00%,
2/01/2008 48,125
50,000 U.S. Office Products Co.,
Sr. Sub. Note, 9.75%,
6/15/2008 26,250
TOTAL 126,625
CABLE TELEVISION-3.1%
100,000 CSC Holdings, Inc., Sr.
Sub. Note, 9.875%,
5/15/2006 105,750
50,000 Charter Communications,
Inc., Sr. Disc. Note,
0/9.92%, 4/01/2011 29,563
100,000 Echostar DBS Corp., Sr.
Note, 9.375%, 2/01/2009 101,250
150,000 NTL, Inc., Sr. Note,
0/9.75%, 4/01/2008 105,750
50,000 Pegasus Communications
Corp., Sr. Note, 9.75%,
12/01/2006 51,125
75,000 RCN Corp., Sr. Disc. Note,
0/11.00%, 7/01/2008 49,313
100,000 United International
Holdings, Inc., Sr. Secd.
Disc. Note, 0/10.75%,
2/15/2008 64,500
TOTAL 507,251
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
U.S. CORPORATE BONDS-
continued
CHEMICALS & PLASTICS-2.1%
$ 50,000 General Chemical
Industrial Products, Inc.,
Sr. Sub. Note, 10.625%,
5/01/2009 $ 49,750
50,000 1 Huntsman ICI Chemicals,
Inc., Sr. Sub. Note,
10.125%, 7/01/2009 51,500
50,000 ISP Holdings, Inc., Sr.
Note, Series B, 9.00%,
10/15/2003 49,375
100,000 1 Lyondell Chemical Co., Sr.
Secd. Note, Series A,
9.625%, 5/01/2007 103,000
50,000 Polymer Group, Inc., Sr.
Sub. Note, Series B, 8.75%,
3/01/2008 48,250
50,000 Texas Petrochemicals
Corp., Sr. Sub. Note,
11.125%, 7/01/2006 43,750
TOTAL 345,625
CLOTHING & TEXTILES-0.3%
50,000 GFSI, Inc., Sr. Sub. Note,
Series B, 9.625%, 3/1/2007 31,250
50,000 Pillowtex Corp., Sr. Sub.
Note, 10.00%, 11/15/2006 23,250
TOTAL 54,500
CONSUMER PRODUCTS-1.9%
50,000 Chattem, Inc., Sr. Sub.
Note, 8.875%, 4/01/2008 47,000
50,000 NBTY, Inc., Sr. Sub. Note,
Series B, 8.625%,
9/15/2007 46,750
50,000 Playtex Family Products
Corp., Sr. Sub. Note,
9.00%, 12/15/2003 49,875
50,000 Revlon Consumer Products
Corp., Sr. Sub. Note,
8.625%, 2/01/2008 25,750
50,000 Sleepmaster LLC, Sr. Sub.
Note, 11.00%, 5/15/2009 50,313
50,000 True Temper Sports, Inc.,
Sr. Sub. Note, Series B,
10.875%, 12/01/2008 48,000
50,000 United Industries Corp.,
Sr. Sub. Note, Series B,
9.875%, 4/01/2009 46,000
TOTAL 313,688
CONTAINER & GLASS
PRODUCTS-0.9%
100,000 Owens-Illinois, Inc., Sr.
Note, 8.10%, 5/15/2007 96,000
50,000 Russell Stanley Holdings,
Inc., Sr. Sub. Note,
10.875%, 2/15/2009 43,750
TOTAL 139,750
ECOLOGICAL SERVICES &
EQUIPMENT-0.6%
50,000 Allied Waste North
America, Sr. Sub. Note,
10.00%, 8/01/2009 44,750
50,000 Allied Waste North
America, Company
Guarantee, Sr. Note

7.625%, 1/01/2006 45,250
TOTAL 90,000
ELECTRONICS-0.9%
50,000 1 Fairchild Semiconductor
Corp., Sr. Sub. Note,
10.375%, 10/01/2007 51,250
50,000 1 SCG Holding Corp., Sr.
Note, 12.00%, 8/01/2009 53,375
50,000 Telecommunications
Techniques Co. LLC, Sr.
Sub. Note, 9.75%,
5/15/2008 45,750
TOTAL 150,375
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
U.S. CORPORATE BONDS-
continued
FOOD PRODUCTS-0.6%
$ 50,000 International Home Foods,
Inc., Sr. Sub. Note,
10.375%, 11/1/2006 $ 52,125
50,000 Triarc Consumer Products
Group, Sr. Sub. Note,
10.25%, 2/15/2009 48,125
TOTAL 100,250
FOOD SERVICES-0.7%
50,000 AmeriServe Food
Distribution, Inc., Sr.
Sub. Note, 10.125%,
7/15/2007 17,250
50,000 Carrols Corp., Company
Guarantee, 9.50%,
12/01/2008 45,750
50,000 Domino's, Inc., Company
Guarantee, Sr. Sub. Note,
10.375%, 1/15/2009 48,375
TOTAL 111,375
FOREST PRODUCTS-0.3%
50,000 Packaging Corp. of
America, Sr. Sub. Note,
Series B, 9.625%,
4/01/2009 51,500
HEALTH CARE-2.3%
50,000 CONMED Corp., Sr. Sub.
Note, 9.00%, 3/15/2008 47,000
100,000 Columbia HCA Healthcare
Corp., Sr. Note, 6.91%,
6/15/2005 91,026
50,000 Hanger Orthopedic Group,
Inc., Sr. Sub. Note,
11.25%, 6/15/2009 51,626
50,000 Kinetic Concepts, Inc.,
Sr. Sub. Note, Company
Guarantee, Series B,
9.625%, 11/01/2007 37,250
100,000 Tenet Healthcare Corp.,
Sr. Sub. Note, Series B,
8.125%, 12/01/2008 95,250
50,000 1 Unilab Corp., Sr. Sub.
Note, 12.75%, 10/01/2009 52,250
TOTAL 374,402
HOTELS, MOTELS, INNS &
CASINOS-0.9%
50,000 Florida Panthers Holdings,
Inc., Series 2009, Company
Guarantee, Sr. Sub. Note,
9.875%, 4/15/2009 48,750
100,000 HMH Properties, Inc., Sr.
Note, Series A, 7.875%,
8/01/2005 94,750
TOTAL 143,500
INDUSTRIAL PRODUCTS &
EQUIPMENT-1.2%
50,000 1 Blount, Inc., Sr. Sub.
Note, 13.00%, 8/01/2009 53,000
50,000 Johnstown America, Inc.,
Sr. Sub. Note, 11.75%,
8/15/2005 51,125
50,000 Neenah Foundry Co., Sr.
Sub. Note, 11.125%,
5/01/2007 46,500
50,000 WESCO Distribution, Inc.,
Sr. Sub. Note, 9.125%,
6/01/2008 47,250
TOTAL 197,875
LEISURE & ENTERTAINMENT-
0.7%
100,000 Premier Parks, Inc., Sr.
Disc. Note, 10.00%,
4/01/2008 69,500
50,000 Regal Cinemas, Inc., Sr.
Sub. Note, 9.50%,
6/01/2008 39,000
TOTAL 108,500
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
U.S. CORPORATE BONDS-
continued
MACHINERY & EQUIPMENT-0.6%
$ 50,000 Fairchild Corp., Sr. Sub.
Note, 10.75%, 4/15/2009 $ 42,750
50,000 United Rentals, Inc., Sr.
Sub. Note, Company
Guarantee, 9.25%,
1/15/2009 48,125
TOTAL 90,875
OIL & GAS-1.0%
50,000 Forest Oil Corp., Sr. Sub.
Note, 10.50%, 1/15/2006 51,375
50,000 RBF Finance Co., Company
Guarantee, Sr. Secd. Note,
11.375%, 3/15/2009 54,000
50,000 Triton Energy Ltd, Sr.
Note, 8.75%, 4/15/2002 50,375
TOTAL 155,750
SERVICES-0.5%
50,000 Crown Castle International
Corp., Sr. Disc. Note,
0/11.25%, 8/01/2011 31,500
50,000 1 URS Corp., Sr. Sub. Note,
Series B, 12.25%,
5/01/2009 52,625
TOTAL 84,125
TELECOMMUNICATIONS &
CELLULAR-5.9%
50,000 Centennial Cellular Corp.,
Sr. Sub. Note, 10.75%,
12/15/2008 53,875
100,000 Intermedia Communications,
Inc., Sr. Sub. Disc. Note,
Series B, 0/12.25%,
3/01/2009 60,500
100,000 Level 3 Communications,
Inc., Sr. Note, 9.125%,
5/01/2008 95,125
50,000 McLeod USA, Inc., Sr. Note,
8.125%, 2/15/2009 46,625
50,000 Metromedia Fiber Network,,
Sr. Note, 10.00%,
12/15/2009 51,250
50,000 1 NEXTEL Communications,
Inc., Sr. Note, 9.375%,
11/15/2009 49,375
150,000 NEXTEL Communications, Sr.
Disc. Note, 0/10.65%,
9/15/2007 114,000
150,000 NEXTLINK Communications,
Sr. Disc. Note, 0/12.25%,
6/01/2009 93,000
50,000 PsiNet, Inc., Sr. Note,
11.00%, 8/01/2009 51,500
50,000 Teligent, Inc., Sr. Note,
11.50%, 12/1/2007 49,250
50,000 Triton PCS, Inc., Sr. Sub.
Disc. Note, 0/11.00%,
5/01/2008 35,750
50,000 1 Verio, Inc., Sr. Note,
10.625%, 11/15/2009 51,250
50,000 Viatel, Inc., Sr. Note,
11.50%, 3/15/2009 51,000
50,000 1 VoiceStream Wireless
Corp., Sr. Note, 10.375%,
11/15/2009 51,750
50,000 Williams Communications
Group, Sr. Note, 10.875%,
10/01/2009 52,625
50,000 WinStar Communications,
Inc., Sr. Sub. Defd. Deb.,
11.00%, 3/15/2008 51,250
TOTAL 958,125
UTILITIES-0.6%
100,000 CMS Energy Corp., Sr. Note,
7.50%, 1/15/2009 92,545
TOTAL U.S. CORPORATE BONDS
(IDENTIFIED COST
$4,925,451) 4,768,718
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
INTERNATIONAL BONDS-35.7%
ARGENTINA-6.7%
SOVEREIGN-6.7%
$ 320,000 Argentina, Government of,
Brady Disc., Par Bond,
6.00%, 3/31/2023 $ 210,800
940,000 Argentina, Government of,
8.375%, Series BGLO,
12/20/2003 871,403
TOTAL 1,082,203
BELGIUM-0.3%
TELECOMMUNICATION &
CELLULAR-0.3%
50,000 Hermes Europe Railtel
B.V., Sr. Note, 10.375%,
1/15/2009 49,625
BERMUDA-0.6%
SURFACE TRANSPORTATION-
0.3%

50,000 Gearbulk Holding Ltd., Sr.
Note, 11.25%, 12/1/2004 51,625
TELECOMMUNICATION &
CELLULAR-0.3%
50,000 1 Global Crossing Holdings
Ltd., Sr. Note, 9.50%,
11/15/2009 49,688
TOTAL 101,313
BRAZIL-6.2%
SOVEREIGN-6.2%
658,000 Brazil, Government of,
Brady EI, Series EI-L,
6.94%, 4/15/2006 577,395
490,000 Brazil, Government of,
10.125%, 5/15/2027 418,950
TOTAL 996,345
CANADA-1.0%
TELECOMMUNICATION &
CELLULAR-1.0%
100,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/9.27%, 8/15/2007 55,750
100,000 Rogers Cantel, Inc., Sr.
Sub. Note, 8.80%,
10/1/2007 101,500
TOTAL 157,250
KOREA-2.5%
SOVEREIGN-2.5%
380,000 Korea, Government of,
8.875%, 4/15/2008 400,854
LUXEMBOURG-0.3%
TELECOMMUNICATION &
CELLULAR -0.3%
50,000 Millicom International
Cellular, Sr. Sub. Disc.
Note, 0/13.50%, 6/1/2006 41,500
MALAYSIA-1.3%
SOVEREIGN-1.3%
200,000 Malaysia, 8.75%, 6/01/2009 210,066
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
INTERNATIONAL BONDS-
continued

MEXICO-5.4%
OIL & GAS-1.3%
$ 200,000 Petroleos Mexicanos,
Company Guarantee, Sr.
Note, 9.375%, 12/02/2008 $ 205,500
SOVEREIGN-4.1%
850,000 Mexico, Government of,
Brady Par, Series W-B,
6.25%, 12/31/2019 667,250
TOTAL 872,750
MOROCCO-3.8%
SOVEREIGN-3.8%
675,000 Morocco, FRN, 6.84%,
1/1/2009 610,875
NETHERLANDS-0.2%
CABLE TELEVISION-0.2%
50,000 1 United Pan-Europe Comm,
Sr. Disc. Note, 0/13.375%,
11/01/2009 28,250
PERU-2.1%
SOVEREIGN-2.1%
500,000 Peru, Government of, Brady
Bond, 4.50%, 3/07/2017 343,750
PHILIPPINES-1.5%
SOVEREIGN-1.5%
250,000 Philippines, Government

of, 8.875%, 4/15/2008 242,848
POLAND-1.3%
SOVEREIGN-1.3%
235,000 Poland, Government of,
Brady PDI Bond, 6.00%,
10/27/2014 210,913
RUSSIA-0.9%
SOVEREIGN-0.9%
160,000 Russia, Government of,
Vnesheconombank IAN,
6.91%, 12/15/2015 26,000
200,000 Russia, Government of,
Series REGS, 11.00%,
7/24/2018 116,000
TOTAL 142,000
SWEDEN-0.2%
SURFACE TRANSPORTATION-
0.2%

50,000 Stena AB, Sr. Note, 8.75%,
6/15/2007 41,250
VENEZEUELA-1.4%
SOVEREIGN-1.4%
120,000 Venezuela, Government of,
Bond, 9.25%, 9/15/2027 79,342
190,475 Venezuela, Government of,
FRN Deb., 7.00%,
12/18/2007 152,380
TOTAL 231,722
TOTAL INTERNATIONAL BONDS
(IDENTIFIED COST
$5,526,439) 5,763,514
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
U.S. GOVERNMENT AGENCIES-
31.7%

LONG-TERM GOVERNMENT
OBLIGATIONS-31.7%
$ 996,434 Federal National Mortgage
Association, 6.50%,
5/1/2013 $ 967,786
1,579,944 Federal National Mortgage
Association, 6.50%,
4/1/2029 1,489,586
955,981 Federal National Mortgage
Association, 7.00%,
6/1/2029 924,615
246,556 Federal National Mortgage
Association, 7.50%,
10/1/2029 243,859
841,728 Government National
Mortgage Association,
7.50%, 2/15/2028 833,049
220,300 Government National
Mortgage Association,
8.00%, 8/15/2029 222,503
436,278 Government National
Mortgage Association,
8.00%, 12/15/2023 442,822
TOTAL U.S. GOVERNMENT
AGENCIES (IDENTIFIED COST
$5,220,699) 5,124,220
REPURCHASE AGREEMENT-1.8%
2

295,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized
cost) 295,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$15,967,589) 3 $ 15,951,452
</TABLE>

3 The cost of investments for federal tax purposes amounts to $15,967,589. The
net unrealized depreciation of investments on a federal tax basis amounts to
($16,137) which is comprised of $309,963 appreciation and $326,100 depreciation
at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($16,159,323) at December 31, 1999.

The following acronyms are used throughout this portfolio:

FRN -Floating Rate Note
LLC -Limited Liability Corporation
PCs -Participation Certificates

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$15,967,589) $ 15,951,452
Cash 1,608
Income receivable 225,665
Receivable for shares sold 459
TOTAL ASSETS 16,179,184
LIABILITIES:
Accrued expenses $ 19,861
TOTAL LIABILITIES 19,861
Net assets for 1,558,037
shares outstanding $ 16,159,323
NET ASSETS CONSIST OF:
Paid in capital $ 15,585,711
Net unrealized
depreciation of
investments (16,137)
Accumulated net realized
gain on investments 3,089
Undistributed net
investment income 586,660
TOTAL NET ASSETS $ 16,159,323
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$16,159,323 / 1,558,037
shares outstanding $10.37
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED DECEMBER 31, 1999 1

<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 649,770
EXPENSES:
Investment adviser fee $ 63,114
Administrative personnel
and services fee 60,617
Custodian fees 3,421
Transfer and dividend
disbursing agent fees and
expenses 8,313
Auditing fees 12,002
Legal fees 3,964
Portfolio accounting fees 21,981
Share registration costs 4,250
Printing and postage 8,468
Insurance premiums 1,183
Miscellaneous 4,268
TOTAL EXPENSES 191,581
WAIVERS AND
REIMBURSEMENTS:
Waiver of investment
adviser fee $ (63,114)
Reimbursement of other
operating expenses (65,031)
TOTAL WAIVERS AND
REIMBURSEMENTS (128,145)
Net expenses 63,436
Net investment income 586,334
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on
investments 3,415
Net change in unrealized
depreciation of
investments (16,137)
Net realized and
unrealized gain (loss) on
investments (12,722)
Change in net assets
resulting from operations $ 573,612
</TABLE>

1 Reflects operations for the period from July 7, 1999 (date of initial public
investment) to December 31, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 586,334
Net realized gain on
investments ($3,560, as
computed for federal tax
purposes) 3,415
Net change in unrealized
depreciation (16,137)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 573,612
SHARE TRANSACTIONS:
Proceeds from sale of
shares 15,587,172
Cost of shares redeemed (1,461)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 15,585,711
Change in net assets 16,159,323
NET ASSETS:
Beginning of period -
End of period (including
undistributed net
investment income of
$586,334) $ 16,159,323
</TABLE>

1 For the period from July 7, 1999 (date of initial public investment) to
December 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31 1999 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.38
Net realized and unrealized loss on investments (0.01)
TOTAL FROM INVESTMENT OPERATIONS 0.37
NET ASSET VALUE, END OF PERIOD $10.37
TOTAL RETURN 2 3.70%

RATIOS TO AVERAGE NET ASSETS:
Expenses 0.85% 3
Net investment income 7.89% 3
Expense waiver/reimbursement 4 1.73% 3
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $16,159
Portfolio turnover 4%
</TABLE>

1 For the period from July 7, 1999 (date of initial public investment) to
December 31, 1999.

2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

3 Computed on an annualized basis.

4 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

DECEMBER 31, 1999

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 11 portfolios. The financial
statements included herein are only those of Federated Strategic Income 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 Fund's investment objective is to seek a high level of current income.

SIGNIFICANT ACCOUNTING POLICIES

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

INVESTMENT VALUATION

U.S. government securities, listed 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. Short-term securities are valued at
the prices provided by an independent pricing service. However, short-term
securities with remaining maturities of 60 days or less at the time of purchase
may be valued at amortized cost, which approximates fair market value.

REPURCHASE AGREEMENTS

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more 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. Non-cash dividends included in dividend income, if any, are recorded at
fair value.

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to market discount. The following
reclassifications have been made to the financial statements.

<TABLE>
<CAPTION>
INCREASE (DECREASE)
UNDISTRIBUTED
NET INVESTMENT
INCOME/
ACCUMULATED
DISTRIBUTIONS

ACCUMULATED IN EXCESS OF NET
NET REALIZED INVESTMENT
PAID-IN CAPITAL GAIN (LOSS) INCOME
<S> <C> <C>
$0 $(326) $326
</TABLE>

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

RESTRICTED SECURITIES

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

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 DECEMBER 31 1999 1
<S> <C>
Shares sold 1,558,185
Shares issued to
shareholders in payment of
distributions declared -
Shares redeemed (148)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 1,558,037
</TABLE>

1 Reflects operations for the period from July 7, 1999 (date of initial public
investment) to December 31, 1999.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser fee equal to
0.85% 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.

Under the terms of a sub-adviser agreement between the Adviser and the
Federated Global Investment Management Corp., Federated Global Investment
Management Corp. receives an allocable portion of the Fund's adviser fee.
Such allocation is based on the amount of foreign securities which
Federated Global Investment Corp., manages for the Fund. This fee is paid
by the Adviser out of its resources and is not an incremental Fund expense.

ADMINISTRATIVE FEE

DISTRIBUTION SERVICES FEE

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Fund
shares. The Plan provides that the Fund may incur distribution expenses up to
0.25% of the average daily net assets of the Fund shares, annually, to
compensate FSC. For the period ended December 31, 1999, the Fund shares did not
incur a distribution services fee.

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

Federated Services Company ("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.

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 December 31, 1999, were as follows:

Purchases $ 16,445,100
Sales $ 578,443

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES AND SHAREHOLDERS OF
FEDERATED STRATEGIC INCOME FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Strategic Income Fund II (a portfolio
of Federated Insurance Series) (the "Trust"), as of December 31, 1999, and the
related statement of operations for the period from July 7, 1999 to December 31,
1999, and the statement of changes in net assets for the period ended December
31, 1999, and the financial highlights for the period presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Strategic
Income Fund II as of December 31, 1999, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
period in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts
February 11, 2000

Trustees 1

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager

Federated Strategic Income Fund II

Federated Insurance Series

ANNUAL REPORT
TO SHAREHOLDERS

ANNUAL REPORT

DECEMBER 31, 1999

[Graphic]
Federated
Federated Strategic Income Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916868

G00433-10 (2/00)

[Graphic]

ANNUAL REPORT

President's Message

Dear Shareholder:

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

The fund is an attractive way to help your money earn dividend income, with some
opportunities for growth, from an investment sector that supplies critical
services to society. At the end of the reporting period, the fund's common and
preferred stock holdings were spread across a range of utility sectors. 1

It was a difficult year for the conventional utilities sector--particularly
electric utilities, which experienced their worst year on record due to rising
interest rates, weak earnings, and questionable merger and acquisition
decisions. In contrast, the telecommunications sector was a strong performer, as
was the foreign utilities sector. For the 12-month reporting period ended
December 31, 1999, the fund produced a 1.69% total return. 2 The total return
was impacted by a decline in net asset value that was tempered by $0.37 per
share in income. In addition, the fund paid $0.74 per share in capital gains. On
December 31, 1999, net assets totaled $187.7 million.

Thank you for choosing Federated Utility Fund II as a diversified,
professionally managed way to participate in the income and growth opportunities
of companies that deliver essential utility services.

As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

February 15, 2000

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

Investment Review

Utilities turned in mixed results in the fourth quarter of 1999, as telecom
stocks rose sharply and electric and gas stocks generally fell sharply. The
Standard & Poor's (S&P) Communications Index returned 10.2%, and the S&P Utility
Index returned (5.4%). 1 The fund returned 3.3%.2

The telecom sector also had the best return over the full year with 19.7%.
Sprint returned 61.0% as it agreed to merge with MCI Worldcom, while SBC
Communications returned (7.5%) due to an earnings slowdown.

It was a difficult year for conventional utilities, as the S&P Utility Index
returned (8.8%). The electric sector had its worst year on record, with a return
of (19.3%) by the S&P Electric Index. 1 Electric stocks were hurt by rising
interest rates, weak earnings, and questionable merger and acquisition
decisions. Among electric companies, Edison International's strong earnings
results led to a comparatively good (3.1%) return for the year, while FPL Group,
Inc., parent of Florida Power, returned (27.7%) due to a regulatory rate cut and
strategic uncertainty.

Natural gas stocks had mixed results. The S&P Natural Gas Index 1 returned 19.1%
for the year, but it was inflated by Enron, which comprises 38% of the index.
Enron returned 56% for the year. In contrast, gas utilities were generally weak.
Nicor, for example, returned (19.7%).

Foreign telecoms were generally the best performers in the world. KPN of the
Netherlands returned 116% in the fourth quarter alone, and Nippon Telephone and
& Telegraph of Japan returned 132% for the full year.

As we look to the year ahead, the telecom sector's prospects remain favorable to
us, as demand for new applications continues to rise, while unit costs fall due
to deregulation and technological advances. The electric sector has become
historically undervalued and is simply in need of a catalyst for better
performance. This could come from falling interest rates or from strategic
buyers, such as Warren Buffett's takeover of MidAmerican Energy. Natural gas
stocks seem to have excellent prospects, despite generally warm winter weather.
Supply and demand conditions are tight, and a sharp increase in construction of
gas-fired power plants to meet summer electricity demands will likely make the
market even tighter. Furthermore, gas companies continue to be acquired at
average takeover premiums of more than 30%.

We are emphasizing companies that have strong cash flow and the management skill
and financial incentives to deploy that cash into attractive returns for
shareholders. By sector, we continue to favor the telecom and natural gas
sectors over electric utilities. Telecommunications services stocks comprise 55%
of the fund, natural gas companies 26%, and electric companies 13% of the fund's
portfolio. This reflects a major strategy change throughout the past year, as we
significantly increased our telecommunications holdings to benefit from the
strong demand for telecom services.

1 The S&P Communications Index is an index that holds 25 of the largest
telecommunications stocks, including the regional bells, long distance companies
and cellular concerns. The S&P Utility Index is an index of common stocks from
40 different utilities. The S&P Electric Index and the S&P Natural Gas Index are
market cap-weighted indexes of common stocks in natural gas and utilities. These
indexes are unmanaged, and investments cannot be made in an index.

Last Meeting of Shareholders

A Special Meeting of Shareholders of the fund was held on November 15, 1999. On
September 16, 1999, the record date for shareholders voting at the meeting,
there were 12,927,981 total outstanding shares. The following items were
considered by shareholders of the fund and the results of their voting were as
follows:

AGENDA ITEM 1

To elect six Trustees 1--all portfolios of Federated Insurance Series voting
together.

<TABLE>

WITHHELD
AUTHORITY

FOR TO VOTE
<S> <C> <C>
Thomas G. Bigley 240,211,548 7,152,692
Nicholas P. Constantakis 239,928,312 7,435,928
John F. Cunningham 240,226,307 7,137,933
Charles F. Mansfield, Jr. 240,298,855 7,065,386
John E. Murray, Jr., J.D., S.J.D 240,016,672 7,347,569
John S. Walsh 240,224,615 7,139,625

</TABLE>

1 The following Trustees continued their terms as Trustees: John F.
Donahue, John T. Conroy, Jr., J. Christopher Donahue, Lawrence D. Ellis,
M.D., Peter E. Madden and Marjorie P. Smuts.

AGENDA ITEM 2

To make changes to the fund's fundamental investment policies:

(a) To approve amending the fund's fundamental investment policy regarding
diversification.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,562,379 473,315 733,919

</TABLE>

(b) To approve amending the fund's fundamental investment policy regarding
borrowing money and issuing senior securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,555,063 480,631 733,919

</TABLE>

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,567,164 468,531 733,919

</TABLE>

(d) To approve amending the fund's fundamental investment policy regarding
investments in commodities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,536,007 499,687 733,919

</TABLE>

(e) To approve amending the fund's fundamental investment policy regarding
underwriting securities.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,568,898 466,796 733,919

</TABLE>

(f) To approve amending the fund's fundamental investment policy regarding
lending by the fund.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,535,039 500,656 733,919

</TABLE>

(g) To approve amending the fund's fundamental investment policy regarding
concentration of the fund's investments in the securities of companies in the
same industry.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,562,779 472,915 733,919

</TABLE>

(h) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding buying securities on margin.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,526,992 508,703 733,919

</TABLE>

(i) To approve amending, and making non-fundamental, the fund's fundamental
investment policy regarding pledging assets.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,549,557 486,137 733,919

</TABLE>

AGENDA ITEM 3

To approve eliminating the fund's fundamental investment policy regarding
selling securities short.

<TABLE>

FOR AGAINST ABSTENTIONS
<S> <C> <C>
11,286,396 678,524 804,693

</TABLE>

GROWTH OF $10,000 INVESTED IN FEDERATED UTILITY FUND II

"Graphic representation "I" omitted. See Appendix."

<TABLE>

AVERAGE ANNUAL TOTAL RETURN FOR THE
PERIOD ENDED DECEMBER 31, 1999
<S> <C>
1 Year 1.69%
5 Years 15.25%
Start of Performance
(2/10/94) 12.15%

</TABLE>

The graph above illustrates the hypothetical investment of $10,000 2 in
Federated Utility Fund II (the "Fund") from February 10, 1994 (start of
performance) to December 31, 1999, compared to the Standard & Poor's
Communications Services Index (SPCSX)3 and the Standard and Poor's Utility Index
(SPUX).3

1 The SPCSX began its performance on July 1, 1996. The index has been assigned a
beginning value of $12,545, the value of the Fund on July 1, 1996.

2 The Fund's performance assumes the reinvestment of all dividends and
distributions. The SPCSX and the SPUX have been adjusted to reflect reinvestment
of dividends on securities in the indices.

3 The SPCSX and the SPUX are not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. The indices are unmanaged.

Portfolio of Investments

DECEMBER 31, 1999

<TABLE>

SHARES VALUE
<C> <S> <C>
COMMON STOCKS--70.3%
CAPITAL GOODS--0.9%
6,700 Mannesmann AG, ADR $ 1,608,349
COMMUNICATION SERVICES--
38.1%

161,250 AT&T Corp. 8,183,437
900 1 Adelphia Business
Solutions, Inc. 43,200
83,700 Alltel Corp. 6,920,944
30,300 Bell Atlantic Corp. 1,865,344
185,300 BellSouth Corp. 8,674,356
63,900 CenturyTel, Inc. 3,027,262
121,100 GTE Corp. 8,545,119
2,444 1 Intermedia Communications,
Inc. 94,858
110,700 1 MCI Worldcom, Inc. 5,874,019
313 1 McLeodUSA, Inc., Class A 18,428
14,500 Nippon Telegraph &
Telephone Corp., ADR 1,248,812
165,293 SBC Communications, Inc. 8,058,034
130,300 Sprint Corp. 8,770,819
5,000 Telephone and Data System,
Inc. 630,000
120,500 U.S. West, Inc. 8,676,000
15,800 1 Viatel, Inc. 847,275
584 1 WinStar Communications,
Inc. 43,979
TOTAL 71,521,886
ENERGY--1.6%

45,500 Burlington Resources, Inc. 1,504,344
49,200 Pennzoil-Quaker State Co. 501,225
38,500 USX - Marathon Group 950,469
TOTAL 2,956,038
TECHNOLOGY--0.8%
4,500 Motorola, Inc. 662,625
14,500 1 Tellabs, Inc. 930,719
TOTAL 1,593,344
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--continued

UTILITIES--28.9%

44,500 Columbia Energy Group $ 2,814,625
50,800 Duke Energy Corp. 2,546,350
81,600 Edison International 2,136,900
228,700 El Paso Energy Corp. 8,876,419
111,100 Enron Corp. 4,930,062
47,100 FPL Group, Inc. 2,016,469
235,200 KeySpan Corp. 5,453,700
85,300 NICOR, Inc. 2,772,250
54,494 NSTAR 2,207,007
44,700 National Fuel Gas Co. 2,078,550
41,400 New Jersey Resources Corp. 1,617,187
120,200 NiSource, Inc. 2,148,575
17,700 ONEOK, Inc. 444,712
85,000 P G & E Corp. 1,742,500
37,700 Peoples Energy Corp. 1,262,950
62,100 Puget Sound Energy, Inc. 1,203,187
77,600 RGS Energy Group, Inc. 1,595,650
77,000 SCANA Corp. 2,069,375
63,500 Texas Utilities Co. 2,258,219
133,900 Williams Cos., Inc. (The) 4,092,319
TOTAL 54,267,006
TOTAL COMMON STOCKS
(IDENTIFIED COST
$118,649,236) 131,946,623
PREFERRED STOCKS--21.9%
COMMUNICATION SERVICES--
10.3%
20,500 BroadWing, Inc.,
Cumulative Conv. Pfd.,
Series B, $3.38 1,214,625
34,200 Cox Communications, Inc.,
PRIDES, $1.71 3,325,950
4,000 2, 3 Global Crossing Ltd.,
Conv. Pfd. 500,352
4,000 2, 3 Global Crossing Ltd.,
Conv. Pfd., $4.38 1,127,000
71,500 Global TeleSystems Group,
Inc., Conv. Pfd., $0.91 4,075,500
25,800 Intermedia Communications,
Inc., Cumulative Conv.
Pfd., Series E, $1.75 877,200
39,700 Intermedia Communications,
Inc., Cumulative Conv.
Pfd., Series F, $1.75 1,066,938
3,000 McLeodUSA, Inc., Conv.
Pfd., $4.22 1,545,000
71,000 MediaOne Group, Inc.,
DECS, $0.76 3,408,000
4,500 NEXTLINK Communications,
Inc., Conv. Pfd., $0.81 863,438
1,000 2, 3 WinStar Communications,
Inc., Conv. Pfd., $1.81 1,356,250
TOTAL 19,360,253
<CAPTION>
SHARES OR

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS--continued

CONSUMER STAPLES--0.7%
18,300 Cox Communications, Inc.,
PRIDES, $0.88 $ 1,244,400
ENERGY--3.0%
68,000 Apache Corp., Conv. Pfd.,
$0.50 2,414,000
8,500 2, 3 Calpine Corp., Conv. Pfd.,
$2.88 557,813
77,600 Kerr-McGee Corp., DECS,
$0.46 2,560,800
TOTAL 5,532,613
TECHNOLOGY--1.0%
22,000 Metromedia Fiber Network,
Inc., DECS, $0.62 1,023,000
16,000 PsiNet, Inc., Conv. Pfd.,
$0.84 934,000
TOTAL 1,957,000
UTILITIES--6.9%
92,600 CMS Energy Corp., Conv.
Pfd., $0.91 3,136,825
162,100 Coastal Corp., PRIDES,
$0.41 3,778,956
137,500 Enron Corp., Note, $1.56 2,578,125
55,500 K N Energy, Inc., Conv.
Pfd., $3.55 1,803,750
73,000 2 Utilicorp United, Inc.,
Conv. Pfd., $0.61 1,651,625
TOTAL 12,949,281
TOTAL PREFERRED STOCKS
(IDENTIFIED COST
$39,440,910) 41,043,547
CORPORATE BONDS--4.7%
COMMUNICATION SERVICES--
3.6%

$ 850,000 2, 3 ITC DeltaCom, Inc., Conv.
Bond, 4.50%, 5/15/2006 1,020,000
2,000,000 2, 3 Liberty Media Group, Conv.
Bond, 4.00%, 11/15/2029 2,512,240
630,000 NEXTEL Communications,
Inc., Conv. Bond, 4.75%,
7/1/2007 1,429,312
1,700,000 2, 3 NTL, Inc., Conv. Bond,
5.75%, 12/15/2009 1,877,514
TOTAL 6,839,066
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--continued

TECHNOLOGY--1.1%
$ 300,000 Comverse Technology, Inc.,
Conv. Bond, 4.50%,
7/1/2005 $ 1,022,778
700,000 2, 3 Level 3 Communications,
Inc., Conv. Bond, 6.00%,
9/15/2009 1,023,953
TOTAL 2,046,731
TOTAL CORPORATE BONDS
(IDENTIFIED COST
$7,861,457) 8,885,797
REPURCHASE AGREEMENTS--3.2%
4

5,905,000 Bank of America, 3.15%,
dated 12/31/1999, due
1/3/2000 (at amortized
cost) 5,905,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$171,856,603) 5 $ 187,780,967

</TABLE>

1 Non-income producing security.

2 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. At December 31, 1999, these securities amounted to
$11,626,747 which represents 6.2% of net assets. Included in these amounts,
securities which have been deemed liquid amounted to $9,975,122 which represents
5.3% of net assets.

3 Denotes a restricted security that has been deemed liquid by criteria approved
by the fund's Board of Trustees.

4 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.

5 The cost of investments for federal tax purposes amounts to $172,364,781. The
net unrealized appreciation of investments on a federal tax basis amounts to
$15,416,186 which is comprised of $22,577,241 appreciation and $7,161,055
depreciation at December 31, 1999.

Note: The categories of investments are shown as a percentage of net assets
($187,666,249) at December 31, 1999.

The following acronyms are used throughout this portfolio:

ADR--American Depositary
Receipt
DECS--Dividend Enhanced
Convertible Stock
PRIDES--Preferred Redeemable
Increased Dividend Equity
Securities

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$171,856,603 and tax
cost $172,364,781) $ 187,780,967
Cash 4,531
Income receivable 587,581
Receivable for investments
sold 2,989,509
Receivable for shares sold 227,939
TOTAL ASSETS 191,590,527
LIABILITIES:
Payable for investments
purchased $ 3,674,171
Payable for shares
redeemed 218,797
Accrued expenses 31,310
TOTAL LIABILITIES 3,924,278
Net assets for 13,078,413
shares outstanding $ 187,666,249
NET ASSETS CONSIST OF:
Paid-in capital $ 162,957,861
Net unrealized
appreciation of
investments 15,924,364
Accumulated net realized
gain on investments and
foreign currency
transactions 3,201,407
Undistributed net
investment income 5,582,617
TOTAL NET ASSETS $ 187,666,249
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$187,666,249 / 13,078,413
shares outstanding $14.35

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED DECEMBER 31, 1999

<TABLE>

<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $19,324) $ 6,757,033
Interest 493,441
TOTAL INCOME 7,250,474
EXPENSES:
Investment adviser fee $ 1,312,874
Administrative personnel
and services fee 132,133
Custodian fees 18,866
Transfer and dividend
disbursing agent fees and
expenses 41,758
Directors'/Trustees' fees 2,713
Auditing fees 12,651
Legal fees 20,316
Portfolio accounting fees 53,857
Share registration costs 7,397
Printing and postage 43,512
Insurance premiums 1,498
Taxes 23
Miscellaneous 4,516
TOTAL EXPENSES 1,652,114
Fees paid indirectly from
directed broker
arrangements (26,193)
Net expenses 1,625,921
Net investment income 5,624,553
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on
investments and foreign
currency transactions 3,446,603
Net change in unrealized
appreciation of
investments and
transactions of assets and
liabilities in foreign
currency (6,031,451)
Net realized and
unrealized loss on
investments and
foreign currency transacti
ons (2,584,848)
Change in net assets
resulting from operations $ 3,039,705

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 5,624,553 $ 4,025,310
Net realized gain on
investments and foreign
currency transactions
($3,713,913 and
$7,999,119, respectively,
as computed for federal tax
purposes) 3,446,603 7,834,265
Net change in unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency (6,031,451) 5,882,380
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 3,039,705 17,741,955
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net

investment income (4,089,640) (1,023,584)
Distributions from net
realized gains on
investments and foreign
currency transactions (8,002,480) (6,251,285)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS

TO SHAREHOLDERS (12,092,120) (7,274,869)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 62,849,877 71,820,125
Net asset value of shares
issued to shareholders in
payment of
distributions declared 12,092,114 7,274,865
Cost of shares redeemed (40,261,149) (31,986,413)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 34,680,842 47,108,577
Change in net assets 25,628,427 57,575,663
NET ASSETS:
Beginning of period 162,037,822 104,462,159
End of period (including
undistributed net
investment income of
$5,582,617 and $4,040,359,
respectively) $ 187,666,249 $ 162,037,822

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED DECEMBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.27 $14.29 $11.81 $11.03 $9.29
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.42 0.37 0.40 0.42 0.45
Net realized and
unrealized gain (loss) on
investments and foreign
currency (0.23) 1.55 2.62 0.82 1.74
TOTAL FROM INVESTMENT
OPERATIONS 0.19 1.92 3.02 1.24 2.19
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.37) (0.13) (0.28) (0.41) (0.45)
Distributions from net
realized gain on
investments and foreign
currency transactions (0.74) (0.81) (0.26) (0.05) --
TOTAL DISTRIBUTIONS (1.11) (0.94) (0.54) (0.46) (0.45)
NET ASSET VALUE, END OF
PERIOD $14.35 $15.27 $14.29 $11.81 $11.03
TOTAL RETURN 1 1.69% 13.95% 26.63% 11.56% 24.18%

RATIOS TO AVERAGE NET
ASSETS:

Expenses 0.94% 0.93% 0.85% 0.85% 0.85%
Net investment income 3.20% 3.20% 3.41% 3.92% 4.62%
Expense
waiver/reimbursement 2 -- 0.07% 0.27% 0.51% 2.24%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $187,666 $162,038 $104,462 $63,558 $29,679
Portfolio turnover 119% 84% 95% 63% 62%

</TABLE>

1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

2 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

DECEMBER 31, 1999

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 11 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 60
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

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. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications were made to the financial
statements.

<TABLE>

INCREASE (DECREASE)
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT
GAINS (LOSSES) INCOME
<S> <C>
$(7,345) $7,345

</TABLE>

Net investment income, net realized gains (losses), and net assets were not
affected by these classifications.

FEDERAL TAXES

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

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

FOREIGN EXCHANGE CONTRACTS

FOREIGN CURRENCY TRANSLATION

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 or 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.

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 the restricted security held at December 31, 1999 is
as follows:

<TABLE>

ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Utilicorp United, Inc., Conv. Pfd. 9/23/99 $1,825,000

</TABLE>

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

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>

YEAR ENDED DECEMBER 31 1999 1998
<S> <C> <C>
Shares sold 4,384,563 5,060,316
Shares issued to
shareholders in payment of
distributions declared 895,049 513,037
Shares redeemed (2,814,347) (2,272,128)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 2,465,265 3,301,225

</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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

SHAREHOLDER SERVICES FEE

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.

EXPENSE REDUCTION

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 (and in-kind
contributions), for the year ended December 31, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 228,157,398
Sales $ 197,296,830

</TABLE>

RISKS OF FOREIGN INVESTING

At December 31, 1999, the diversification of non-U.S. countries was as
follows:

<TABLE>

PERCENTAGE OF
COUNTRY NET ASSETS
<S> <C>
Germany 0.9%
Japan 0.7%

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED INSURANCE SERIES AND SHAREHOLDERS OF
FEDERATED UTILITY FUND II:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Federated Utility Fund II (a portfolio of
Federated Insurance Series) (the "Trust") as of December 31, 1999, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended December 31, 1999 and 1998, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Utility
Fund II as of December 31, 1999, the results of its operations, the changes in
its net assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

February 11, 2000

Trustees 1

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

1 Trustees as of January 1, 2000.

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated Utility Fund II

Federated Insurance Series

ANNUAL REPORT TO SHAREHOLDERS

DECEMBER 31, 1999

[Graphic]
Federated

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

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313916108

G00845-01 (2/00)

[Graphic]

A. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. Federated American Leaders Fund II (the "Fund") is represented by a
solid line. The Standard & Poor's 500 Index ("S&P 500") is represented by a
dotted line, and the Lipper Growth and Income Funds Average ("LGIFA") is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Fund,
the S&P 500 and the LGIFA. The "x" axis reflects computation periods from
2/10/94 to 12/31/99. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund, as
compared to the S&P 500 and the LGIFA. The ending values were $26,803, $35,291,
and $25,375, respectively.

B. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated Equity Income Fund II is represented
by a solid line. The Standard & Poor's 500 Index is represented by a dotted line
and the Lipper Equity Income Fund Index is represented by a broken line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in Federated Equity Income Fund II and the
Standard & Poor's 500 Index and the Lipper Equity Income Fund Index. The "x"
axis reflects computation periods from January 30, 1997 (start of performance)
to December 31, 1999. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in
Federated Equity Income Fund II, as compared to the Standard & Poor's 500 Index
and the Lipper Equity Income Fund Index; the ending values were $116,308;
$19,153; and $14,808, respectively.

C. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated Growth Strategies Fund II is
represented by a solid line. The Standard & Poor's 500 Index is represented by a
dotted line and the Lipper Growth Fund Index is represented by a broken line.
The line graph is a visual representation of a comparison of change in value of
a $10,000 hypothetical investment in Federated Growth Strategies Fund II and the
Standard & Poor's 500 Index and the Lipper Growth Fund Index. The "x" axis
reflects computation periods from November 9, 1995 (start of performance) to
December 31, 1999. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in Federated
Growth Strategies Fund II, as compared to the Standard & Poor's 500 Index and
the Lipper Growth Fund Index; the ending values were $32,937; $26,665; and
$24,904, respectively.

D. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated High Income Bond Fund II is
represented by a solid line. The Lehman Brothers Single B Rated Index is
represented by a dotted line and the Lipper High Current Yield Fund Average is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in Federated
High Income Bond Fund II and the Lehman Brothers Single B Rated Index and the
Lipper High Current Yield Fund Average. The "x" axis reflects computation
periods from March 1, 1994 (start of performance) to December 31, 1999. The "y"
axis reflects the cost of the investment. The right margin reflects the ending
value of the hypothetical investment in Federated High Income Bond Fund II, as
compared to the Lehman Brothers Single B Rated Index and the Lipper High Current
Yield Fund Average; the ending values were $15,864; $15,242; and $14,672,
respectively.

E. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. Federated International Equity Fund II (the "Fund") is represented by
a solid line. The Morgan Stanley Capital International Europe Australia Far-East
Index ("EAFE") is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Fund and the EAFE. The "x" axis reflects computation periods
from 5/8/95 (start of performance) to 12/31/99. The "y" axis reflects the cost
of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund, as compared to the EAFE. The ending values
were $28,651 and $17,302, respectively.

F. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated Quality Bond Fund II (the "Fund") is
represented by a solid line. The Lehman Brothers Corporate Bond Index (the
"LBCBI") is represented by a dotted line, the Lehamn Brothers
Government/Corporate Bond Index (the "LBGCBI") is represented by a broken line
and the Lehman Brothers Corporate Bond Index/Lehman Brothers
Government/Corporate Bond Index (the "LBCBI/LBGCBI") is represented by a dashed
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Fund, the RUS2 and the S&P
600. The "x" axis reflects computation periods from April 28, 1999 (start of
performance) to December 31, 1999. The "y" axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the Fund, as compared to the RUS2 and the S&P 600; the ending
values were $9,800; $9,875; $9,904 and $9,890, respectively.

G. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated Small Cap Strategies Fund II (the
"Fund") is represented by a solid line. The Russell 2000 Small Stock Index (the
"RUS2") is represented by a dotted line and the Standard & Poor's 600 Small Cap
Index (the "S&P 600") is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Fund, the RUS2 and the S&P 600. The "x" axis
reflects computation periods from May 28, 1999 (start of performance) to
December 31, 1999. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund, as
compared to the RUS2 and the S&P 600; the ending values were $13,910; $11,597;
and $11,313, respectively.

H. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated Strategic Income Fund II (the "Fund")
is represented by a solid line. The Lehman Brothers Government/Corporate Bond
Index (the "LBG/CBI") is represented by a dotted line and the Lipper
Multi-Sector Income Funds Average (the "LMSIFA") is represented by a broken
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Fund, the LBG/CBI and the
LMSIFA. The "x" axis reflects computation periods from July 7, 1999 (start of
performance) to December 31, 1999. The "y" axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the Fund, as compared to the LBG/CBI and the LMSIFA; the ending
values were $10,370; $10,028; and $10,171, respectively.

I. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left quadrant
of the graphic presentation. The Federated Utility Fund II is represented by a
solid line. The Standard & Poor's Communications Services Index is represented
by a dotted line and the Standard & Poor's Utility Index is represented by a
broken line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in Federated Utility Fund II and
the Standard & Poor's Communications Index and the Standard & Poor's Utility
Index. The "x" axis reflects computation periods from February 10, 1994 (start
of performance) to December 31, 1999. The "y" axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in Federated Utility Fund II, as compared to the Standard & Poor's
Communications Services Index and the Standard & Poor's Utility Index; the
ending values were $19,647; $32,811; and $18,178, respectively.